Market overview: Bioenergy in India

published on 13th February 2020

The Government of India has set an ambitious target of 175 GW renewable power installed capacity by the end of 2022, therefore making it one of the most progressive renewable energy policies in the world. This target aims to install a total of 10 GW worth of Bioenergy capacity. India’s Bioenergy potential is tremendously high and driven largely by overpopulation and vast agricultural pastures. Experts estimate peg this at a total of 25 GW. India is one of the biggest economies with a growing population, big capacities of field and plantation biomass, industrial biomass, forest biomass, urban waste biomass and aquatic biomass. In addition, the demand for electricity is growing every year due to economic growth, increasing prosperity and urbanization, rise in per capita consumption and massive rural electrification infrastructure. Another critical factor to consider is that India is highly dependent on crude oil imports, with an approximately 82 percent of total crude oil imports used to fulfil the domestic consumption demand, which makes this susceptible to price shocks due unforeseen escalations in crude oil prices. Therefore it seems to be only logical to combine the potential in Bioenergy as a cheaper, greener source of power, with the increasing demand for electricity across the country.

Bioenergy so far is especially prominent in rural India since agricultural residues such as straw and cow dung are easily available. As per the Ministry of New and Renewable Energy (“MNRE”), about 32 percent of the total primary energy use in the country is derived from biomass and more than 70 percent of the country’s population, in one way or the other, depends upon it for their energy needs in the rural regions.

However, even though Bioenergy has an important role in rural India, it is not yet as attractive as other renewable energy sources in the rest of the country.

What are the problems facing India?

The Indian Government does realize Bioenergy’s potential as a cheap renewable source of energy and has initiated a number of programmes for the promotion of efficient biomass conversion technologies. Nevertheless, in the current scenario, bioenergy remains an under-explored and under-utilized sector.
Generic barriers, mostly institutional, technical and financial manner, made it difficult for India to develop a Bioenergy footprint. The initial investment required for Bioenergy technology is high. This along with the fact that Indian Government follows long and complex licensing requirements and environmental pollution standards, make it in general difficult for new competitors to enter the market. Additionally, one problem regarding biomass from agriculture is that it is usually just available for a short period after harvesting. Therefore market mechanisms have to be developed for procurement and safe storage of biomass in an efficient way, which ensures a solid supply throughout the year.

The Indian Government realizes this and is working on necessary changes to achieve their target. For this the Indian Government has released, amongst other things, the “National Policy on Biofuels, 2018”. It anticipates that biofuel may be one of the ways towards independence from crude oil, its unpredictable price escalations and as a means to tightening automotive vehicle emission standard to curb air pollution. Adopting biofuels as an alternative source of energy shall significantly improve farmers’ income, generate employment opportunities, reduce imports etc. as well as align the country towards a more greener energy goal. MNRE has set an indicative target of 20 percent blending of ethanol in petrol and 5% blending of biodiesel in diesel to be achieved by 2030. The focus for development of biofuels in India shall be to utilize waste, degraded forest and non-forest lands and cultivation of shrubs and trees bearing non-edible oil seeds for production of bio-diesel. In India, bio-ethanol is mainly produced from molasses, a by-product of the sugar industry.

The extraordinary role of Sugarcane

India is one of the biggest producer of sugar in the world. In fact India has approx. 550 sugar mills all over the country. In total MNRE is expecting about 5,000 MW power which could be generated through bagasse based cogeneration in these sugar mills itself. To realise this, sugar mills must adopt technically and economically optimum levels of cogeneration meant for extracting power from the bagasse produced by them.

The Government of India has introduced, in May 2018, a new scheme to support biomass cogeneration in sugar mills and other industries in order to boost the biomass energy production in this particular sector. This is to be achieved via progressive higher steam temperature and pressure and efficient project configuration in new and existing sugar mills, which will produce electricity and steam for their own requirements and sell surplus electricity to the grid. At the same time, the by-product of this sugarcane-crushing process can be used for manufacturing ethanol, which is used nowadays as environmentally friendly fuel. This Scheme has the objectives of promoting efficient and economic use of surplus biomass for power generation, maximizing surplus power generation from sugar mills using improved technologies and promoting technologies of co-generation for supplementing conventional power.