To venture or not to venture: Emerging compressed biogas sector lucrative for enterpreneurs but present dilemmas

The budding entrepreneurs in compressed biogas (CBG) space in India find themselves in a dilemma: Is the sector as viable as it is touted to be?

A recently concluded three-day on-site training by the Centre for Science and Environment, a Delhi-based think tank, witnessed the enthusiasm of aspiring entrepreneurs looking for answers to many questions the sector is fraught with.

CBG, a nascent but a significantly growing industry, is being pushed by the Government of India and various state governments through various financial assistance, policies and programmes to develop the entire value chain. This includes feedstock supply chain, technology adoption, off-take mechanisms and creating market for the end of the process product called fermented organic manure (FOM), a waste rich in organic content suitable for improving soil health. 

Despite various mechanisms and assistance, the sector is struggling to add capacities due to various concerns. Choice and availability of feedstock is one among many. 

While some regions have surplus availability of biomass, agri residues, the others have easy access to the waste from other industries. For example, pressmud, MSW etc. Entrepreneurs are trying and exploring the possibility of growing dedicated energy crops for sustainable supply of the feedstock. 

Currently, we have CBG manufacturing plants consuming various feedstock, single and multiple such as poultry litter, cow dung, paddy straw, food waste etc but multiplicity of feedstock adds to the complexities in the plant operation resulting in much larger requirement of investments towards capital cost as well as operating cost. One of the key challenges it poses in the profitability of CBG production is varying prices of feedstock against a fixed or one off-take price of the CBG irrespective of the feedstock. It makes the business vulnerable and volatile in terms of financial viability. 

At some point, the industry needs to look at a fair and robust pricing mechanism for feedstock in order to have long term availability and visibility of the feedstock supply chain. It can be based on the energy value or total solid content or volatile solids content. These are some of the possibilities that require a collective approach and efforts from the industry. 

Sustainability of the CBG industry is one of the key areas to look into. It requires creating a market for the CBG but equally importantly sustainable disposal of the by-product it generates in the form of FOM. Otherwise, it would be self-defeating if the industry does not take care of the FOM rather ends up generating waste out of processing the waste itself. 

FOM in itself could be one main product that would require an entire value chain as part of the CBG ecosystem. Market Development Assistance is one such attempt by the Centre to enable / allure the manufacturer of CBG and FOM to responsibly and sustainably deal with this by way of improving its marketability. Industry needs to demonstrate innovation in the market creation for FOM.

Interaction with multiple entrepreneurs tell us that challenges are multifold, including technology selection especially for anaerobic digestion and gas purification which in experience is the most difficult part for entrepreneurs in addition to designing the system to take up multiple feedstock, lack of willingness for plant automation etc. 

Because selection / choice of technology has direct implication on the cost and overall financial viability, entrepreneurs are attracted more towards the low cost technology options, at times with improper and insufficient guidance from the technology providers themselves ultimately resulting in underperformance of the plant or compromise on the quality of products hampering the overall business viability. 

The industry needs to outgrow from being cost sensitive to cost aware for a long term viability and operational sustainability. Short term approach will not only negatively impact the market but also it will not lead to building a sustainable ecosystem for CBG in the country. This requires a proactive approach by the industry itself. 

In order to do so, various industry stakeholders need to come together, contribute to developing a robust mechanism on both sides of the value chain, be it feedstock pricing, off-take, market creation for FOM etc and create a healthy competition among themselves. 

At least the CBG industry can rightly follow a cluster approach thereby providing some visibility to the availability of basic raw material, the feedstock thereby eliminating the competing demand from any other CBG producer in the neighborhood. 

It is good that relevant authorities, such as in the state of Uttar Pradesh, are given the task of sanctioning such units defining a catchment area much like the supply chain for sugarcane in the case of the sugar industry. Similar approaches can be followed in other states and regions too. 

Community engagement or community driven models could be the way forward with share / ownership of the feedstock suppliers, which could be farmer-producer organisations, farmers, among others. There are national and international examples of this sort already. 

CBG, to stay relevant and be part of the future growth story with new avenues opening up with its use in production of green hydrogen, needs a strong external as well internal push from the industry itself. 

Developing an entire ecosystem would mean identification of right / appropriate technologies suitable for specific feedstock, fair feedstock pricing mechanism, minimum-off take prices linked with the feedstock, collective presence in the voluntary carbon market and above all concessional / enabling financial assistance available to the developers of CBG projects. 

Last but not the least, unless the industry gears up for sustainable disposable / application of FOM through marketing / awareness, the industry may face a huge challenge in the near future as it may prevent further expansion of CBG plants jeopardising the operation and overall investments at stake. In that case, we may only see just a handful of survivors, with the rest collapsing due to the environmental burden of the FOM challenge, which the sector has already witnessed, albeit as a one-off case. 

While there is a growing interest in the CBG sector, the entrepreneurs need to exercise some caution towards technology and feedstock selection as well as minor and major operational factors and variables. 

It would not be an exaggeration to say the CBG sector has numerous variables along the entire value chain and is as complex as it can be from the perspective of developing a sustainable business and an ecosystem. 

The training programme intended to impart basic but necessary considerations enabling the entrepreneurs and other relevant stakeholders to make a well informed decision whether ‘to venture or not to venture’. 

And as per the feedback received, we can say that the training programme has achieved its intended objective to a major extent evidently manifesting, through the requests, to increase the frequency of the event as well enquiries on the next one. It also implies that the sector needs significant capacity-building initiatives.

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