Verbio AG, headquartered in Germany, is one of Europe’s leading biofuel producers. Verbio India is a 100 per cent subsidiary of Verbio AG, incorporated in 2016. Although it started showing interest in India in 2014, Verbio’s final decision came via the investment facilitation programme of the Indian embassy in Berlin, “Make in India Mittelstand”. In an interview with Renewable Watch, Ashish Kumar, managing director, Verbio India, talked about the company’s business model, the experience gathered from its project in Punjab, the challenges in the sector and some policy suggestions to the government. Edited excerpts….
What are the key services/products offered by Verbio India?
Verbio has developed and proven its patented technology with best-in-class parameters for the conversion of agri-residue (straw) into biomethane on an industrial scale. Verbio has set up its first, and Asia’s largest, straw-to-biomethane project in Punjab’s Sangrur district.
Automotive-grade biomethane and carbon-rich fermented organic manure (FOM) are our two major products in India. Globally, our product portfolio comprises renewable natural gas, bioethanol, biodiesel, biofertilisers (FOM) and value-added by-products.
What is the organisation’s current business model? How will it change over the years?
Verbio’s first project in India is a 100 per cent self-financed proof of concept with a fully integrated value chain, based on the conversion of paddy straw, a primary agri-residue largely burnt in the northern states, into biomethane/compressed biogas (CBG). For the first time in India, it has been commercially demonstrated on an industrial scale that Verbio’s technology can convert the notorious stubble into an automotive-grade fuel. The project has been operational since May 2022 and was formally inaugurated by the minister of petroleum and natural gas, Hardeep Puri, and the chief minister of Punjab, Bhagwant Mann, in October 2022.
Due to the nascency of the sector and its gradual policy development, the CBG business model also has an evolving character with improving economic viability. Out of three (or four) potential revenue streams, in India, we have achieved significant stability with respect to commercial conditions from CBG sale, though a progressive policy framework is still awaited for the monetisation of FOM and the introduction of carbon credits across the value chain. Such policies will eventually lead to the creation of a serious, sustainable and economically viable CBG business case. Additional revenue streams from carbon dioxide valorisation and other by-products could be subsequently addressed.
Currently, Verbio’s model is 100 per cent based on the supply of agri-residue-based CBG to the gas retail outlets of Indian Oil Corporation Limited, as part of a commercial agreement under the Sustainable Alternative Towards Affordable Transportation (SATAT) scheme. To further improve offtake conditions, Verbio recently signed a tripartite agreement with GAIL-Torrent, a CGD operator. Carbon-rich FOM is new for farmers and is being disbursed within a catchment area of 30 km at no cost. It is gaining acceptance gradually.
A policy for FOM disbursal, which can effectively combine the rationales of an acceptance period and soil health improvement with commercial realisation via the provision of market development assistance (MDA) directly to CBG producers, is urgently needed. The effective yet pragmatic implementation of a carbon circular logistic model will result in FOM getting delivered back to the farms of origin of the agri-residue, thus closing the carbon cycle. The Indian government’s decision on FOM monetisation will be the next upgrade for the existing CBG business case, to be followed by the implementation of carbon credits.
What are the key highlights of the bio-CNG plant developed by Verbio India in Punjab?
Over the last three years of our experience in India, the following were the key highlights:
- Fully integrated up-, mid- and downstream implementation of a CBG value chain on an industrial scale with our patented and proven advanced straw-to-gas technology; technology and operations ownership with 100 per cent self-financed investment.
- At full capacity, 120 KT of agri-residue consumption to produce 33 MT of biomethane/CBG per day and 650-750 MT of FOM per day.
- Implementation of multiple feedstock-based technologies and successful production of CBG from residues of paddy, wheat, maize and sugarcane, with other feedstock types currently under testing.
- Creation of a 100 per cent self-owned/ operated agri-residue supply chain involving the creation and integration of processes and infrastructure for the aggregation, transportation, storage and security of feedstock.
- Direct interfacing with farmers within a catchment area of 20-30 km for both feedstock aggregation and, now, FOM disbursal.
