This post is a part of BioBiz’s Bio-CNG Perspectives.
BioBiz, a division of EAI, is a leading market intelligence & strategic consulting firm for the Indian bio-based sectors.
This blog post uses the terms bio-CNG and renewable natural gas (RNG) interchangeably.
Bio-CNG or bio-compressed natural gas, also known as sustainable natural gas or biomethane, is a biogas which has been upgraded to a quality similar to fossil natural gas and having a methane concentration of 90% or greater. As the gas is derived from natural and renewable sources, it is also termed renewable natural gas (RNG).
Introduction
Market demand for a product plays a critical role in determining the viability and growth of an industry. As RNG is an emerging market and is expected to have several stakeholders in the industry, it is essential for entrepreneurs to understand the demand potential for RNG over the next 10 years before investing. For early movers, this helps them to invest in the right geography as well as focus on the right end user market to have a competitive advantage.
This blog post provides brief details on the estimated market demand potential for RNG in various end user markets for the period 2020-30. Data estimates have been provided based on an extensive primary and secondary research and analysis. Market data estimates for competing fuels such as CNG, natural gas and LPG have also been provided.
Following are the major end user markets focused in this section:
- Transport segment using CNG and LPG
- Commercial and small-medium industries using PNG and LPG
- Large industries using natural gas
1. Transport
This segment represents the fuel offtake by oil marketing companies such as IOCL, BPCL and HPCL for supply through retail outlets. Currently, the transport segment is marked by two conventional fossil gaseous fuels:
- Compressed natural gas (CNG) – supplied through CNG filling stations
- LPG – as auto LPG – supplied through auto-LPG stations
As of 2020, the demand for CNG pan India is 3.4 million tons per annum and that for auto-LPG is 0.2 million tons per annum. With PNGRB plans to expand the CNG filling stations by 2030 and with the growth of auto-LPG filling stations, the demand for these fuels is expected to reach about 11 million tons for CNG and 0.29 million tons for LPG per annum by 2030 under business as usual (BAU) scenarios.
RNG, which could be a potential replacement for both CNG and LPG, is expected to have a total annual market demand of 36,000 tons in 2020 and about 1.7 million tons by 2030.
The following table provides a snapshot of CNG, LPG and expected RNG demand estimates pan India for the transport sector for the period 2020-30 under BAU scenario.
Data for pan India (‘000 tons)
| Year | CNG demand | % of RNG in total | Potential RNG demand for transport as a replacement for CNG | LPG demand | % of RNG in total | Potential RNG demand for transport as a replacement for LPG | Total potential RNG demand for transport |
| 2020 | 3400 | 1% | 34 | 200 | 1% | 2 | 36 |
| 2025 | 5600 | 5% | 280 | 250 | 5% | 12 | 292 |
| 2030 | 11025 | 15% | 1654 | 290 | 20% | 58 | 1712 |
Table 1: Estimated market demand for CNG, LPG and RNG for transport – 2020-30
It could be observed that RNG market is expected to grow at a CAGR of 52% during the 2020- 25 period to reach an annual market demand of 0.2 million tons by 2025 and at a CAGR of 42% during 2025-30 to reach a market demand of 1.7 million tons per annum under business as usual scenario.
2. Non-transport end use segments
Both natural gas and LPG have applications other than the transport segments. These segments include residential, commercial and industrial. The following flowchart depicts the different non-transport end use segments and the fuels used.
Figure 1: Non-transport end use segments of RNG
The following table analyses the above end use segments for their feasibility for RNG in the short, medium and long term.
| End use segments | Feasibility of RNG use | |||
| 2020 | 2025 | 2030 | ||
| PNG | Residential users using PNG | Yes | Yes | Yes |
| Commercial users using PNG | Yes | Yes | Yes | |
| Small-medium industries using PNG | Yes | Yes | Yes | |
| LPG | Residential users using LPG | No | No | No |
| Commercial users using LPG | Yes | Yes | Yes | |
| Small-medium industries using LPG | Yes | Yes | Yes | |
| Natural gas for large industries | Large industries using natural gas | No | No | Not sure |
Table 2: Feasibility for RNG in non-transport end use segments 2020-30
As shown above, from our analyses, we assume the feasibility for use of RNG in residential sector as a replacement of LPG and in large industries as a replacement of natural gas does not exist in the 2020-30 period owing to supply chain rigidity, high volumes of consumption and more. Thus, these segments have not been considered for RNG demand in the following sections.
a. For residential, commercial and small-medium industrial sectors
Both LPG and natural gas are widely used as fuels in the residential, commercial and small-medium industrial sectors. However, the supply chain is quite different for both the fuels. Natural gas is supplied to these sectors through network of distribution pipelines and hence called PNG. On the other hand, LPG is being supplied directly to the end user segments in cylinders of different capacities. While this section predominantly provides data on the commercial and industrial end user segments, owing to the nature of supply chain and the available data, the natural gas market demand includes residential sector also, while LPG sector includes only commercial and industrial segments.
