Views of Pankaj Jain: “This is an exciting time to enter the CBG industry”

Pankaj Jain, Secretary, Ministry of Petroleum and Natural Gas

Compressed biogas (CBG) is seen as a game changer in the clean energy and transportation space. It has the potential to achieve multiple objectives including increasing the share of renewables in the energy mix, reducing import dependence, generating employment opportunities in rural areas, mitigating pollution caused by vehicular emissions and stubble burning, and managing urban waste. Furthermore, it can contribute to India’s climate change goals. In view of this, the Ministry of Petroleum and Natural Gas (MoP&NG) launched the Sus­tainable Alternative Towards Affordable Transportation (SATAT) initiative in October 2018. The primary objective of SATAT is to establish an ecosystem for CBG production from various waste/biomass sources and to promote its use, along with natural gas. Under the SATAT initiative, oil and gas marketing companies are in­viting expressions of interest to procure CBG from potential entrepreneurs. At the recent global conference on compressed biogas hosted by the Compressed Biogas Producer Forum; Pankaj Jain, secretary, MoP&NG, highlighted key parameters that CBG developers should consider before investing in the segment. Jain also discu­ssed the various challenges and opportunities in this space and outlined several supportive initiatives planned by the government. Edited excerpts…

For many years, India has struggled with et­ha­nol blending. In 2013-14, ethanol blending in the country was merely 1.4 per cent. However, we achieved 10 per cent blending last year and 12 per cent this year. Several challen­ges were faced while increasing the blending rates, but appropriate solutions were planned to overcome them. Going forward, the country aims to achieve 20 per cent ethanol blending by 2025-26.

The country’s next priority is to work on new types of biofuels, including sustainable aviation fuel. In addition, the government’s priority is to solve various issues and challenges associated with CBG. There has been a learning curve in this field given that only a few CBG projects utilising different feedstocks have been implemented in the country.

Companies interested in investing in the CBG space in India should consider the following points:

One, the choice of feedstock to be used is key. Companies should ensure that the plant’s de­sign and technology must be capable of hand­ling multiple feedstocks. This is essential for the plant’s viability, flexibility, ability to address seasonality and the nature of by-product, which play a crucial role in the CBG ecosystem.

Two, location is critical for the success of a CBG plant. In terms of location, several parameters need to be taken into consideration. First, how far the plant is from the existing pipeline. Seco­nd, whether the plant involves transporting gas or feedstock. For instance, should the plant be situated near the dumping yard or close to the city gas distribution pipeline? The selection of the location should not be arbitrary or based on the attractiveness of the state as an investment destination. Unlike other industries, the location of a CBG plant is critical to profitability.

Three, CBG players should keep in mind that the feedstock may have alternative uses. Therefore, they should be nimble. Press mud has alternative uses. It is used in brick kilns th­rough briquetting. This can impact the project cost economics if any other industry is ready to pay a higher price for press mud. This parameter may require administrative responses from the state governments.

Four, technology will be a key factor that will impact the viability of CBG projects. Of­ten, even when using the same raw material, the output of CBG plants can vary, hi­ghlighting the importance of efficient technology. To meet the required standards, industry stakeholders should adopt ad­vanced technologies. In terms of technology, the CBG producers should consider using cheap solar power. They should not assume that cheap electricity will be available from the grid as they are unlikely to be charged industrial tariffs. Therefore, reducing electricity costs by using solar power is vital to ensuring the viability of CBG projects.

Five, additional revenue from the sale of green credits will be facilitated by the government. The carbon credits generated by CBG plants can be monetised to improve their financial viability. The recent budget mentioned this mechanism and the Mini­stry of Environment, Forest and Cli­ma­te Ch­ange is working on it. The blending ma­n­dates are being formulated so that the green attribute of CBG can be re­cognised and nurtured from the start till the end.

Six, blending of CBG in the pipeline will be ensured. In this space, some hard de­ci­sions need to be made by the stakeholders with respect to pipeline infrastructure. Whi­le considering grid connectivity, the decision on optimal plant sizing is also im­por­tant. The government is keen to provide so­me support for pipeline infrastructure. However, the government cannot pr­o­mise that the pipeline will reach each plant if it is, say, 100 km away from the grid.

The MoP&NG has issued guidelines for co-mingling of domestic gas to supply compressed natural gas (CNG) to the tra­nsportation sector and piped natural gas for domestic use in city gas distribution (CGD) networks. The aim is to synchronise CBG with CNG in the CGD network for the enhanced use of CBG. Once the CBG blending obligations are implemented, the need for the synchronisation sche­me will reduce. According to me, synchronisation should serve as a backstop. The priority should be to supply CBG to the pipeline.

In addition, if there are issues regarding the long distance between the plant and the pipeline, the producer may decide to supply gas through cascades. Moreover, the producer has the option to open its own outlets if it is more profitable than investing in pipeline infrastructure to connect to the grid.

Seven, going forward, a CBG producer can monetise innovative co- and by-products. One such opportunity is to produce purified carbon dioxide used in the production of dry ice and in various food processing industries.

Eight, CBG producers should synergise with ethanol production. Going forward, ethanol plants may as well be designed alongside CBG plants.

Nine, in terms of pricing, a cost-plus app­roach (regulated tariff) to determine the price of CBG is not recommended. Going forward, there will be a point of time when there will be several buyers and sellers and administered pricing will not be needed. While we do have administered pricing of ethanol from different feedstocks at present, we will have to eventually move away from it.

Overall, to become pioneers in the industry, the CBG producers should aim to gain the first-mover advantage. However, be­fore making the final investment decision in this industry, due diligence is critical as success depends on several parameters. It is unlikely that a single consultant will be able to provide immediate advice on all these parameters. Developers may need to get their hands dirty in the industry, learn from experiences and understand the nuances.

From the government’s perspective, we can anticipate several support initiatives as we are committed to ensure the growth of the CBG industry. The future of the CBG industry is bright given the immense potential in the gas industry in India. Gas is expected to become a major fuel in the country. Currently, we rely on imports for over half of our natural gas requirements. Despite an increase in domestic production, the demand continues to grow exponentially. In my opinion, this is an exciting time to enter the CBG industry.