Indian bio-CNG demand set for 40-fold increase by FY2030: interview [Global Gas Perspectives]

The demand for compressed biogas (CBG) or bio-CNG in India is set to see massive expansion due to mandatory blending obligations in the city gas distribution (CGD) sector, covering both piped natural gas (PNG) used for cooking and compressed natural gas (CNG) used for transport.

The Indian government last year announced mandatory phased blending of CBG in CNG and PNG segments starting the fiscal year 2025-26. Under the new policy, the compulsory blending obligation will begin at 1% of total CNG and domestic PNG consumption in fiscal 2025-26, gradually increasing to 5% by fiscal 2028-29.

The quantity of CBG to be mandatorily blended in PNG and CNG sector is set to reach around 868,000 tonnes by FY2029-30, almost 40-fold jump from CBG sales of approximately 22,000 tonnes in FY2023-24, according to Ashim Sharma, senior partner & group head business performance improvement consulting (auto, engineering & logistics) at Nomura Research Institute (NRI).

The CBG utilisation due to mandatory blending is forecast to be 87,000 tonnes in FY2025-26, 310,000 tonnes in FY2026-27, 491,000 tonnes in FY2027-28, 731,000 tonnes in FY2028-29 and 868,000 tonnes in FY2029-30, according to a report by NRI.

By embracing CBG, India aims to reduce dependence on traditional fossil fuels, promote sustainable energy sources, and work towards achieving net-zero emission goals. This move will not only contribute to environmental sustainability but also result in a reduction of costly imported LNG, thereby helping India save precious foreign exchange.

Sharma says that this increase will create derived demand for CBG across the CGD sector, encompassing both PNG and CNG. However, it remains difficult to pinpoint exactly how much of this demand will be attributed to each, given the intertwined nature of these sectors.

Feedstock supply challenges for CBG production

Sharma calls for a diversification of the feedstock profile to ensure a stable supply of raw materials for CBG production. While sources such as sugarcane bagasse, press mud, and industrial biomass waste are already being utilised, kitchen and vegetable waste, municipal solid waste, and animal waste, including poultry litter and cow dung, are also considered promising alternatives.

Despite this promising outlook, supply chain issues remain a major challenge, Sharma says. Feedstock is often seasonal, logistics are costly due to the bulkiness of the material, and sourcing is disaggregated. To mitigate these issues, Sharma suggests relying on multiple sources of feedstock, including year-round options such as industrial and municipal waste.

India is currently generating about 62mn tonnes/year municipal waste which will increase to about 165mn tonnes/year by 2030, with a biogas yield of roughly 8%, according to the report by NRI. When it comes to industrial biomass waste, India has more than 500 sugar refineries and over 350 sugar distilleries, they have a biogas yield range of about 10%. Similarly, agricultural waste has a high biogas yield of about 13%. India has more than 300mn cattle and buffalo population and over 851mn of poultry, their residues have biogas yield potential of around 13%, according to the NRI report.

Private sector interest and viability of projects

In the last year, several major companies, including Indian Oil and private players like Adani and Ambani, have announced ambitious projects aimed at boosting CBG production. These large private sector conglomerates plan to set up multiple CBG plans in India. However, concerns remain about the viability of some projects. Several CBG plants in states like Punjab have struggled due to a lack of raw materials and other operational challenges. The biogas and CBG sector lacked a comprehensive market ecosystem in terms of pricing and offtake. The lack of guaranteed offtake for CBG has resulted in its sluggish adoption as companies fear losses in case there are no buyers.

Sharma argues that this could change as the mandatory blending obligations will play a crucial role in ensuring the viability of these projects. "With the blending obligations in place, these projects are expected to become viable as the offtake will be guaranteed," he states. The NRI report suggests that the sector is poised for significant growth once these obligations take effect, driving the demand for CBG and ensuring the success of ongoing projects.

The Indian government launched the Sustainable alternative towards affordable transportation (SATAT) programme in 2018 to promote CBG in line with National Policy on Bio-Fuels 2018. According to the NRI report, under the SATAT programme 2,061 active letters of intent and 68 CBG plants have been commissioned with 22,097 tonnes of CBG sold in FY2023-24.

Waste-to-Energy: A sunrise sector

The waste-to-energy sector is emerging as another key player in the drive toward renewable energy. Municipal solid waste, industrial biomass waste, and agricultural and animal residues are seen as potential feedstock sources for energy production. A partnership between the Municipal Corporation of Gurgaon (MCG) and NTPC for waste-to-energy projects is expected to yield 25 MW of energy per day once operational, with two boilers processing 750 tonnes of waste per day.

When asked whether these projects would cater mainly to captive use or feed into the grid, Sharma says that biogas, especially in the form of CBG, would be integrated into the city gas distribution network. Additionally, NTPC's project is expected to supply energy directly to the grid.

According to the NRI report, 90 waste-to-energy projects are under implementation (seven biogas, 34 bio-CNG, 49 power generation units).

NGV market growth and LNG as a fuel alternative

The NRI report also touches on the rapid growth of natural gas vehicles (NGVs), with registrations in FY2023-24 expected to reach over 1mn—a 55-57% increase over FY2021. Sharma expressed confidence in the robustness of this growth, with projections revised upwards to 33mn NGVs by FY2029-30. While three-wheelers and passenger vehicles currently dominate the NGV market, Sharma points out that the two-wheeler segment is an area to watch in the coming years.

The rapid increase in the number of CNG dispensing station will provide major fillip top the sector. The NRI report says that told number of CNG station will climb to almost 17,500 by FY2029-30 from about 7,000 in FY2023-24.

The discussion also turned to the future of LNG as a fuel for long-haul trucks. India lags behind countries like China, where LNG fuel trucks have gained significant traction. Sharma says that the lack of LNG fuelling stations has hindered growth in India. However, with plans to set up LNG stations along arterial roads, there is hope that the market will develop, particularly for medium and heavy commercial vehicles (M&HCVs) that carry volumetric loads.

Under the next phase of the project, the government has a target to develop approximately 250 LNG retail stations with a focus on South India, according to the NRI report. Also, further supply of LNG in the remote northeast region is to be done through a pilot project to distribute LNG for transportation sector.

Sharma says that while cryogenic tanks for LNG vehicles are currently imported, there is potential for localisation if the market grows sufficiently. "If volumes pick up, it's not going to be difficult for players to start manufacturing cryogenic tanks in India," he argues.