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 a sustainable, compressed natural gas produced from biogas through a process involving anaerobic digestion, upgradation and compression. It is similar to natural gas in terms of its composition and properties and is a cleaner alternative to fuels such as LPG, petrol and diesel.
Considering the properties of RNG as well as its nascent market, it is essential for an entrepreneur to identify potential end user market segments for RNG to have an early mover advantage.
This blog post provides details on the major end user market segments for RNG in India.
Major end user segments for bio-CNG
Renewable natural gas has the potential to be a replacement for the more widely used CNG and liquefied petroleum gas (LPG) in India. Thus RNG can find applications in diverse segments – commercial (hotels, canteens, bakeries and resorts), industrial (food and beverage, metal processes, cement and textiles) and automotive (public transport and private vehicles).
Apart from replacing CNG and LPG, RNG can be used in lieu of biogas, which has an estimated market potential of 1,281 MW. For instance, distilleries, sugar and starch factories in India meet about 75 per cent of their energy needs through biogas, and thus could be potential consumers of RNG as well. Other industries like milk processing, pulp and paper, and slaughterhouses could also utilise RNG to meet their energy needs.
The following list provides a snapshot of potential end user markets for RNG
- End user segments with potential for RNG use in small or medium quantities
- Small and medium scale industries
- Large scale potential users for RNG
The following subsections provide details on the various end user segments, their current fuel usage and the potential for RNG to be an alternative fuel.
1. End user segments with potential for RNG use in small or medium quantities
This segment comprises a range of consumers – from very small users such as two wheelers to moderate users like fleets. Currently, the transport segment is marked by two conventional fossil gaseous fuels: Compressed natural gas (CNG) – supplied through CNG filling stations and LPG – as auto LPG – supplied through auto-LPG stations.
These fuels are lifted by Oil Marketing Companies such as Indian Oil, HPCL, BPCL and supplied via respective filling stations to various end users.
CNG for transport
Compressed natural gas has gained prominence in recent years as a potential fuel for the transport sector. With the demand for sustainable fuels increasing in India, CNG market is expected to have an exponential growth in the near future. PNGRB has also identified 86 geographical areas for the 9th CGD bidding round and 50 geographical areas for the 10th CGD bidding round for expansion of CNG filling stations which is expected to drive the demand for CNG in the short and medium term.
LPG for transport
LPG is a conventional fuel that has been in use for several years for heating and cooking applications. In recent years, the fuel has also been used as autogas in the automotive sector. The use of LPG as an automotive fuel has become legal in India since 2000. India has around 663 auto LPG filling stations as of 2019. As LPG has lesser carbon emissions compared to petrol and gasoline, the demand for LPG is expected to have a steady growth in the near future.
Benefits of RNG as a potential replacement for CNG and LPG in the transport sector
Considering the characteristics of RNG and its reduced carbon emissions compared to CNG and LPG, RNG has the potential to be a replacement for these fuels in the near future. Further, the supply of RNG by the production companies is flexible – it can be supplied in cylinders as well as injected in the existing natural gas infrastructure. Oil Marketing Companies have also guaranteed the offtake of RNG at a fixed price from potential companies under the SATAT initiative.
b. 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.
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.
Offtake through PNG network (for residential, commercial and small-medium industrial sectors)
Piped natural gas refers to transportation or distribution of natural gas to consumers in domestic, commercial or industrial sectors through a network of pipelines. With PNGRB plans in the 9th and 10th CGD bidding rounds for expansion of PNG pipelines, the market for natural gas is expected to have a significant growth in the near future.
In the regions where natural gas infrastructure is available, RNG could be a potential replacement as a fuel for the PNG segment.
LPG for commercial and industrial sectors
LPG is a widely used fuel in the commercial and industrial sectors. Some of the major end users in the commercial sector include hotels, restaurants, malls, hospitals, educational institutions and more. These segments consume about 100-500 kg of LPG per day, depending on their requirements. In addition, small-medium industries also use LPG for their heating requirements and their LPG consumption is in the range of approximately 500-700 kg / day. As both these segments are easily accessible for conversion from LPG to RNG and the decision-making is also quick, these segments will be potential end users of RNG.
2. Large scale potential users for RNG
Natural gas has a multitude of industrial uses, including providing the base ingredients for such varied products as plastic, fertilizer, anti-freeze, and fabrics as well as an energy source. In fact, industry is the largest consumer of natural gas, accounting for 43 percent of natural gas use across all sectors. Natural gas is the second most used energy source in industry, trailing only electricity. Lighting is the main use of energy in the industrial sector, which accounts for the tremendous electricity requirements of this sector.
Natural gas is also used for waste treatment and incineration, metals preheating (particularly for iron and steel), drying and dehumidification, glass melting, food processing, and fuelling industrial boilers. Natural gas may also be used as a feedstock for the manufacturing of a number of chemicals and products. Gases such as butane, ethane, and propane may be extracted from natural gas to be used as a feedstock for such products as fertilizers and pharmaceutical products.
Major large industries using natural gas as a fuel or raw material include
As RNG is similar to natural gas in its properties, RNG could be a potential fuel for large scale industries such as power plants and fertilizers. However, considering the volume requirements of natural gas by these industries, RNG could be used only as a blending fuel, thereby help in reducing carbon footprint.
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