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).
Renewable natural gas is an exciting, emerging market. With the industry expected to have several large players in the next few years, it is critical for early movers to have a competitive advantage through innovations across the value chain. One key segment to focus on to enhance the business could be business and revenue models.
This blog post provides details on some innovative business and revenue models which could be an avenue for new entrants to have a competitive advantage.
Innovative business and revenue models
1. Energy service provider (on site with OPEX model)
Where a customer needs an on-site waste treatment and processing for RNG production, the investor can also explore the OPEX or RNG as a service model
2. Tech solution provider (EPC)
While being a producer of RNG would be the main business model for most of the investors, an alternative business model could be to add value as a solution provider. This is an asset light model where the investor needs to mainly use the expertise of his technology team to develop RNG plants for others
3. Value added tech solution provider (through partnerships)
Extending the technology solution provider model further, the investor can also become a full solution provider for anyone considering putting up a RNG plant. This could be done through partnerships, and could involve adding additional value upstream (say, financing support, land acquisition, inbound logistics support etc.) or downstream (identifying customers for the investor, outbound logistics support etc).
4. Innovative approaches to B2C market
The B2C market for RNG, while large, will be difficult to access and service for small players. However, there are innovative approaches to these end user markets that an investor can apply after he has been fully established. For instance, the investor can selectively target end user markets such as wedding halls etc., and by promoting the concept of green fuel for weddings, make inroads into these select but relatively premium B2C segments.
While for a new entrant, the initial focus will be on catering to commercial and small industrial segments, once the CNG and PNG distribution network is well established in India, the investor can consider catering to the government by supplying to oil marketing companies.
6. Centralized vs decentralized
Currently, RNG plants need to have a certain scale in order to operate, owing mainly to the technical limitations in the biogas purifying equipment. With time however, it is likely that the biogas to RNG purification process can be carried out economically at smaller scales too. Under this possibility, the investor can also consider developing decentralized, small-scale models for RNG generation, closer to source. This could significantly cut down transport costs – inbound and outbound – and also result in higher feedstock reliability.
7. Selling other synergistic products in portfolio
As a supplier of RNG which is a sustainable energy product, an investor has the potential to expand to other sustainable energy products that can be derived from solar energy, agro waste and other biomass.
8. Expanding upstream (sourcing/logistics/tech)
Sourcing and logistics of waste for RNG plants is a critical and challenging activity in itself. Once the investor has established his operations and has achieved significant expertise in sourcing and logistics, he can consider utilizing such expertise in a relevant manner for other similar RNG producers. While they could be his competitors in theory, they could be operating in different regions or under different business models such that in practice they are not really competitors and hence are in a position to use the investor’s expertise.
9. Expanding downstream (value added fertilizer, fertilizer sales on our own)
There is a growing market for natural and organic fertilizers in many parts of India. While reaching out to the mainstream farming sector in this regard might be challenging for an investor both in terms of access and economics, a suitably enriched product that is also branded well could fetch a premium in the urban consumer segment. If the investor is also able to establish an optimal distribution system for such a product, he could be in a position to derive rich returns in terms of both value and volume from the sale of fertilizers.
RNG sector is expected to have several such niche business and revenue models in the near future and early movers could start exploring these opportunities from the beginning to hold a unique position in the market when the sector starts expanding.
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