October 12, 2024

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Greening The Gas By Director Petroluem & Gas.

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New Delhi, Delhi, 21st of September, 2024 : The Government of India is taking big strides in the development of compressed Biogas (CBG) ecosystem. The stated target for the sector is to produce 15MMT of CBG per year. While the initiative started mainly to establish a sustainable alternative to the fossil fuel based transport system, the wide array of potential benefits are beginning to emerge just now. CBG has the Potential to contribute significantly to the net zero ambition of GOI. 15MMT of CBG can effectively replace all the demand of domestic natural gas used in the CNG (T)/PNG (D) segment of the CGD sector in the year 2030. The reduced carbon content of the soil can be restored by use of FOM produced in the CBG plants. Fermented organic Manure (FOM) can also replace a part of the chemical fertilizer mainly by way of increasing uptake of chemical fertilizer’s nitrogen and phosphorus in the soil by enhanced carbon content.

What started as an initiative of the Government has turned into a major focus area with multiple schemes and mandates dotting the entire landscape. The Ministry of Petroleum and Natural Gas has come up with a scheme for financial support for procurement of biomass aggregation machinery for procurement of biomass, financial support for pipeline connectivity between CBG plants and the CGD network and also mandatory CBG blending obligation for CGD entities. The Department of Fertilizer has come up with Market Development Assistance for FOM. The Ministry of New and Renewable Energy supports the sector through Central Financial Assistance. Similarly state governments are also supporting the sector through various incentives like land at concessional lease rates, subsidies on feedstock procurement, single window clearances, priority in land allotments, etc.

However, the revenue model of the ecosystem is yet to stabilize. All the possible revenue streams are yet to reach their full potential. Revenue from FOM, which is a major co-product, is yet to be realised. Carbon credit mechanism is not fully established. This brings some uncertainty about generation and monetisation of carbon credits. The non-monetisation of all the revenue resources also creates some risk for the lending agencies, indirectly further impacting the growth of the sector. Lack of full monetisation of the FOM produced has led to focus on gas for ensuring the viability of the plants. Currently, gas produced from the CBG plants has to take the burden of being the sole bread earner of the family. With some demand related issues in certain areas of the country, full offtake of gas is impacted. This makes it difficult for a CBG plant to be viable and the whole sector to expand. Revenue has to be generated from gas, FOM as well as the green attributes or carbon credit available for the sector.

Government focus on ensuring the offtake of CBG has led to total gas sales almost doubling from about 12,000 tonnes in FY 2022-23 to 19,000 Tonnes in FY 2023-24. The data of offtake for the two months of FY 2024-25 indicates that the offtake of CBG shall more than double this year. However challenges remain in offtake of gas on account of uneven demand for CNG/PNG in the area. Government has come up with scheme to support pipeline connectivity between the CBG plants and the CGD network to help ensure full offtake of gas produced by the plant. Development of CBG grid will be take care of the problem of low demand for CNG/PNG in the area. It would also be necessary to allow open access to CBG through the CGD network to so that CBG could be supplied to actual demand centres across the country. Also injection of CBG in the trunk pipelines, as in the case of some European countries like Germany could also help in making it a part of national gas consumption growth story.

The Government has announced MDA on sale of FOM by the fertilizer marketing companies. This in turn gets passed on to the CBG producers. However, the scheme has not picked up mainly on account of two unique characteristics of the FOM produced. Firstly, while FOM is a great source of carbon for the soil, its comparatively lower nutrient content makes it less attractive to the fertilizer companies for procurement and sale to farmers. The second is the moisture content of the product which makes the storage and transportation slightly tricky. Also what is missing is the farmer’s enthusiasm in using this rich source of carbon in their fields.

The carbon content of the soil in India and northern Indian states viz Haryana, Punjab, UP and Rajasthan is very poor. This also adversely impacts the capacity of soil to fully utilize the nitrogen and phosphorus of chemical fertilizers being fed in the soil for increasing productivity of soil. It is important to increase the carbon content of soil, both for making it fit for agriculture and also for increasing the absorption power for nitrogen and phosphorus. It is also important to make farmers a stakeholder in the exercise by incentivising them for the same. For effective offtake and consumption of FOM, it might help if the farmers are incentivised by the government for every tonne of organic carbon sequestered in the soil. The CBG producers could take care of the logistics part of delivering FOM to the farmers. The cost of logistics and cost of FOM could then be monetised by the CBG producers by sale of organic carbon sequestration (OCS) certificates to the fertilizer companies who would have been mandated for net zero commitments through blended sale of fertilizer to farmers. This would not only solve the issue of decreasing carbon content of the soil and thereby reducing the need and budget for fertilizer subsidy but also help in fully monetising the FOM produced as well as solve the issue of emission reduction in fertilizer sector.

On the gas side, the Government has come up with the blending obligation for CGD entities, including the provision for issuance of renewable gas certificates (RGCs). It also provides for the regulator to frame mechanisms for effective monetisation of these RGC. Alongside, India is also working with partner countries on taking forward the World Biofuel Alliance. A mutual recognition framework for the RGCs produced in India would go a long way in enabling exports of these certificates and monetisation of the same. While there are some restrictions on the export of biofuels from India, the same does not apply to green attributes attached with the biofuel. Suitable value for the green attributes shall help the gas part to be sold to consumers competitively against other gases – domestic gas/LNG, etc. that are available in the market. CBG being available in the vicinity of the industry, the logistics cost would also be very low as compared to LNG / RLNG which entails transportation and taxation cost over their transportation lengths. The obligated entities would also not be hesitant in buying CBG as this would also reduce their logistics cost.

Decarbonising the transport sector will also be enhanced by liquefying CBG into BioLNG and using it as a substitute of LNG for long haul trucking. For large plants located in areas where the CNG/PNG ecosystem may not be developed to the extent of consuming the full quantity of CBG produced, conversion of CBG into BioLNG and transporting the same to demand centres for LNG trucking will help in effective consumption of CBG and decarbonising the transport sector.  The cost of liquefying the CBG can be spread over the consumers by making it a part of the pool of domestic gas supplied to the CGD entities.

Government is working on eliminating the inefficiencies in the system. Support of multilateral development banks in green financing of the sector will go a long way in development of the sector. Export of green credits will not only stabilize the sector but also help bring in forex in the country. The path to energy transition is waiting to be lit by the green gas.

 Anand Kumar Jha, Director (Gas Projects), Ministry of Petroleum & Natural Gas

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