Sustainability Trends 2024: The focus of the Indian biofuel industry must be to evolve into a self-sustaining one to ensure long-term viability rather than being merely driven by short-term gains
Decarbonisation is pivotal to arresting global climate change. Through the substitution of fossil fuels with cleaner alternatives like biofuels, the production of copious amounts of greenhouse gases that are responsible for trapping heat within the earth’s atmosphere can be drastically reduced.
It is no surprise then that, as per some estimates, the demand for biofuels in developed countries is expected to rise to 5700 million litres by 2024.
India, too, with its burgeoning population, robust economic development, and determined approach towards achieving carbon neutrality, will have a high demand for cleaner substitutes for fossil fuels in the years to come.
Although electrification efforts in sectors such as the railways, which were once heavily reliant on diesel and coal, have been extremely successful in moving them away from fossil fuels in India, there is still much to be done in terms of decarbonising other industries and modes of transportation in the country.
In my opinion, 2024 will mark the start of a new era in India’s climate-conscious journey towards attaining net-zero carbon emissions through several developments in the biofuel industry and consumption. Some of the more prominent initiatives that will mark 2024 are as follows:
Collaboration and conducive policies to accelerate biofuel adoption
Last year, the Global International Biofuel Alliance was launched. I foresee this alliance fostering symbiotic collaborations between the member countries through 2024 and beyond, which will facilitate a cross-pollination of technologies and know-how across international borders. Successes in terms of policies in other countries can be used to formulate our own biofuel-related policies and regulatory initiatives.
By learning from more mature biofuel markets and implementing these lessons while shaping India’s biofuel policies, the resulting conducive regulatory support will act as a catalyst for the adoption of cleaner fuels.
The transition will begin to take place once these policies are introduced and begin to take effect in the country.
Increased blending of fuels will be explored.
Blending fossil fuels is a rapid way to drive down fossil fuel consumption in vehicles because conventional internal combustion engines need minimal modifications to burn these sources of energy.
Last year, petrol with a 20 percent blend of ethanol was launched in a pilot programme introduced in limited fuel stations spread across eleven states of the country. This is an increase of 10 percent as compared to the blend that has been on sale across the nation for some time now.
It will not be long before blended diesel, too, makes its way into the markets. The aviation industry, which has long been regarded as a significant contributor of global warming, is also exploring a blend of ethanol to reduce its consumption of fossil fuels.
Just like with vehicles, thermal power stations are increasingly blending coal with biomass fuels like pellets and briquettes to reduce their fossil fuel consumption.
The momentum of these initiatives is bound to grow during the course of 2024.
Rural India Will be the Early Adopter for Biofuels in India
Agricultural waste and other organic matter are the prime feedstock to produce biomass-based biofuels. Therefore, with such proximity to the source of raw materials, it is only inevitable that rural India will be the first beneficiaries of these clean fuels.
Hence, I foresee farm equipment like tractors, harvesters, and the like moving away from diesel and using biofuels like compressed biogas (CBG) instead. Similarly, with the recent trend of industries migrating away from the cities and into rural India, they too stand to benefit from a seamless transition to biofuels by virtue of being close to the source.
Besides, even if fossil fuels manage to reduce consumption by just a margin this year, it is most definitely a step in the right direction.
Decentralisation of biofuels
The energy industry has witnessed a gargantuan shift from an exclusively centralised sector to one that has evolved into a hybrid model, incorporating the central grid that is now coupled with various decentralised avenues of energy generation like roof-top solar and low-capacity wind farms that continue to be set up across the country.
We shall soon witness a similar transition when it comes to the way biofuels are produced and consumed in India. Facilities producing biofuels like CBG and briquettes will be located closer to organic waste generation points like farms, thus creating smaller local ecosystems for the production, sale, and consumption of these green fuels in addition to bustling rural economies.
Digital solutions will lead to efficient price discovery.
To drive the adoption of any new fuel, it must be available to the consumer at an attractive cost. The pricing of fossil fuels is governed by several indicators, like the Henry Hub for gas prices and the prevailing international prices of crude oil and coke. Several mechanisms have gained prominence over the years for their efficacy and have matured to become the accepted benchmarks for pricing fossil fuels across the world and in India.
With biofuels, however, this is a major challenge. Unlike conventional fuels, the infrastructure for biofuels is still being set up, and arriving at an adequate price for them is a risk that players in the industry continue to face. Furthermore, the mechanisms for pricing biofuels are still being developed.
Digital platform-based energy markets have achieved significant success in creating a local price discovery in India for natural gas and liquified petroleum gas traded in the country. Similarly, an Indian company has successfully demonstrated the efficacy of such a system for biofuels, with 7600 trades accounting for 3.8 million MT published so far on its digital platform.
Thus, these platforms can be effectively used to discover localised prices for India based on domestic supply and demand characteristics. This will also help insulate this indigenous biofuel market from price shocks brought about by global geopolitical situations in the future.
In addition to the right pricing, successful adoption of a fuel directly depends on the ease of its availability and the consistency in its quality and characteristics. Digital platforms can connect feedstock producers to processing companies, who can then further connect with the end users who will consume the biofuels. By incorporating other digital solutions like blockchain technology, the quality of the biofuels can also be verified prior to purchase.
Green Hydrogen and Green Ammonia
The government is strongly driving Green Hydrogen and Green Ammonia as fossil fuel substitutes, and we shall see some of these efforts bear fruit in 2024.
A truck designed to run on hydrogen was already unveiled last year, and it is now only a matter of time before other manufacturers follow suit.
Although electrolysis is the preferred technology being used to extract Green Hydrogen today, there is another method of extraction that exists that uses methane instead. However, till date, the methane used for this extraction process comes from natural gas, and therefore the resulting hydrogen is termed 'grey' instead of ‘green’ since the feedstock is a fossil fuel. If we replace this natural gas with CBG, then the hydrogen extracted can be classified as green.’
Although this latter technology is still quite nascent, my hope is that it gets explored more thoroughly and will, in my opinion, be more beneficial for a country like India which faces tremendous challenges dealing with the responsible disposal of organic waste. Additionally, the complexities involved with methane-based extraction are much lesser than those with electrolysis and could therefore prove to be more cost-efficient in the long run.
Carbon Markets and Environmental, Social, and Governance (ESG) instruments
Decarbonisation efforts, coupled with the transition towards renewable energy and biofuels, require the setting up of extensive infrastructure and rampant re-engineering of existing technologies to be able to run on these new-age fuels.
As can be imagined, these initiatives will cost trillions of dollars, and it is ESG instruments like Green Bonds that will help fund these endeavours to arrest global warming.
With the government releasing its Green Bond Framework in 2022 and with these mechanisms mentioned in last year’s budget, I would expect to see a lot more traction happening in these realms through the current year.
India’s foray into carbon markets began last year with the government announcing its intention of creating an Indian Carbon Market that will cover voluntary as well as compliance-based transactions. Although the compliance market is still some time away, we will certainly see significant growth in the voluntary carbon market through the current year.
Way forward
The focus of the Indian biofuel industry must be to evolve into a self-sustaining one to ensure long-term viability, rather than being merely driven by short-term gains. Achieving this aspiration will attract investors into the industry, as they will be assured that their capital will be put into a segment that is future-ready and sustainable.
The biofuel industry must also continue to be a segment that enjoys the participation of many people and players, which will continue to foster a healthy mix of competition and collaboration within the industry. These attributes will make shareholders feel like they are partaking in a burgeoning industry at the right time.
(Suhas Baxi, Co-Founder and CEO, BioFuelCircle )