India has a high untapped bioenergy potential. Some of the bottlenecks that have impeded segment growth are feedstock supply issues, high capital requirement and techno-economic barriers. However, the past few months have witnessed a host of measures being announced by the government to promote the segment. These include continuation of the National Bioenergy Programme for the period 2021-22 to 2025-26, new targets for ethanol blending and a focus on biomass pellet co-firing in thermal power plants. Leading players in the bioenergy segment share their views on the challenges, opportunities and outlook for the segment.
What are the key reasons for the limited uptake of bioenergy in India?
Bioenergy includes biofuels (ethanol), bioCNG, bioLNG, biodiesel, biohydrogen and briquettes/pellets. A policy regarding these has been rolled out by the government and well received by the industry. Following the policy impetus, we are seeing positive traction from the industry and there has been a surge in investments. State-of-the-art technologies for many of these clean fuel solutions are now ready to be offered at scale. And, significant investment is already lined up for these clean fuels.
One of the limitations has been aggregation of feedstock as the agricultural market is fragmented in India. There are a few companies which are trying to fill the void with new-age business models and last-mile farmer engagements. The farmer producer organisations (FPOs) with legal structures are mushrooming across the country and can be roped in to play a vital role in the supply chain to provide a platform while generating additional income for farmer groups. The aggregation enabled through FPOs can provide the required comfort for project developers and investors to support the bankable agreements.
The residue from bioenergy operations can be a valuable organic fertiliser. It can reduce chemical fertiliser usage while reducing imports. In addition, organic fertiliser acts as carbon going back into the soil for regeneration and carbon sequestration, providing future security for farmer incomes and providing resilience to climate change.
Availability of biomass does not directly translate into supply of biomass. India generates a minimum of 235 million tonnes of biomass residue every year. Notably, 100 per cent utilisation of this surplus crop residue can meet 17 per cent of the country’s energy needs. However, over 70 per cent gets burnt or wasted due to a combination of reasons.
A deep dive into the agricultural biomass segment in India indicates that supply chain inefficiency has created twin problems of wastage and pollution. The problems are:
- Fragmented rural sources: Small and spread-out landholdings make aggregation difficult
- High cost of logistics and storage
- Low farmer incentives
- Market access: Inability of rural suppliers to have direct access to industrial buyers
While the available potential is immense, we have to set up reliable infrastructure that is able to supply this biomass on a sustained basis. Viability of investments being made towards bioenergy generation and usage depends heavily on the reliability of this supply chain.
Lt Col Monish Ahuja (Retd)
The traditional use of bioenergy in developing countries is in cooking and heating. This amounts to suboptimal utilisation of biomass, which is in fact an excellent enabler of net zero emissions by the energy sector. However, there are a few barriers that need to be addressed for biomass to be used effectively.
- Policy ambivalence
- Economic and financial barriers
- Lack of necessary infrastructure and technology at affordable rates
- Ineffective supply chain
- Lack of public awareness
Project 42, which was recently submitted to the government, solves all these problems by innovating the financing models and deploying 11 different technologies. The need of the hour is to change the way biomass is used. This can be achieved by bringing in advanced technology to generate electricity from biomass, make compressed biogas (CBG) and 2G ethanol, or use it as a fuel in co-firing, etc. Steam-as-service (SAS) is a way by which biomass, in loose or densified form, is used to replace fossil fuel across industries in India and globally. This is contributing significantly towards the decarbonisation of industrial steam energy requirements. Punjab Renewable Energy Systems Private Limited (PRESPL) is a market leader in the innovative business model of SAS. Sustainable aviation fuel is another example of clean fuel. It has good potential to replace petroleum-based fuel and can help in bringing down GHG emissions.
What have been the major initiatives taken in the past few months in the bioenergy segment? Will they be successful in addressing the issues plaguing the segment?
Green investments and climate finance can act as catalysts for bioenergy solutions. Akin to innovative financial instruments, government support and multilateral development institution guarantees have accelerated the growth in the solar segment. Similar interventions for bioenergy hold the promise for the segment to take off over the next few years. The bioenergy policy needs to be comprehensive, covering all the clean fuels and should be regularly finetuned to meet the market expectations in a bid to encourage investments in the sector.
