Biogas Industry: 500 GW Target By 2030 - Achievable? Experts Decode

Biogas is gaining steam in India, which can be seen by the recent developments like the recent inauguration of the MEPL BioEnergy Biogas Plant and the launch of a decentralised biogas plant at Osmania University. The Bhubaneswar Municipal Corporation (BMC) has also inked a pact with Oil India Limited to help convert the city’s waste to biogas.

According to the IBA (Indian Biogas Association), India generates an average of 500 Million Tons (MT) of agricultural residue annually, and it is not fully utilied for the production of Biogas. It is still a small component of India's mix of renewable energy sources comprising small hydro, biomass, solar, and wind generation, which aim to achieve an overall 500 gigawatts (GW) of non-fossil fuel-based electricity capacity by 2030.

The Government has taken many steps to promote biogas as a fuel source, like setting up the National Bioenergy Scheme in 2021, wherein the government combined various types of assistance to encourage the use of biogas plants. There is also the GOBARdhan plan, which is an umbrella initiative that covers all schemes and policies that promote the conversion of organic waste to biogas or CBG. The National Project on Biogas Development (NPBD) was launched in 1981-82 and aimed to promote family-type biogas plants for cooking and lighting in rural areas.

As part of the Government's continuing efforts, the GOI also provides central financial assistance (CFA) for small biogas plants, with the amount based on the plant's size. Recently, the Government introduced the Sustainable Alternative Towards Affordable Transportation (SATAT) scheme utilising Compressed Biogas (CBG). This scheme encourages entrepreneurs to set up CBG plants, produce CBG, and supply it to Oil Marketing Companies (OMCs) for sale.

Biogas Success?

Over the last two years, under the SATAT scheme, the Government has offered attractive prices for biogas producers and mandated that the gas be bought by oil and gas companies. Five percent of natural gas concoction must come from mixing it with biogas. As a result of this push, in the last few years, municipal solid waste, or MSW, has become the primary source of biogas production.

Biogas: Quality And Quantity

Given the multiple government initiatives, it is easy to presume India is close to achieving its biogas goals. However, this is not the case. Sorting out and transporting municipal solid waste (MSW) is the Achilles heel in biogas transportation. It is “governed by municipalities... Many have refused to pay transportation costs,” said Paddy S Padmanabhan, Director at Padmaja Financial Services Private Limited, talking about the difficulty in scaling up biomass production. Biowaste is tricky for contractors to carry anyway, given its viscous nature.

Another challenge is sorting the biogas-suitable waste from others, which includes plastic, leather, glass, etc, as well as other muck. “Sorting is only recently introduced in major cities,” said Padmanabhan. Gas can be produced only from wet biomass, and even in wet waste, 5 to 8 percent has some sand and also non-recyclable plastics. Bangalore, Indore, and Nagpur are sorting and delivering wet waste to the contractors. Unless this improves, biogas industries will not go ahead.

The quality of biomass is not certain. 45 percent of delivered biomass has good water quality but the quantity is not certain of biogas.

The Biogas Pipeline Is Stuck

“The existing gas pipelines in India are not widespread enough to handle large-scale CBG injection,” said  Gandhi, adding, "While CBG production is expected to grow in rural areas, where organic waste like agricultural residue is readily available, these areas often lack the necessary pipeline infrastructure to connect CBG plants to the national gas grid.” This has to be sorted. There are no pipelines, and gas is delivered in large tankers.

Potential Biogas Market

City gas distributors are looking at this market; if they purchase, they will be the largest buyers of biogas. However, “City gas pipelines will take another 5 to 8 years to mature.” said Padmanaban. Once matured. large condominiums in all cities are also a market.

The second major market emerging is gas stations, three-wheelers, etc. Dedicated CBC pumps are being set up independently of oil companies for 65 to 67 Rs sale per unit.

Other fuels, like waste from forests, have not been successful because it is majorly dry waste Napier grass for biogas, and does not need much water. It is slowly coming up. Some 1000 acres are being planted across cities. This will grow because there is a better price for farmers. They will move towards this sector. They might have to form co-ops for this.

Another potentially strong client is a private collection of MCW (Municipal Solid Waste) in hotels and large flats. The third external factor will be the failure of biomass to electricity.

Pain points of the CBG Industry and for CBG Plant Owners

Prince Gandhi, CEO & Founder of CEID Consultants & Engineering Pvt Ltd said. “First, talking about the lack of pipeline infrastructure in India. As of 2023, only 1,000 CBG plants are expected to be operational by 2025 under the SATAT scheme,but the country has only about 11,000 km of pipelines for CBG injection, and this infrastructure is still in the early stages of development”

A consistent feedstock supply like agricultural waste, or municipal waste is also a major issue. The irregular collection and transportation of these materials cause production delays, leading to higher operational costs for CBG plant operators. Plants are not running at their full capacity due to this lack of sustainable supplies.

Another key challenge is the government's SATAT policy that aims to promote CBG production, which is facing some challenges due to different states having their own rules, subsidies, and regulations. “This creates confusion for investors who have to navigate through varying policies across regions, making it harder to set up and operate plants in multiple states,” Gandhi said.

There is still a slew of issues that are not easy to overcome, viz., no consistent technology, the high tariff of biogas producers that is over Rs 6, while the tariff of solar is Rs 2.75 to 3.5, coal is Rs 4.25, gas is Rs 5.20. “They sign contracts but they don't pay,” said Padmanabhan, critiquing the parties who ask for biogas but do not fulfill their commitment.

Access to offshore gas is not readily available, further complicating the growth utilising biogas by the industry. The key to unlocking this potential resource lies in the stabilization of domestic technology. This technological hurdle must be overcome before offshore gas can become a viable option for the industry.

There are also insurance challenges for the biogas plants. Indian insurance companies have a lot to learn and provide support because production insurance is not available for the owners/investors of these plants. Of the handful of insurers that offer services,  only 75 to 80 percent of the cost is covered.

The financial challenges in the biogas industry are significant. The cost of biogas plants is soaring, with few plants producing less than 10 MW and project costs ranging between Rs 150 to 200 crores. The high Capex, coupled with the lack of production insurance for biogas plant owners/investors, makes these projects financially unattractive. However, with compelling governmental regulations and encouraging widespread acceptance, CBG technology could emerge as a viable, environmentally friendly solution in India.

There is also competition from other fields. Fuels, like waste from forests, have not been successful because it is mainly dry waste. The good news is Napier grass, which is used for biogas, does not need much water, but it is slow to come up. There are a few rare 1000 acres of biogas plants that are being planted across cities. However, these will grow only if there is a better price for farmers. “They will move towards this sector. They might have to form co-ops for this,” Padmanabhan added.

What’s The Future Of Biogas?

Without a mandate that 10 to 20 percent of electricity has to be sourced from biomass/biogas, discoms will not honor their commitment. There has to be a legal obligation. An added advantage is that if we can produce biogas domestically, then forex will be saved. Over and above, International financing should be available. IREDA, PFC, and ICICI are gradually showing interest, but there are few promoters because large industries are not interested. Markets are slowly changing now. When they come to the city gas market, they must buy, but the production and price points are the sticky issues.

Biomass: Budget Expectation

“One major expectation is carbon credit marketing. The carbon credit rate in India is Rs 16 compared to the European Union market. it is paid out at 64 Euros and Non-EU it is 30 to 35 USD per ton of carbon saving ” said Padmanabhan.

Today, India cannot register its carbon credit for international selling. “Cop 29 being signed, I expect the government to register carbon credit in the international market. This means a tough registration process. India should set up an operation council for this.”