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Tom Still: Wisconsin's maturing biotech economy means storms can be weathered


By Tom Still
Some of the 130 or so workers at Madison's Hologic Inc. facility were among the first employees of Third Wave Technologies, which was born in the mid-1990s in the labs of UW-Madison and grew so quickly that its stock was listed on the NASDAQ exchange by 2001.

They're still the same talented molecular biologists, laboratory technicians and product designers today they were 15 years ago, but beginning Sept. 30, all 130 will lose their jobs over the next two years.

It's a story that tracks the life cycle of one of Wisconsin's earliest biotechnology success stories – from Third Wave's startup to its initial public offering to its rough times, followed by resurrection, acquisition and, finally, looming shutdown. But it also speaks to the underlying resilience of the state's biotech economy, which should encourage displaced workers hoping to land on their feet.

Massachusetts-based Hologic produces medical devices, imaging equipment and molecular diagnostics, much of which are focused on women's health. The company told its Madison workers this summer it will phase out the former Third Wave facility, which it had acquired in mid-2008. The decision was tied to Hologic's acquisition of Gen-Probe Inc., a San Diego company that owns molecular diagnostic product lines similar to those produced in Madison. Something had to give – and that something was Hologic's Madison plant.

Not so long ago, the shutdown of a Madison biotech company with 130 workers would have prompted a flood of resumes to Boston, California, North Carolina's Research Triangle and beyond. There simply wasn't enough critical mass in Wisconsin to allow that many workers, or even a portion of them, to find jobs close to home.

That situation has changed, according to a panel of industry veterans who discussed the Hologic shutdown Tuesday during a meeting of the Wisconsin Innovation Network in Madison. Their message: Don't panic.

"This wasn't the first time something like this has happened and it won't be the last," said Randy Dimond, chief technology officer and vice president of Promega Corp., Wisconsin's oldest and most globally recognized biotech company. "However, we are better positioned today than we've ever been to work through it."

Promega was launched in 1978 and has grown to about 1,100 workers worldwide today, including about 700 on its gleaming campus in Fitchburg. Construction began a year ago on a $90-million expansion that will lead to about 100 new Promega jobs over five years – including many scientific jobs that require the kind of skills held by Hologic workers.

Kevin Conroy, the former Third Wave CEO who helped rescue the company in the mid-2000s, echoed Dimond's remarks. Conroy left Third Wave after the Hologic acquisition and could have landed a job just about anywhere, but he never forgot Wisconsin and its talented core of tech workers.

In 2009, Conroy persuaded the board of a small publically held firm in Massachusetts – Exact Sciences – to move to Madison. The relocation has paid off. Exact Sciences has grown to 90 employees and the company may be within a year of federal approval of its non-invasive colorectal cancer test, which could dramatically improve detection and treatment.

As Exact Sciences nears product launch, it will also need more workers with backgrounds like those who will soon leave Hologic.

"I knew this was where I wanted to be, in large part because of the talented people," Conroy said.

Biotechnology is a young industry and prone to the "creative destruction" of new companies pushing up from below. Meanwhile, mature companies are acquired or buy other companies themselves. That kind of churn is inevitable nationally, and Wisconsin's biotech industry is not immune. But it has grown to a point that it can roll with the market punches.

From Promega's birth in 1978 until 2003, 25 years later, the Madison-area biotech economy grew to 52 companies. Five years later, in 2008, there were 68 biotech firms. In the latest count for MGE's High-Tech Directory, there were 88 biotech companies with 6,350 employees and $1.6 billion in revenues.

It's one of the reasons why the Madison-area economy is still "among the most dynamic in its weight class," said Aaron Olver, economic development director for the city of Madison.

The growth in Madison's tech economy is continuing, despite the national recession, a dearth of venture capital and other factors that have slowed some sectors. Even as biotech fought through troubled times the last three years, other local tech sectors have grown.