- Implementation of best practices for quality-driven feedstock collection targeting less than 20 per cent moisture. Maintaining high quality standards during aggregation leads to significant yield improvement.
- Achieving zero liquid discharge; the liquid extract from the digestate is reutilised in our process, thereby reducing the freshwater requirement.
- Implementation of 100 per cent green forward logistics for CBG transportation.
In your view, what are the key challenges in India’s CBG sector? How is your company solving these issues?
These are the key challenges from our current perspective, with an overview of how they are being addressed:
- Quality feedstock supply security: We are maintaining our own feedstock aggregation/storage with strong quality control.
- Guaranteed CBG offtake: Direct gas grid injection is the most optimal solution for medium- and large-scale projects. We are in the final stage of concluding our implementation of this, though transfer via cascades will continue for smaller-scale projects, or till the gas grid is built. Balancing proximity to feedstock with CBG offtake is key, though the former is of the utmost priority.
- No monetisation of FOM: We initiated direct disbursal within the catchment area at no cost and received a positive response from the farmers; an active approach with relevant central/state government support for adaptation of fertiliser control order (FCO) norms, acceptance of FOM disbursal and introduction of MDA for FOM directly to CBG production units is also helpful.
- No mechanism of credits on green attributes: We are strongly advocating for the introduction of a policy allowing the export of green attributes with the relevant government bodies and industry associations. Such a move will strongly incentivise investments in the CBG sector in the short- to mid-term, until the “local for local market development of CBG/FOM finds stability.
How can the CBG sector assist in solving the menace of stubble burning?
We need large industrial-scale biomass consumption applications, because the volume of generated surplus biomass is also massive; for example, approximately 18-20 mt of paddy residue is generated annually from 2.58 million hectares of farmland sown with paddy in Punjab alone, which gets largely burnt.
Biofuel production can be the primary biomass consuming application. Large projects can save 40,000-45,000 acres of land from stubble burning. And we need several industrial-scale plants across India.
Biomass-based power generation is another large-scale consumer, but the cost of biomass power is amongst the highest. Its commercial security and economic viability need to be evaluated at a regional level, along with those of state power purchase and distribution companies.
What are your policy suggestions to the government?
We are at an extremely crucial juncture with regard to the take-off of CBG in India, driven by extremely supportive and progressive policymakers from the central ministries of petroleum and natural gas, agriculture and farmer welfare, fertilisers, drinking water/sanitation, and new and renewable energy; as well as NITI Aayog, and the PMO.
The Ministry of Petroleum and Natural Gas has been at the helm with the foundational CBG policy initiatives of SATAT, indexing the CBG pricing to CNG, CBG-CGD synchronisation and removing the taxation bottleneck on CBG-CNG comingling. The CBG sector is still at an early stage, though it shows promise. To stabilise and attract significant investments, we recommend the following measures for the CBG sector:
- Feedstock (agri-residue specific): Introducing strong financial and community-inclusive measures for the promotion of ex-situ crop residue management, ensuring the build-up of a secure and sustainable feedstock supply chain.
- CBG offtake: Build-up of an open access gas grid to guarantee offtake and seamless connectivity to production units, with direct gas injection, achieving maximised value.
- FOM monetisation and disbursal: FCO adaptation for the inclusion of FOM supported by market development assistance; a “carbon” enrichment narrative to be introduced, promoted and integrated within farming practices; introduction of simplified, implementable and producer-friendly procedures for manufacturing, sales and export of FOM.
- Introduction of carbon credits and provisions for export of green attributes: This will attract domestic and foreign direct investment from countries with advanced carbon-neutrality targets, as well as an attractive valuation of green attributes.
- Green financing: Lending conditions need to evolve to “green” with greater awareness of the CBG domain among financial institutions so as to have a realistic understanding of business risk assessment and mitigation.
- Appointment of a central administrative body accountable and responsible for the effective implementation of CBG policy measures at the central and state government levels, and most importantly for efficient and timely coordination between various departments.