Sustainable fuels

Ashwinkumar Arora, MMS Finance, 9869471362, ashwin.arora@ymail.com

The various wars fought for oil, the strategic move by nations and many
other such instances have amply demonstrated how important fuels are to
a nation’s progress and development. The reliance has been primarily on
fossil fuels for almost the entire past century for satisfying the primary
energy needs. However, the ever progressing scientific and technological
development and the ever growing population have led to the danger of
extinction of these fossil fuels. It has been said that the reserves of these
fuels are merely sufficient to meet the needs of the world for the next fifty
years. However, these claims are scientifically debatable but still the
shortage is apparent from the ever increasing prices of crude oil that
doesn’t increase in percentages now but in multiples. The cost factor is
not the only factor that increases the need for alternative fuels. The
climatic conditions sufficiently exhibit the need for adoption of alternate
less polluting sources of primary energy. It is a matter of physical survival
for some countries to reduce levels of emission to reduce global warming
and its side effects in the form of increasing sea levels, changing annual
weather patterns and catastrophes.

Specifically in the Indian perspective, the country has been a net importer
of the fossil fuels over the years. Of the total imports of the country, the
oil imports constitute nearly 30% percent of the total import bill. The
proportion of the oil imports to the aggregate of imports has been growing
from about 26.3 % in 2003 – 04, it has gone up to about 30.5 % as per the
available numbers for 2008 – 09. This means a lot of foreign exchange
outgo. The low crude oil prices for a major part of the year coupled with a
somewhat lower demand kept the proportion low which would have been
a few percentage points higher. The strengthening worldwide demand,
after the downturn, has led to the crude oil prices in the upward direction
again. The industrial activity in the country has also been accelerating as
evident from the IIP figures. These aspects would further inflate India’s
import bill.

The above discussions make a strong case for the increased adoption of
alternate sustainable fuels which are less polluting than the conventional
fossil fuels and can be made available from a wide variety of sources. The
economic growth in the country has led to the belief that India can
emerge as Numero Uno in the world. In the coming paragraphs we discuss
how sustainable fuels can play a part in this quest of India becoming the
Numero Uno.
Sustainable fuels
Sustainable fuels are alternate fuels that are derived from a wide variety
of sources. These are sustainable as they are non exhaustible and are less
polluting leading to less strain on the environment and its conservation for
the future generations. These fuels can biofuels obtained from biomass
fermentation, alcohols, algal oil extractions or even waste vegetable oils.
The biomass mentioned above may be oilseeds like sorghum or jatropha,
corn, may be fermented bagasse or rice bran, etc. There are innumerable
such sources and new research has helped in continuous augmentation of
the number of such sources.

Importance of Sustainable fuels

The sustainable fuels have been gaining importance in the worldwide
scene and are also very important from India’s point of view. The
importance of these fuels is discussed as below.

Self Dependency

As stated above, India spends a lot on the import of oil leading to

negativity in the foreign trade balance. The country needs to depend a lot
on the foreign countries for the fulfilment of their requirements. To reduce
this dependency, it would be better for the country to develop the
alternate fuels and increase reliance on these sources. India has abundant
biological diversity to support this. So, alternate sustainable fuels provide
us with an opportunity to reduce reliance on external sources and
internally fulfil the requirements for primary energy, though to a small but
a significant extent.

Reduction in pollution

The increasing global warming has led to countries to adopt means for
reduction in pollution. With the growing industrial activity and being the
second fastest growing economy in the world, India would be required to
curb its emissions owing to the pressure from various international bodies.
This point, no doubt, is debatable based on the bargaining power of the
country. However, reducing pollution is more of a social responsibility of
the country as a whole. This also leads to a better name of the country in
the international scene. It was estimated for 2007 that about 450 MMT out
of 1100 MMT of CO2 emissions in India were from fossil fuels. Sustainable
fuels help in achieving these objectives by significantly lower emissions on
burning as compared to their conventional fossil counterparts.