For workers at Hologic and other biotech firms that ride the roller-coaster of the markets, that means more opportunities to find good jobs close to home. The process won't be easy, but it shouldn't be impossible, either.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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Wednesday, August 29, 2012

Tithi Chattopadhyay: Score for Wisconsin: A new broadband playbook


By Tithi Chattopadhyay
As the state's first statewide broadband director, I am here to encourage a dialogue on how to best promote broadband deployment across the state. But first, I have to answer a common question. What is broadband?

In short, broadband is high-speed Internet. In practice, it is a vital business tool, a key link to the global economy, and integral to the function of our health care system, schools, and other public service places. While its importance can't be over-emphasized, its implementation can be hard to track, and investment in broadband can be expensive.

Fostering better broadband access across the state not only encourages investment in infrastructure, it makes it easier to attract start-ups and businesses that rely on data to provide a service to customers. Think of the value to our agriculture industry when a farmer from Antigo is able to research new, sustainable farming techniques online and correspond with farmers in other areas of the state to get feedback. Or, think of the college student at the University of Wisconsin – Stevens Point streaming a class online she would not otherwise be able to enroll in because her professor is based in Superior. These activities are made possible by broadband, though not every corner of the state has a level of access to enable all applications.

Given the importance of broadband to education, health care, small businesses, and global exports, expediting its implementation is a top priority for policy-makers, and the Public Service Commission of Wisconsin (PSCW) has been tasked with developing a statewide broadband plan. At the beginning of this year, the PSCW began the process to create a "Playbook" designed to identify opportunities to expand broadband investments, adoption, and application statewide.

The Playbook was developed to identify initiatives and actions that encourage increased investment in broadband infrastructure and increased broadband utilization throughout the state of Wisconsin. The Playbook was developed with input from a variety of stakeholders, with direction provided by a Steering Committee of regional leaders. Based on discussions of the Steering Committee and focus group meetings of various broadband providers, stakeholders, and users, a draft Playbook has been issued and is available for public input and review. (Note, visit http://psc.wi.gov or call 608-266-9600 to view or request a copy of the draft Playbook)

The plays in the Playbook are organized under several key themes including leveraging existing government resources to incentivize private investment; providing forums for public and private sector partnerships and collaborations to advance Wisconsin's broadband communications; and, promoting awareness of shared opportunities among consumers, government leaders and providers.

Creating incentives to invest in Wisconsin is a top priority. By doing so, we improve broadband deployment rates, especially to the areas of the state where broadband is not readily available or affordable.

The draft Playbook also focuses on reducing barriers to broadband investment. By cutting the red tape we can facilitate deployment through a focus on opportunities to reduce barriers and cost of broadband investment through mechanisms like the sharing of right-of-ways and infrastructure where it makes sense. Proposed efforts include actions such as streamlined approaches to permitting and model agreements to make community assets, such as water towers, more accessible to broadband providers.

We also recognize the importance of leveraging existing government resources by preparing the state to take the fullest advantage of federal dollars, and effectively purposing existing state program dollars to accomplish the state's broadband goals and objectives.

Finally, education, awareness, and personnel to support broadband development in Wisconsin communities will be vital to promoting broadband's long-term role in reviving our economy and putting Wisconsin businesses out front in a rapidly changing, digital marketplace. The draft Playbook recommends taking actions that support local leadership with information on best practices; identifying matching funds to help support positions to advocate and coordinate collaborative initiatives; and encouraging public access, training and awareness at libraries and other locations.

Public input on the Playbook will help shape the state-level efforts to improve broadband that provide a solid foundation for economic growth, improved access to education and healthcare, enhanced public safety, stronger communities and an enriched quality of life.

Your comments on the Playbook can be submitted in several ways. Email suggestions to PSCBroadbandComments@wisconsin.gov or file them at the PSC's website, http://psc.wi.gov, by clicking on the "Public Comments" button, and choosing the "Wisconsin's Broadband Playbook: File a Comment" link. And, of course, if you don't have access to the Internet, you may send comments addressed to: "Wisconsin's Broadband Playbook Comments," Public Service Commission, P.O. Box 7854, Madison, WI, 53707-7854.

-- Chattopadhyay is Wisconsin's state broadband director.