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Offtake through PNG network (for residential, commercial and small-medium industrial sectors)
As of 2020, the annual market demand for natural gas for the PNG sector is 4.9 million tons pan India and is expected to grow at a CAGR of 18% for the period 2020-25 to reach an annual market demand of 11 million tons by 2025. By 2030, the market is expected to reach 25 million tons per annum.
In the regions where natural gas infrastructure is available, RNG has the potential to replace the conventional natural gas in the next few years and thus the annual demand for RNG is expected to reach 2.5 million tons by 2030 pan India.
The following table provides a snapshot of the estimated natural gas and RNG demand per annum for the 2020-30 period Pan India under BAU scenarios.
(All data in ‘000 tons)
| Year | Natural gas demand | RNG demand | % of RNG in total |
| 2020 | 4984 | 50 | 1% |
| 2025 | 11402 | 570 | 5% |
| 2030 | 25000 | 2500 | 10% |
Table 3: Estimated natural gas and RNG demand in PNG sector – 2020-30
It could be observed that RNG market demand is expected to grow at a CAGR of 62% for the period 2020-25 and 34% during 2025-30.
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LPG for commercial and industrial sectors
LPG is a widely used fuel in the commercial and industrial sectors. As of 2020, the total LPG demand pan India is 2710 thousand tons per annum, which is 10% of the total LPG consumption. With government initiatives to attract more commercial and small industrial customers over the next few years, the demand for LPG is expected to have a steady growth in the near future. By 2030, the total LPG demand is expected to reach 9 million tons per annum.
RNG, which is a potential fuel as a replacement for LPG is expected to have an annual market demand of 27,000 tons in 2020 and 2.3 million tons by 2030.
Note: RNG replacement for LPG in residential sector is not considered as it is not feasible until 2030.
The following table provides a snapshot of expected LPG and RNG demand estimates during 2020-30 period under business as usual scenario.
(All data in ‘000 tons)
| Year | LPG demand | RNG demand | % of RNG in total |
| 2020 | 2710 | 27 | 1% |
| 2025 | 5218 | 261 | 5% |
| 2030 | 9196 | 2300 | 25% |
Table 4: Estimated LPG and RNG demand for commercial and industrial sector – 2020-30
b. For large industries
Note: Potential of RNG as a replacement for natural gas in large industries is conservatively not considered owing to supply chain rigidity and high volumes.
Several large industries depend on natural gas as a fuel or raw material for production of products. Prominent large industrial sectors include
- Manufacture
- Fertilizer
- Power
- Industrial
- Refinery
- Petrochem
As of 2018, the total annual natural gas demand for the industrial sector is 30 million tons. The market is expected to expand to 51 million tons per annum by 2025.
The following table provides snapshot of total natural gas demand estimates for the period 2018-2025 under business as usual scenario.
(All data in ‘000 tons)
| Year | Natural gas demand | RNG demand | % of RNG in total |
| 2018 | 30605 | 0 | 0 |
| 2022 | 41646 | 0 | 0 |
| 2025 | 51785 | 0 | 0 |
Table 5: Snapshot of natural gas and RNG demand for industries – 2018-25
RNG demand for large industries
Our analysis of large industry use of natural gas shows that these sectors have very large requirements of natural gas with structured and well established supply chains. As a result, we do not expect any offtake of RNG from these sectors for the 2020-25 timeline. Even for the 2025-30 period, we expect only marginal consumption of RNG from this sector. Even though considerable quantities of RNG are expected to be supplied by 2025, the distributed nature of the RNG production, compared to bulk supplies of natural gas to these segments through dedicated distribution networks will make it quite challenging for RNG to be absorbed in this segment.
In addition, the other markets (especially OMC and PNG are likely to consume most if not all the RNG produced and as a result, there are unlikely to be forceful government mandates for these sectors to use RNG, even during the 2025-30 period.
With all these considered, we are not considering any contribution from the large industry sector to RNG demand for the 2020-30 period.
Total RNG demand potential Pan India under BAU scenario
The following section provides a summary of total RNG demand pan India under business as usual scenario. In addition to demand, data on number of equivalent RNG plants have been provided assuming a plant of equivalent capacity to produce 5 tons of RNG per day.
| Year | Business as Usual scenario | |
| Demand (‘000 tons) | No. of equivalent RNG plants | |
| 2020 | 113 | 61 |
| 2025 | 1123 | 615 |
| 2030 | 6512 | 3568 |
Table 6: Total estimated RNG demand Pan India – 2020-30
Thus, the total RNG market demand pan India is estimated to be 6.5 million tons per annum by 2030 from just 0.1 million tons per annum in 2020. The market is estimated to grow at a CAGR of 58% for the period 2020-25 to reach a market demand of 1 million tons and at a CAGR of 42% during the period 2025-30 to reach 6.5 million tons per annum.
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