Business Models for Bio-hubs in Canada and Australia

The development of a circular bioeconomy presents a major economic opportunity for several countries as it supports the transition to a low-carbon economy. Though there are multiple sources of clean energy, biomass is the only renewable resource that can substitute the carbon from fossil fuels found in chemicals, plastics, and other products. Access to a consistent, predictable, and competitively priced biomass poses a challenge to bioeconomy development globally, including in Canada and Australia. Centralized collection points, known as bio-hubs, can contribute to stabilizing biomass supply chains and maximizing market value for bio-based energy and products. Despite their potential benefits, challenges such as the lack of suitable locations, infrastructure, and feedstock availability can impede bio-hub development.

Mid 2023, a workshop titled “Business Model for Bio-hubs in Canada” was conducted by Task 43 (Biomass supply) of the IEA Bioenergy TCP to develop a business model for bio-hubs within the broader bioeconomy. The workshop convened nearly 27 invited individuals from various organizations, representing stakeholders across the Canadian bioeconomy, including those from both the supply and demand sides, as well as representatives from policy and academia. A similar workshop was held in Australia, mid 2024, with 16 participants.

This report presents the main conclusions of the workshops.

• Bio-hubs can provide sustainable biomass supply within the bioeconomy by offering services such as feedstock acquisition, conversion, and the production of high-quality bio-based intermediates. They can also serve as a supply buffer to centralized facilities and are effective during periods of lighter or more intermittent biomass supplies.
  However, the development of bio-hubs faces various challenges such as biomass variability, logistics, quality control, emerging regulatory requirements, and financial viability.
• A bio-hub business model can guide their design and operation by promoting strategic partnerships, access to essential resources, optimized operations, robust customer relationships, and effective customer outreach channels.
• Bio-hubs should aim to offer diverse value propositions, including reliable feedstock supply, cost savings, expert guidance, value-added products, optimal biomass conditioning, and comprehensive energy supply solutions.
• Fostering collaboration with industry networks is pivotal in providing expertise and resources, while cooperation with forest owners and operators is crucial for ensuring a stable and consistent biomass supply.
• Connections to capital markets are needed to secure funding, reduce financing costs, and attract necessary investments.
• Research networks also play a key role in advancing bio-hub technology and knowledge, potentially reducing R&D costs, and improving overall efficiency.
• Key customer segments identified include industries with emission reduction targets, energy firms, regional developers, as well as businesses operating in agriculture, forestry, and manufacturing.

Future work will involve refining the business model, with a next step being to estimate costs for each of the elements included and to identify possible revenue streams. Upcoming studies should also aim to engage more stakeholders (in Canada, Australia, and other countries) that design and operate bio-hubs, to validate the business model and demonstrate bio-hub implementation. Lastly, research should explore how investment and relevant policies can facilitate the development of bio-hubs.