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Thursday, August 16, 2012

Tom Still: Launch of The Art Commission offers right mix of experience in new setting


By Tom Still
Toni Sikes is hardly your wet-behind-the-ears entrepreneur. Her startup credentials include several online businesses tied to the arts, she’s a co-founder of Calumet Venture Fund and she’s raised tens of millions in private equity capital for her endeavors over time.

So, what’s Sikes up to these days? She’s starting another company, of course.

Along with partner Terry Maxwell, an angel investor, former investment banker and UW-Madison finance instructor, Sikes is launching The Art Commission this fall. It’s a website designed to connect architects, designers and art consultants with a worldwide offering of artists who are available for commissioned works.

Much like two of her past companies, The Guild Sourcebooks and Artful Home, The Art Commission is a connector that takes distance out of the equation for buyers and sellers. It will provide listings and photo packages for selected artists. Buyers in the design trades could use that database to search for artists, submit requests for proposals and take other steps toward commissioning specific arts projects.

The Art Commission already has a staff of eight, its beta website launches in September, and some 200-plus artists are already signed up. The business model is subscription-based, with a mix of rates available to artists who want to get their work in front of designers and others who commission public and private art.

Think LinkedIn for the creative world, and you’re imagining what Sikes and Maxwell would like to build over time.

“Artists have much to offer our public and private spaces, whether it is a sculpture for a corporate lobby, a wall hanging for a healthcare facility, or a stained-glass window for a church,” Sikes said. “We want to serve as a matchmaker that helps make this happen.”

While it’s not a shock that Sikes and friends would start yet another company – some entrepreneurs are incurable – the location for The Art Commission may come as a surprise.

Sikes and Maxwell had the resources to open just about anywhere, but they chose to set up shop in the Gener8tor accelerator space on Madison’s Capitol Square – amidst a group of much younger entrepreneurs. Gener8tor is a business accelerator with space in Milwaukee and Madison, and which is steaming toward its own Aug. 23 launch party at Milwaukee’s Discovery World.

“I wanted to be in a place where there are lots of other entrepreneurs,” said Sikes, who is already helping out by listening to company pitches from young startups.

Like similar accelerators in Wisconsin and nationwide, Gener8tor is modeled after Y Combinator and TechStars, both of which have yielded successful startups across the country.

The best accelerators carefully review what companies they accept, which greatly increases their chances of survival after they “graduate” from the intensive startup phase. In some accelerators, less than 1 percent of startup applicants are accepted.

However, the proliferation of accelerators nationwide has raised questions about survival rates for accelerators that are less picky, or which feel compelled to accept marginal companies because of public financing models or geography. Some observers worry that an “all-comers” approach does entrepreneurs no favors.

“Most incubators are cultivating a garden of startups that are dead on arrival,” said Kendall Wouters, CEO of Reach Ventures, Cleveland, Ohio. “(They are) puppy mills gambling with people’s dreams.”

A recent study conducted by the Kauffman Fellow Program, the Kellogg School of Management and DFJ Mercury, a venture capital firm with interest in Wisconsin, found “a vast majority of accelerators have neither funding nor liquidity events, bringing their efficacy into question.”

Those concerns seem less threatening for Gener8tor because of its experienced leadership and its basic acceleration model. The for-profit accelerator will provide seed capital investments of nearly $20,000 and tens of thousands more in services and resources to each startup. Gener8tor will work with the startups over 12 weeks to help them identify customers and grow their businesses.

“Many accelerators don’t know what they are doing,” Sikes said, “but I think the Gener8tor team is doing a great job.”

Startups come from all kinds of places – from experienced entrepreneurs who want another challenge, and from young people with little more than an idea and a dream. The presence of The Art Commission inside Gener8tor offers the best of both approaches for Wisconsin’s startup economy.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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Dan Danner: Why small business is big in politics


By Dan Danner
It seems like Washington can't agree on anything these days, except maybe one thing:

Small business.

It seems everyone in Washington loves small business, or pretends they do.

