Supporting Bioproducts Industry Growth with a System Dynamics Decision-Support Tool

Abstract

A bio-based economy requires chemical products as well as fuels to be produced from biomass. Although a variety of universities, government agencies, start-ups and established firms have engaged in bioproduct development, many projects have failed to reach the point of commercialization and commercialized bioproducts struggle to capture and maintain market share. To date, there has been no general research into the factors that contribute to bioproduct failure or success. This work presents the Bioproduct Transition Dynamics (BTD) system dynamics model, a decision-support tool that simulates the bioproduct development process from pre-piloting research through construction of the first commercial-scale plant, as well as the processes of obtaining funding from investors and government agencies. The core of the BTD is a feedback loop between bioproduct developers and funders, which relates development progress measured with indicators such as net present value to funders’ decisions to continue investing. External factors such as feedstock prices, market size and growth, and the existence of bioproduct consumers also influence a development project’s chances of receiving follow-on funding. Virtually any bioproduct can be represented with the BTD: direct replacements, performance-advantaged products, niche and commodity markets can all be modeled. The goal of the BTD project is to inform decisions made by developers in both established firms and start-ups, investors, government agencies, and other stakeholders interested in growing the nascent U.S. bioproducts industry. This talk will cover the general structure and functionality of the BTD, and present results from an analysis performed with the BTD to demonstrate its use as a decision-support tool and the insights it can provide. The goal of the analysis is to identify the most critical factors that lead to direct replacement and performance-advantaged bioproduct projects emerging successfully from the “Valley of Death”, and to determine if these factors differ between the two bioproduct types.