To promote clean energy transition, the government has set a goal of reaching up to 15 per cent of energy supply from natural gas from the present level of about 6 per cent.
According to CEA data, CO2 emissions generated in producing electricity from Natural Gas are only 54 per cent of what is emitted in producing the same amount of electricity from coal. However, there is one major difficulty in pursuing this goal.
India currently imports about 50 per cent of the gas consumed and imports are going increase further as we enhance the share of gas because of limited domestic availability.
But the supply disruptions due to the Russia-Ukraine war and the maritime conflict in the Middle East could hamper energy security of India.
This challenge can be addressed to a large extent by blending domestically produced Compressed Bio-Gas (CBG) with Natural Gas similar to the Renewable Purchase Obligations for electricity consumers – which mandates electricity purchase in laid down proportion from renewable sources.
CBG is derived from the anaerobic decomposition of waste and biomass sources like agriculture residue, food waste, and municipal solid waste and is a renewable, cleaner alternative to conventional fossil fuels.
It has calorific value and other properties similar to CNG and can be used as substitute fuel in mobility, industries and commercial areas.
We have abundant quantities of waste and other residue material in India for producing CBG. In Europe, CBG has been promoted as a clean energy option through legislative measures, awareness creation and supportive policy interventions.
Germany doubled the number of biogas plants to about 9,000 since 2010. India also announced a national initiative in 2018 to set up 5,000 CBG plants by 2023-24 with annual production of 15 million tonnes.
But progress on this front has been sluggish with the number of commissioned plants hardly touching 100.
CBG – The Current Challenges
CBG production depends upon seasonally available raw material and varying quality and uncertain supply chains are areas of concern.
It is produced in remote areas closer to sources of raw material. Due to the seasonal availability of raw material, there are additional costs involved in storing and transporting it to either a petrol pump or to an injection point on the gas pipeline network.
Further, given the uncertainty in offtake, either the surplus gas has to be flared or sold in the local market with price realisation uncertainty.
For example, in the SATAT scheme, oil marketing firms offer a price which includes transportation of CBG in cascades only upto 25 km and in case of low off take, there is no commitment to pay.
Even in the fermented organic manure market, the by-product of CBG production has not matured. The CBG programme envisaged simultaneous development of linkages to natural gas pipeline network for injection of CBG in the pipeline for blending and transport. This has not progressed.
So what can be done in the interim to give a fillip to CBG?
The Oil Ministry’s report of the ‘Energy Transition Advisory Committee’ has identified several drivers for CBG Market Development. One key aspect involves proposing CBG blending mandates for all CGD entities marketing CNG and PNG.
The report suggests trading CBG’s green attributes and the creation of an extra revenue stream for biogas producers by monetising these attributes. This strategy involves creating certificates that hold a premium value over standard natural gas.
Recently, the National Biofuels Coordination Committee, led by the Union Petroleum Minister, announced the gradual mandatory blending of CBG in the CNG and PNG segments of the CGD sector.
The Compressed Biogas Obligation (CBO), which is voluntary till FY25, is proposed to be made mandatory from FY26. It will start at 1 per cent, and raised to 5 per cent by 2028-29.
The amended Energy Conservation Act empowers the Centre to mandate consumption of a particular non-fossil fuel in laid down proportion.
CBG Certification Scheme
Currently, there’s no system for trading, purchasing, and monitoring of green attributes of CBG. To address this gap, the CBG mechanism needs to be be formulated. This scheme entails creating and managing a registry for CBG certificates (CBGCs). The gas is traded and transported similar to regular gas.
However, once CBG is produced and sold either through pipelines, cascade or in LNG form (Bio-LNG), its “green” attribute can be tokenised as a CBG Certificate, allowing it to be traded independently from the physical use of CBG. Due to the flexibility provided by CBG certificates CBG producers can opt to sell the gas produced as green gas along with CBG certificate.
They also have the option of separating CBG from its certificate, selling the CBG as regular gas in the local energy market and trading the certificate separately in a virtual market for CBG Certificates. It aims to empower both mandated and voluntary buyers to procure certificates tailored to their specific needs.
This mechanism will require a transparent trading platform. Since gas sector already has authorised Gas Exchanges, they can be designated for trading. The whole mechanism can be regulated under PNGRB.
But there is one particular challenge. In case of renewable electricity, generation and consumption can be easily measured through grid level electricity meters whereas in case of CBG, accredited verifiers will have to be deployed to verify the production of CBG. But this is doable.
The writer is former Union Power Secretary and Chaired the G 20 Energy Transitions Working Group in India’s Presidency