If you watch the news or listen to the ads, you'll hear candidates on both sides of the aisle vow to help small businesses grow and create jobs.

Of course, some of that is just election-year baloney, but it raises a good question: Why do politicians want voters to know they're fighting for small business?

Politicians love small business because small business matters. It's important, it's trusted, and it's going to make a big difference in this year's elections. It isn't stretching things to say that small business is the engine that drives our economy. The federal government defines a small business as one with fewer than 500 employees. By that measure, small business accounts for 99.7 percent of all U.S. employers, and it employs 49.6 percent of the private-sector workforce.

When ordinary people think of small business, 500 employees may seem big, but even if you look at just the smallest employers, those with fewer than 20 workers, it's easy to see that small business is a powerful force.

According to the U.S. Small Business Administration, these businesses account for 89.3 percent of all employer firms.

The bottom line is that small business has a big voice in what happens with the economy, and voters know it. Gallup did a survey a few months ago asking who people trust when it comes to coming up with ideas for creating jobs. The No. 1 answer: small business, before governors, academics, members of Congress or the president.

The other reason politicians like small business is because small business votes.

A survey by the National Federation of Independent Business before the last presidential election found that small-business owners account for about 11 percent of registered voters – about the same as union members. When you include those who work for small businesses, the small-business voting bloc swells to nearly one-third of the electorate.

Small-business voters support the candidates who support small business, the candidates who understand risk and free enterprise and will run government with the prudence of a small-business owner. Small business supports the candidates who believe in sensible regulations and less bureaucracy and lower taxes. Small business supports the candidates who will spend taxpayers' money wisely. Small-business owners have to stick to a budget, and they believe government should, too.

Right now, small business is hurting. According to the latest NFIB Small Business Optimism Index, the single most important problem facing small business right now is weak sales, followed by high taxes and government rules and regulations. Uncertainty over the outcome of this year's elections doesn't help.

As we approach Election Day, we hope small business owners will talk to their friends and employees about where candidates stand on important business issues and focus on what these politicians have done or will do to help America's job creators. If we're going to fix this economy, we need to elect the candidates who will do big things for small business by passing meaningful tax reform and enacting sensible regulations, candidates who won't punish success or put up roadblocks to growth.

For more information about pro-small business candidates and how you can make a difference, please go to http://www.nfib.com/politics.

Because big things happen only when you support small business.

-- Danner is president and CEO of the National Federation of Independent Business, which represents 350,000 small-business owners in Washington, D.C. and every state capital.

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GreenBiz: Speakers push for "organic and beyond" to improve food system


By Gregg Hoffmann
Two recent speakers at the Organic Valley annual Kickapoo Country Fair said the "organic and beyond" movement could help fix a broken food system in the world.

Raj Patel, a visiting scholar in the Center for African Studies at UC-Berkeley, and Andrew Kimbrell, founder and Executive Director of the Center for Food Safety and the International Center for Technology Assessment, said the current food system leads to global markets that exploit farmers and the poor and can compromise the safety of food.

"The current system leads to a stuffed or starved population," said Patel, who has authored a book by that "Stuffed or Starved" title. "Around 2 billion people in the world are overweight, while almost a billion people are going hungry."

Patel said the global food system leads to the marketing of food that often contains a great deal of sugar and other ingredients that make people who can afford it fat. Meanwhile, many of those who produce the food, including more and more farmers in the United States, have difficulty affording the food to feed themselves and their families.

Kimbrell concurred with Patel's opinion and added pesticides and fertilizers used to increase yields of crops, as well as genetically-modified products, often compromise the safety of food.

"Many have been linked to cancer and other illnesses around the world," said Kimbrell, who has represented clients who have sued Monsanto and other large chemical companies. One of his cases helped lead to the labeling of BGH in milk.

Kimbrell said there are two visions of how people in the world should eat. One he called the "Jetsons' vision," referring to a TV cartoon program, in which, "we eat pills using a knife and fork and Tang."

An alternative vision includes local food, produced and provided at an appropriate scale, by a system that is fair for all and bio-diverse.

