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).
Market drivers play a significant role in the growth and development of an industry. With climate change being the key focus in today’s scenario and many sustainable business opportunities emerging, market drivers are critical in the growth of these emerging segments. This holds good for RNG also.
This blog post highlights the major market drivers for the growth of RNG market in India.
Market drivers for RNG
From a sustainability perspective, RNG is interesting for two reasons: One, it is derived from natural and renewable sources. The second reason is that RNG also takes care of the vexing problem of waste management for a range of waste generated – from human and animal waste to food waste in urban areas to industry waste such as press mud from the sugar industry or poultry waste from poultry farms.
Producing RNG from waste feedstocks thus solves a growing challenge while providing a sustainable source for energy.
Following are the drivers for the growth of RNG market in India
1. India’s climate change commitment
Global warming has been the topic of discussion throughout the world and many organizations and governments have been introducing policies and targets for climate change. In line with this, at COP 21 in Paris, on 12 December 2015, parties to the UNFCCC reached a landmark agreement to combat climate change and to accelerate and intensify the actions and investments needed for a sustainable low carbon future. The Paris Agreement builds upon the Convention and brings all nations into a common cause to undertake ambitious efforts to combat climate change and adapt to its effects, with enhanced support to assist developing countries to do so.
The Paris Agreement’s central aim is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. Additionally, the agreement aims to increase the ability of countries to deal with the impacts of climate change, and at making finance flows consistent with a low GHG emissions and climate-resilient pathway.
As part of this agreement, India’s goal is to reduce the emissions intensity of GDP by 33-35% below 2005 emission levels by 2030 and non-fossil share to be 40% of cumulative power generation capacity by 2030.
To achieve India’s climate change goals, RNG could be a potential avenue as it is a sustainable fuel produced from waste sources as well as results in significant reduction of carbon emissions.
2. Sustainable solid waste management
Solid waste management has been a major challenge globally. For developing countries like India, solid waste management is of critical concern and needs attention. The high rate of industrialization and urbanization has resulted in changes in the life style, and hence the quantity of solid waste generated has increased significantly and its characteristics have changed. Lack of financial resources, institutional weakness, improper choice of technology and public apathy towards solid waste management has made this service far from satisfactory. This in turn has led to hazards like environmental degradation, water pollution, soil pollution and air pollution.
While some technologies such as incineration and composting exist and are being practiced throughout the country, increasing concerns over the technology’s adverse effects on the environment, especially incineration and improper management in the case of composting has led to the exploration for a more viable and sustainable waste management solution.
RNG could be a long-term, sustainable avenue for solid waste management as it utilizes all types of organic solid wastes – organic portion of MSW, food waste, industrial waste etc.
3. Environmental sustainability
Environmental sustainability is defined as responsible interaction with the environment to avoid depletion or degradation of natural resources and allow for long-term environmental quality. The practice of environmental sustainability helps to ensure that the needs of today’s population are met without jeopardizing the ability of future generations to meet their needs.
RNG could be a long term sustainable avenue to protect the environment due to two reasons – one it utilizes the wastes and second – it could also be a potential, sustainable fuel in various applications.
4. Energy security
Energy security is the association between national security and the availability of natural resources for energy consumption. Access to (relatively) cheap energy has become essential to the functioning of modern economies. India is a net importer of both liquid and gaseous fossil fuels (and increasingly, even coal!). As of 2019, according to PPAC, India spent US$111.9 billion on oil imports in 2018-19, up from US$87.8 billion in the previous fiscal year. Similarly, as of 2019, India has imported 13.2 million tonnes of LPG in the year to March 2019, a record high and more than double the import volumes in 2013-14. Imports have been 15.9% higher than the previous year.
In the case of natural gas, for the calendar year 2019, imports reached 28.74 billion cubic meters at a cost of US$10.3 billion, an increase compared to the 27.44 billion cubic meters in 2018, and the price tag of US$8.1 billion.
Dependence on imported fossil fuels demands a need for energy security and hence using a locally available resource to generate natural gas thus reduces the dependence on foreign fuel, thereby ensuring energy security.
5. Attractive economics for end user segments
Prices of conventional fossil fuels such as LPG, petrol and diesel have been increasing dramatically on a daily basis which results in an increase in economics for various end user segments such as transport, industrial and commercial segments. The higher fuel prices result in inflation, risen input costs, reduced investment in oil-importing states and more. RNG, on the other hand, has an advantage of lower fuel cost compared to conventional fossil fuels such as LPG and diesel; thus provides an attractive economics for various end user segments.
It could be observed RNG has the potential to be an avenue for the major painpoints in India atleast partially and thus could be a viable business opportunity for many prospective investors atleast for the next 10 years, until 2030.
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