At the macro level, the initiatives can be listed in two categories:
- Policy push: The central government as well as several state governments are pushing the envelope on the policy side. A policy to drive investments, usage and scale in this space is now in place. The National Biofuel Policy, SATAT, co-firing and blending targets are all a part of this push.
- Investments: We see several new investments being committed in projects such as CBG, second-generation ethanol, and sustainable aviation fuels. The scale of these investments is potentially a needle mover for the bioenergy sector.
Lt Col Monish Ahuja (Retd)
The noteworthy initiatives announced to encourage the bioenergy industry are as follows:
- Central Financial Assistance (CFA) for briquettes/pellets manufacturing and biomass (non-bagasse)-based projects.
- CFA of Rs 0.9 million per MTPH to be disbursed to briquette/pellet manufacturing plants (maximum CFA of Rs 4.5 million per plant)
- CFA of Rs 4 million per MW (installed capacity) to biomass (non-bagasse generation) cogeneration projects (maximum CFA of Rs 50 million per project)
- On November 2, 2022, the MNRE notified the implementation of the National Bioenergy Programme, which will comprise two phases. For the first phase, a capital allocation of Rs 8,580 million has been approved.
- The Ministry of Petroleum and Natural Gas (MoPNG) has approved a new pricing formula for CBG. It will be priced at 80 per cent of the gas station sale price, which is higher that the previously announced pricing. Thus, this should further galvanise investments in the CBG sector for production.
- Prime Minister Narendra Modi inaugurated the first 100 per cent rice paddy straw to 2G ethanol plant set up by IOCL with indigenous technology from PRAJ Industries. It is an innovative and path-breaking initiative. This is in addition to the 10 per cent ethanol mix in petrol which has been achieved by India with an ambitious target of 20 per cent ethanol mix by 2025.
- Active engagement among various stakeholders by the Confederation of Biomass Energy Industry of India has seen a committee being formed jointly by the Ministry of Agriculture and Farmer Welfare and the MoPNG, thus finding synergies in project and scheme implementation.
- A recent announcement by Petroleum Minister Hardeep Singh Puri about forming the Global Biofuels Alliance akin to the International Solar Alliance under the G20 framework is a welcome move. It is expected that India will lead the world to develop this segment.
What potential do you foresee for bioenergy application in the green hydrogen, round-the-clock (RTC) and corporate PPA markets?
Green hydrogen holds significant promise for the energy transition goals that India has committed to fulfil. There are different bioenergy technologies for green hydrogen at various stages of development. Grassroots Energy is developing biohydrogen from varied agricultural sources using the proprietary microbial approach, which is the least energy-intensive and most cost-effective option. Currently, Grassroots Energy is pursuing feasibility studies in the UK and India with encouraging results.
In the RTC segment, there is room for biogas to electricity conversion which can complement solar to generate 24×7 electricity. Peak power supply plants can be cost effective for this 24×7 electricity generation. While wind energy and battery storage are currently looked at as an add-on solution to solar, biogas is an unexplored area in the Indian context. Biogas to electricity can be a cost-effective option over the expensive battery storage alternative. Districts with high biomass and solar potential can be earmarked for provision to feed in the grid.
Corporate captive plants for biogas, biohydrogen, biofuels and briquettes/pellets or PPAs with private companies can be a significant risk mitigation tool for energy transition in the industry. Like solar was adopted with rooftop, RECs and feed-in options, bioenergy can act as an alternative option in the energy mix for the industry. These bioenergy-based clean fuels can be generated closer to the place of consumption of corporate end users, providing resilience and, price stability and reducing the risk of international supply chain challenges and round-the-year availability. For example, the policy to use 5 per cent briquettes/pellets along with coal is a promising start in this direction.
The biomass opportunity in our country is big enough to potentially power a $40 billion economy. The 235 million mt of surplus agri-residue available in farms annually is equivalent to 125 million mt of coal or 600 million barrels of crude oil, which is nearly 25 per cent of India’s oil imports. To realise this opportunity, we need to establish an end-to-end farm-to-fuel ecosystem. Given the tenuous nature of rural-industrial connect, this would require enormous efforts to organise and enable all stakeholders in the biomass supply chain.