"These are the two competing visions of food in the world," Kimbrell said. "We participate in a decision on those two every time we buy food."

Both Kimbrell and Patel said the organic food movement offers an alternative to that "Jetsons' vision."

"I call it organic and beyond," Kimbrell said. "Organic is at the floor level of what we are building. We are going beyond to add other elements to it."

Regulations on what is certified as organic must be maintained, and must resist watering-down pressure from large corporations.

"Walmart can join, but not change the rules. Instead, change its production system," Kimbrell said.

Patel said that while big agribusiness companies control much of the world food system there are pockets of alternatives developing all over the world, including India, Cuba, Africa and elsewhere.

"We should look at what is happening outside this country, as well as within it," Patel said.

Organic Valley is an example of an alternative within the United States, Patel said. "It was started in response to the prices being paid to farmers in the 1980s," he said. "People took power into their own hands."

Patel said, "There is an abundance of organizations and companies that have built alternatives. All we need to do is look at our own history."

Kimbrell said change starts with a change in thinking, "We are not consumers; we're creators," he said. "We can create systems that work better.

"When somebody says, 'we have to progress' as an argument against organic and beyond, ask 'progress toward what?' We determine what is progress."

Both speakers said the 2012 drought and other factors will make the debate over food systems even more important in upcoming months.

Now an activist, Patel has worked for the World Bank and the World Trade Organization, as well as protested against them. His most recent book, "The Value of Nothing: How to Reshape Market Society and Redefine Democracy," has been hailed as a "deeply thought-provoking guide to the way economics works, exploring the recent economic collapse and painting a clear picture of how to achieve a fairer, more sustainable economy and society. He is also the author of the book "Stuffed and Starved: The Hidden Battle for the World Food System."

Kimbrell was named by the Utne Reader as one of the world's leading 100 visionaries in 1994. In 2007, he was named one of the 50 people most likely to save the planet by The Guardian-UK.

His books include 101 Ways to Help Save the Earth, The Human Body Shop: The Engineering and Marketing of Life, Your Right to Know: Genetic Engineering and the Secret Changes in Your Food and general editor of Fatal Harvest: The Tragedy of Industrial Agriculture.

-- Hoffmann has written many columns and features for WisPolitics.com and WisBusiness.com over the years. He writes the GreenBiz column monthly.


Tom Still: Curiosity's landing on Mars is reminder of Wisconsin space know-how


By Tom Still
MADISON -- The pinpoint landing of the Curiosity rover on Mars, where it will meander across 12 miles of the red planet's surface over the next two years, has revived interest in the exploration of our solar system – and beyond.

Unlocking those secrets and learning how it affects our planet is a job that Wisconsin researchers and companies are well-equipped to handle.

Direct Wisconsin ties to the Curiosity landing begin with Adam Steltzner, a UW-Madison engineering Ph.D. who led the "Entry, Descent and Landing" team that figured how to bring the rover from a speed of 13,200 miles per hour to a safe stop on the surface. Surviving the mission's "seven minutes of terror" was Steltzner's challenge.

Marquette University graduate Kathryn Weiss monitored the flight software and avionics of the spacecraft as it entered the Martian atmosphere.

UW-Green Bay researcher Aileen Yingst, the director of the Wisconsin Space Grant Consortium, is the deputy principal investigator for Curiosity's Mars Hand Lens Imager camera. It's an instrument so powerful it can return images of individual grains of sand on the planet's surface. Yingst has already begun analyzing images returned to the Jet Propulsion Laboratory in California.

Beyond the Curiosity mission itself, there are many other examples of why Wisconsin's aerospace research base has built global credentials.

The UW-Madison Cooperative Institute for Meteorological Satellite Studies is the leading source of satellite weather data in the world. The National Oceanic and Atmospheric Administration recently renewed a $60-million contract with the institute.

The UW-Madison College of Engineering has longstanding ties into NASA and space science. That includes its Wisconsin Center for Space Automation and Robotics and its work around development of helium-3 energy technologies.

The Madison campus also has a Space Science and Engineering Center as well as a highly-rated astronomy department.

