Biogas: Core to India's transition to clean energy

Biogas: Core to India's transition to clean energy

The energy landscape in India

India’s demand for energy is continually increasing, along with its GDP and population. Close to 70% of the country’s energy needs are met by coal and oil—while coal fosters industrial growth and electricity generation, oil is used mainly for road transportation. But depleting fossil fuel reserves, rising greenhouse gas (GHG) emissions, and increasing costs for imported oil are leading to change. By the end of 2021, 154.40 gigawatts (GW) of the total installed capacity in India was renewable, with 10.17 GW attributed to biomass energy.

India has committed to five key steps within its climate action goals:

By 2030:

  • reaching 500 GW of non-fossil energy capacity
  • attaining 50% of energy requirements from renewable energy
  • reducing projected carbon emissions by one billion metric tons
  • reducing carbon intensity of the economy by 45% (over 2005 levels)

And by 2070:

  • achieving net-zero emissions

Much of the focus on renewable energy has zeroed in on solar and wind power, but biofuels/biogas can be readily used, with existing fuels, to help reduce carbon footprints.

Biogas in India

From April 2021 to January 2022, India spent $94.3 billion on oil imports. GHG emissions are currently 2.88 gigatons. The country imports close to 25 million metric tons per annum of liquefied natural gas. Biogas can play an important role in India’s energy transition, ensuring energy security and affordability, enhancing entrepreneurship, providing rural employment, and boosting local economies. Transitioning to biogas can contribute to job creation for semi-skilled and skilled labor in multiple areas: waste collection, operations, construction, designing, engineering, and business development.

The Government of India’s Sustainable Alternative Towards Affordable Transportation (SATAT) initiative was launched to boost the availability of compressed biogas (CBG) for the automotive and industrial sectors. It envisages an investment of INR 2 lakh crores ($263 billion) for setting up 5,000 CBG plants by 2024, with a production target of 15 million metric tons of CBG and 50 million metric tons of bio manure. Some other incentives include:

  • assuring a long-term price of INR 46/kg for CBG offtake until 2029
  • providing loans to set up CBG plants through priority sector lending
  • incorporating the use of bio manure—a by-product of CBG plants—in the amended Fertilizer Control Order in the form of fermented organic manure and digested biogas slurry
  • ensuring offtake of CBG via long-term agreements with oil and gas companies
  • synchronization of CBG with city gas distribution networks
  • providing financial assistance of INR 4 crores ($520,000) per 4.8 metric tons of bio-compressed natural gas (BioCNG)/day generated from 12,000 cubic metres of biogas/day for enriched biogas/CBG projects, capped at INR 10 crore for each project (this policy is currently under re-assessment)

Biomass and other waste: The current situation

India produces close to 500 million metric tons of agricultural waste per year. When burned, the waste is a major cause of CO2 emissions in the Indo Gangetic plains. With the highest livestock population in the world, India also produces vast amounts of animal waste. Agricultural and livestock waste are major potential feedstocks for producing biogas, as are pressmud (sugar industry waste), spent wash, waste from abattoirs, pulp and paper waste, and organic municipal solid waste generated in urban centers.

Progress to date

As of March, 2022, 3,192 letters of intent were issued to set up new CBG plants. Twenty-eight have been commissioned under SATAT. Since October 2018, 5,262 metric tons of CBG have been sold in India under SATAT. The number of plants commissioned, though, is low relative to targets. A more robust ecosystem and supporting policies are needed to reach the target of 5,000 CBG plants or production of 15 million metric tons.

CBG: Potential roadblocks

Integrating biogas presents some challenges:

  • Supply chains – not enough aggregation yards for collecting agricultural residue and lack of a formal supply chain to acquire biomass
  • Absence of formal aggregation models in the livestock waste sector
  • Lack of organic manure offtake
  • Difficulties for entrepreneurs to obtain financing due to high interest rates and limited knowledge of biogas technologies
  • Delays in setting up CBG plants (feedstock availability, lack of technological awareness, demand-based offtake of CBG from oil marketing companies, prolonged time periods to obtain environmental clearances, which are from six to nine months)

Possible solutions

Ensuring a robust supply chain for every CBG plant is critical for each project. Challenges are best dealt with at the local level—state governments and local municipalities need to support initiatives despite the fact that policies are being rolled out by the central government. Other initiatives include:

  • Focusing on ease of access – CBG plants that have feedstock available at a single location (captive) such as pressmud, bagasse, distilleries, poultries, and sewage treatment plants can help remove challenges around feedstock gathering
  • Involving local stakeholders – generating CBG waste from organic municipal solid waste ensures at-source segregation of waste into organic and inorganic components; one example is the Indore Municipal Corporation, which has been a leader in waste segregation and provided opportunities to CBG plant developers by ensuring offtake of CBG produced
  • Providing access to information – agricultural residues can be tapped by using existing databases to prepare agro-climatic/seasonal resource assessment maps. For example, the Government of Haryana is facilitating the exchange of biomass bales among agricultural firms and local-level aggregators or village-level entrepreneurs at set market prices, creating an enabling marketplace for managing surplus biomass; the biomass supply chain can also be strengthened through the creation of biomass depots/aggregation yards
  • Enabling organic farming practices – bio-manure is an excellent supplement for synthetic fertilizers and can stimulate sustainable agriculture; a mechanism to enable offtake of fermented organic manure could be aligned with national organic farming policies (the regions of Madhya Pradesh, Rajasthan, and Maharashtra account for 50% of the acreage under organic cultivation while Sikkim has been declared fully organic)
  • Mandating CBG-based stations – creating a natural gas-based ecosystem in rural areas can be achieved through mandates, which also allow for offtake from CBG plants; under the purview of domestic gas allocation to city gas distribution companies, CBG is considered a domestic gas source—a framework could be developed to combine domestic gas allocation systems for priority sectors
  • Enabling power of choice – city gas distribution companies can sell biogas to consumers and industry without price ceilings, which will allow for CBG plants to charge more than current fixed prices
  • Supporting R&D – technological innovation is essential to the biogas industry; entrepreneurs and companies can collaborate with research institutions and foreign associations, through joint ventures, to catalyze implementation of new technologies
  • Mitigating financial risk – innovative financing models such as interest subsidies, viability gap funding, and ensuring partial risk guarantees will encourage innovation and entrepreneurship
  • Promoting healthy competition – an open market would encourage plant developers to set up retail outlets for selling CBG at competitive prices; mandating biogas purchase obligations will contribute to the long-term goal of achieving net zero emissions ahead of schedule
  • Capacity building and engagement – creating awareness among plant developers, technology and equipment providers, financiers, government administrators, letter of intent holders, and CBG end users can help strengthen the CBG value chain

Getting to zero

The CBG industry has huge potential for India as the country moves toward its goal of generating clean energy. Net zero is ambitious, but with a CBG ecosystem, it is achievable. Renewable gas can play a key role in transitioning from fossil fuels. With more districts coming under the management of city gas distribution networks, local production makes sense. It can be done—by supporting local CBG ecosystems and getting buy-in from policy makers.

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Meet the authors
  1. Ankit Gupta, Managing Consultant, Natural Gas

    Ankit has more than 10 years of experience assisting commercial clients, assessing business plans and infrastructure needs for the gas sector. View bio

  2. Samiksha Shrivastava, Energy Analyst - Oil and Gas

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