Bioenergy is unique in the context of being a green energy source that can herald social change. Participation of farmers can lead to the development of rural businesses that can act as an integral part of the bioenergy supply chain. A participative model that brings together farmers, transporters, small rural businesses and large industrial consumers could integrate the fragmented rural participants with the industry and create one seamless supply chain. This is where corporate participation can drive change. BiofuelCircle plans to create 1,000 such rural franchises over the next five years. Be it aimed at green hydrogen or any other end use, the supply chain will still be the same.
Lt Col Monish Ahuja (Retd)
There is immense potential for bioenergy application in green hydrogen, RTC and corporate PPAs. Two promising projects in the nascent phase are green hydrogen mobility projects in Leh for implementation in fuel cell buses and the Kawas green hydrogen blending with natural gas project in Gujarat to cut the dependency on natural gas. Further, RTC power projects are at preliminary stages of development. Mitsui is planning to invest in ReNew Power’s RTC venture consisting of one solar storage farm and three wind farms. These projects can also act as science-based technology initiative projects that help the company in ESG reporting. In the corporate PPA market, companies such as Dalmia Cement, Tata Motors, Accenture and Starbucks have announced RE100 initiatives. Green trading mechanisms and markets have also been launched to encourage companies to procure renewable power through RPOs.
Biomass to electricity will be the single largest game changer in the RTC segment and the corporate PPA market as it guarantees true RTC and grid stability, with clean green energy and more importantly decentralised renewable power projects. These are based on the principle of equitable distribution of wealth, as the entire agri-sector including farmers get involved in the bioenergy projects. Biomass to green hydrogen is one of the five ways to produce green hydrogen and this will surely see rapid growth in the next decade with many innovative projects getting implemented.
With the focus on clean mobility, what is your outlook for uptake of biofuels and ethanol in the near future?
The bioethanol segment has already made rapid progress especially by using waste from the sugar industry. In addition, the upcoming 2G/3G technologies can use a diverse range of agricultural residues, overcoming the energy versus food debates. Thanks to the favourable policies, India is on course to meet the blending targets ahead of schedule in this segment.
Regarding clean mobility, bio-CNG can play an important role in the energy transition of the industry. We have seen most of the leading automobile manufacturers roll out CNG vehicles and there is a good market response for the same. Under the SATAT scheme, plans are to a provide platform for 5,000 plants to complement imported natural gas. Over the next few years, bio-LNG infrastructure can provide solutions to long distance trucks and buses. Likewise, hydrogen (including biohydrogen) can be an alternative for EVs overcoming the range anxieties and avoiding the need for battery replacements. Multiple manufacturers are waiting for hydrogen infrastructure to be developed for the launch of the products.
In combination with electric, biomobility holds potential for transformation in the transport sector. I am particularly excited about its potential to transform rural mobility. Local generation and local end use of biofuels will help create economic circles of self-sufficiency for energy generation as well as mobility. Not only will it help create more rural employment but also reduce fossil fuel dependence and imports of fossil fuels.
Lt Col Monish Ahuja (Retd)
The outlook for clean mobility using biofuels is quite bright as the transportation industry contributes about 6.3 per cent to India’s GDP, but a disproportionate 13.2 per cent to CO2 emissions. EV30@2030 is India’s commitment towards clean mobility under the UNFCCC with focus on shared mobility and penetration of public transport. In this respect, after Covid-19, organisations across India have been setting up robust supply chain management systems and to support it we need strong road connectivity with better CO2 emissions regulations. This includes the change from BS-IV norms to BS-VI norms, production-linked incentive schemes, FAME II and other biofuel policies, etc. There needs to be focus on advanced biofuels and storage alternatives such as hydrogen fuels, sodium-ion batteries, etc.
According to the Ethanol Blending roadmap 2021, the target for blending with petrol stands at a ratio of 20 per cent by 2025. With this scheme, approximately $4 billion per year can be saved. To attain the blending ratio, more maize and sugarcane production needs to be encouraged, in a manner that does not lead to food security issues. For example, ABRBPL in Jorhat, Assam, is producing 2G ethanol based on bamboo plantations.
My outlook towards biofuels and ethanol is only northwards and upwards. I am very enthusiastic regarding the manner in which the biomass-bioenergy-biofuels sector has now become the sunrise sector in renewables. The next two decades will lead to rapid global growth for bioenergy and it will become the mainstay for sustainable ESG-compliant renewables wherein hard-to-abate sectors will find energy alternatives from the bioenergy segment.