The university is also home to the multi-national IceCube project. Completed in late 2010 at the South Pole, IceCube is the world's largest neutrino observatory. It was built at the cost of $271 million over 10 years to find extremely high-energy neutrinos – tiny subatomic particles – originating from supernova explosions, gamma-ray bursts and black holes. Scientists believe it will greatly expand knowledge of astrophysics and "dark matter."

Yingst's work at UW-Green Bay is indicative of other work throughout the UW System. Researchers at UW-Stout, UW-Oshkosh, UW-Platteville and UW-Milwaukee are also engaged in aerospace R&D through projects as diverse as rocket fuel propellants to sensors, composites and even clothing.

An example of a successful private contractor with NASA is Orbital Technologies of Madison, which has won more than $150 million in grants and contracts over time. It's a prime example of R&D yielding products and jobs.

Look for the data sent home by the Curiosity rover to be examined by scientists in Wisconsin, who will help analyze what it means to people on earth – and the future of space exploration.

With manned missions to Mars possible, finding water, energy and carbon on the planet is essential for determining whether the planet ever supported life. Curiosity's landing site of Gale Crater has rock formations that suggest water once flowed through the area. The rover's science kit, including laser and X-ray instruments, will study the soil for bio-signatures and take atmospheric and radiation measurements.

From the dawn of the space program in the 1960s until now, Wisconsin scientists and astronauts have played a major role. Who knows? Maybe there's a bit of Badger red on the red planet.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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Friday, August 3, 2012

Tom Still: Reliable power is part of Wisconsin's appeal to attracting, growing companies


By Tom Still
The lights went out last Tuesday in India. From its eastern border with Myanmar to its western frontier with Pakistan, the electrical system failure spread across 2,000 miles and left 670 million people -- nearly 10 percent of the world's population -- without power.

The outage was so extensive that trains sat motionless on tracks, miners were trapped underground, traffic slowed to a crawl and the nation's fragile power grid was once again exposed in ways that may even threaten India's coalition government.

Fortunately for Wisconsin, a miniature version of India's Black Tuesday is becoming less likely by the year. That's thanks to factors that are modernizing the state's electrical power grid -- and ensuring greater reliability for residential and business users.

Think back to the late 1990s, when Wisconsin's electric utilities asked customers to reduce their use of electrical power in order to prevent system failures in the summer. The prospect of brownouts or even blackouts was real because the power grid itself, a complicated infrastructure designed to move electrons safely and efficiently from point to point, was incapable of handling heavy loads.

The creakiness of the system not only threatened homeowners and key public facilities such as hospitals and schools, but businesses that were asked to use less power. Some installed costly backup generators rather than put their businesses at risk.

That began to change with 1999 when major utilities were ordered by federal regulators to form independent regional companies to control electric transmission lines. It was envisioned as a way to force economies of scale, including more efficient transmission of power across state and even national borders.

That order led to the birth of American Transmission Co., the nation's first for-profit, multi-state transmission utility. Owned by 29 investor-owned utilities, electric cooperatives, municipal utilities and local governments in four states, its holdings include 9,440 miles of lines, 519 substations and a number of projects in the works.

American Transmission Co. has invested $2.7 billion in Wisconsin, Michigan, Minnesota and Illinois since 2001 and plans to spend another $4 billion in the next decade, with the bulk of it related to upgrade existing lines, building new lines, improving substations and reducing energy losses associated with transmission.

Under construction is the 32-mile Rockdale-West Middleton line in Dane County. On the drawing boards are projects in western Wisconsin, eastern Wisconsin and the area straddling the Wisconsin-Michigan border. The company is also heavily involved in connecting wind energy generation sites in the Plains states to Wisconsin and beyond.

"The improvements ATC has made over the past 10 years were focused on keeping the lights on in Wisconsin and the upper peninsula of Michigan," said Anne Spaltholz, the company's communications manager. "There are some challenges that remain, but there are also some opportunities to improve connections to neighboring systems that will enable more economic movement of power during peak usage times, such as what we're experiencing this summer, and to enable local distribution companies to access high-quality renewable resources in other regions."

