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Green dreams often conflict with economic reality
In a contest between government decrees and market forces, the wise bet is on a win by the market.
Our state government has been trying to spur production of diesel fuel made from vegetable oil, and the market is winning so far.
The Port of Bremerton dreams of a “clean technology” center with a business incubator in the South Kitsap Industrial Area (SKIA), but how many of us want to bet against the market?
Market forces that hinder the state’s “biofuels” program also apply to the port district’s plans.
The market for “biodiesel” fuel suffers from too little demand because of the higher price, and the low demand results in few suppliers — which then makes it inconvenient for individuals who may be interested despite the price.
State government set a goal in 2006 of using at least 20 percent biofuel by this June, but fell far short.
The state’s goal applied to government activities rather than private individuals, but having control of the government consumers wasn’t enough to overcome market forces.
Biodiesel costs too much compared to fuel made from petroleum. In the last half of 2008, a blend of 80 percent diesel and 20 percent biodiesel cost 12 percent more than fuel made from crude oil.
When the price of petroleum products soared last year, biodiesel still cost more than diesel fuel made from petroleum.
Because of biodiesel’s higher price, few private consumers have been interested in buying it, so the state’s willingness to buy had a relatively small impact on market demand.
It didn’t help that the state’s largest user of diesel fuel is the ferry system, since some engineering solutions turned out to be necessary before biodiesel can be used without clogging fuel filters.
Even if the clogging problem is solved, the state has decided for the near future to exempt ferries from meeting the goal, since the cost is too high.
Unless the cost difference is eliminated, the state’s goal is not likely to be met in the foreseeable future. Even government occasionally has to pay attention to costs.
There is demand for fuel, but not for more expensive alternatives to petroleum-based fuel.
The Sustainable Energy and Economic Development (SEED) project that the Port of Bremerton has pursued for years also involves an effort to supply an alternative product and spur development of a sector of the economy.
Instead of an alternative fuel, SEED would be an alternative site for business development in the “clean technology” market sector.
In other words, the port district would be trying to lure startup businesses to SKIA as an alternative to anyplace else.
The attraction would be SEED’s business incubator.
If the port can assemble a team of experts to assist entrepreneurs in starting their businesses, then this incubator might make it more likely that a startup would survive.
People with business ideas who need the expert help but cannot afford to hire their own experts may find it worthwhile to come to South Kitsap to get started, even if this is the last place they would have considered for their business.
The concept seems simple enough. Government pays the operating costs of the business incubator as a way to make the SKIA suitable to meet the demand for a business site.
There may some day be enough startup businesses paying rent for spaces in the port’s building so that the cost of construction can be recovered.
But the cost of the incubator’s expert assistance would continue to be paid with public funds for the foreseeable future.
So, what is the probability that the demand for a spot in a business incubator is high enough to make this expenditure of public funds worthwhile?
If there were a big demand by new or existing businesses for space in the SKIA, the port wouldn’t be dangling the incubator as a lure.
And if the lure isn’t sufficient, the lack of demand for a spot in the SKIA cannot be overcome.
Robert Meadows is a Port Orchard resident.