In short, Wisconsin's power grid has held up so far this summer – even with a spate of 100-degree days. With a more efficient transmission system, electrons can flow to where they're needed and the state can tap into energy from elsewhere. In a state that must import electrical power to meet all of its needs, that reduces long-term need for costly new plants at home.

Energy costs in Wisconsin have climbed, but so has reliability. There have been no reports of extended or widespread power outages in the state this year, nor does it appear that local utilities enacted emergency measures to curtail power use.

In a global economy with myriad competitive factors, energy reliability matters. If you're a business owner, especially one with technology systems that require constant "up" time, you need to know the power will stay on. That's not the case in some developing nations, as evidenced by India's mega-blackout, but it's a selling point for Wisconsin.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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Wednesday, August 1, 2012

Josh Morby: What will affect food prices this year? It won't be ethanol


By Josh Morby
With the drought conditions continuing throughout much of the country, we already know that this year's corn yield will be down, potentially resulting in price increases for animal feed and consumer food products.

Ethanol opponents are already fingering the industry as one of the contributors to these expected price increases. In fact, they're in the process of trying to convince the Environmental Protection Agency (EPA) to waive the existing Renewable Fuel Standard (RFS) as a means to keep the cost of animal feed down for livestock producers.

This mindset is absolutely wrong. The ethanol industry should not be held responsible for the consequences of this year's unusual weather patterns. In fact, the RFS already addresses this issue.

A bipartisan mechanism included in the December 2007 Energy Independence and Security Act provides a safety net for ethanol producers and blenders in years where market conditions are not advantageous. The ethanol industry has slowed production from a peak of 14.6 billion gallons annually to the current 12.3 billion gallon operating rate, showing that the system is working.

All ethanol produced in the country is assigned a Renewable Identification Number (RIN). These numbers are, on a very practical level, an accounting mechanism. They ensure that ethanol blenders are implementing the mandated amount of biofuels into our nation's fuel supply, and they allow for the tracking of every gallon of ethanol from producer to blenders and even fuel exporters.

Producers assign the number at production, which is then reported to the EPA. Through the entire process, every time ownership of ethanol changes, the number is also transferred with it. Eventually, once the ethanol is blended into gasoline, the number is turned into the EPA to prove compliance.

For 2012, the EPA is requiring that renewable fuels account for 9.23 percent or 15.2 billion gallons of the fuel produced in the United States this year. This is in keeping with the mandates set forth in the Renewable Fuel Standard (RFS2). That means that every gallon of those 15.2 billion gallons has its own, unique 38-character number.

During the previous few years, the ethanol industry has produced more ethanol than what is mandated in RFS2, resulting in the accumulation of excess RINs. This situation is not only acceptable, but was anticipated within the RFS2.

Blenders are able to hold up to 20 percent of the current year's mandate level. These RINs can be banked for future use or sold. This mechanism is essentially a safety net, and it allows blenders to shift that portion of the mandate compliance over a larger period of time.

Holders of RINs have developed a swap market, and RINs can be sold from one blender to another. The price of an individual RIN fluctuates, depending on market demand within the industry. This is perfectly logical and legal. Blenders can turn in RINs from periods when production exceeded the mandate in lieu of actually blending more fuel.

Like any market, RINs are a commodity that becomes more valuable when blending returns become more unfavorable, such as what is happening this year. Because yields will be reduced, corn will be more expensive.

Based on weather factors, yields, and demand for corn, the gallons of ethanol produced is likely to continue its trend downward, prompting blenders to use their banked RINs to meet the RFS2 requirement this year.

That means that while there will be factors affecting the cost of food in 2012 and well into 2013, ethanol production is not among those factors. In fact, the ethanol industry has been watching this situation very closely to avoid any increase in fuel costs for American consumers as we work through the aftereffects of the unusual growing season this year.

-- Morby is the executive director of the Wisconsin Bio Industry Alliance. Follow him on Twitter @WBIA or at www.wisconsinbioindustry.com.


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