Means of increasing earnings

The Kyoto Protocol had laid down targets for the reduction of emissions to
lower levels. It made the reduction of the carbon footprint of countries
mandatory to levels fixed at the carbon emission levels at some earlier
point in time. The Protocol defined certain mechanisms for the reduction
in emissions or at least mitigating them. The mechanisms included ways
in which the developed countries can emit in their own land and
compensate for the same by either establishing projects in developing or
emerging economies like India or buying Carbon Credits from them which
are equivalents to the quantum of the carbon emissions of these
countries. Thus, the emission reductions help in generating Carbon Credits
which help earn foreign currency. The establishment of projects by foreign
companies at times involves transfer of advanced technology to the
country which is very valuable to the country as a whole.

The above mentioned means are some of the various macro benefits of
using sustainable fuels. However, in some cases sustainable fuels have
assisted certain small clusters in becoming self sustaining and have led to
their development in a very big way leading to a huge social impact and
their upliftment. Thus, there are innumerable benefits of sustainable fuels.

Sustainable fuels – Present State

The sustainable fuels have gathered wide popularity in throughout the
world. The major sustainable fuels in India are Ethanol and extractions
from oilseeds like jatropha, sorghum, etc. It is worth discussing the oil
consumption in India and the proportion of sustainable fuels in it. As per
the latest estimates given by the Ministry of Petroleum and Natural Gas,
the oil consumption in India in the year 2008 – 09 stood at about 160.8
million metric tonnes ( MMT ) which was mainly fulfilled by imports to the
tune of 128.2 MMT. However, as per estimates available from an informal
blog plantoils.in, the quantum of biofuels produced stood at about 16.9
MMT majorly made up by ethanol. This makes up a proportion of 10.5 % of
the total oil consumption in the country.

A comparison between India and China

India and China have been the fastest growing economies in the world. It
is imperative for us to compare India with China for the more rapid
development that China has undergone and to find areas where we can
learn from them. The comparison is based on the details provided in the
report “Second Generation Biofuels” published by the International Energy
Agency with a collection of more reliable data from a wide variety of
sources and analysis. A systematic comparison is as below.

Production Characteristics

China

China began bioethanol production in 2000 using surplus grain. In 2008,

annual bioethanol output reached 1.51 billion litres. In January 2008,
Guangxi set up bioethanol projects with a capacity of 253 million litres
(0.13 Mtoe) per year, taking cassava as the feedstock and establishing the
use of ethanol gasoline throughout the whole region, consuming around
1.4 million tons of cassava annually.

In recent years, private enterprises took the lead in biodiesel production in

China and have built production plants with a capacity of 11.4-22.7 million
litres/year. Biodiesel production reached approximately 362.8 million litres
in 2008, whereas ethanol production reached 1.5 billion litres in the same
year.

India

According to the IEA’s Medium Term Oil Market Report 2009, the
production of biofuels in India reached 1.08 billion litres of ethanol and
about 0.24 billion litres of biodiesel in 2008. The current share of biofuels
in total fuel consumption is extremely low and is confined mainly to 5%
blending of ethanol in gasoline, which the government has made
mandatory in 10 states (MPNG, 2004). While this ethanol blending is
mandatory, it is still subject to availability and market fluctuations, so
exact figures of the amount of ethanol that goes into blending are not
documented. The only available estimate is for the production surplus of
molasses-based ethanol and for the demand of ethanol required for
blending the total gasoline consumed in the country. Domestic ethanol
production is currently sufficient to provide the ethanol required for 5%
gasoline blending. However, even at 100% efficiency and with all
available molasses being used for ethanol production, molasses cannot
support the long-term demand of ethanol for gasoline blending if the
blending levels are increased significantly.

Currently, biodiesel is not sold on the Indian fuel market, but the
government plans to meet 20% of the country’s diesel requirements by
2020 using biodiesel (Planning commission, 2003). Since the demand for
edible oil seeds exceeds current production, the government promotes
the use of nonedible oils from Jatropha curcas and Pongamia pinnata as
feedstock for biodiesel production.

Policy Targets

China

In order to support the production of fuel ethanol, the Chinese

government introduced a number of preferential policies, including the
investment of USD 70.6 million of treasury bond funds for the construction
of bio-ethanol plants in Henan, Anhui and Jilin provinces; the
implementation of preferential taxation policies for four state-approved
pilot units to exempt them from a fuel ethanol consumption tax of 5%;
and the Central Financial Authority has allocated USD 294 million to
subsidise loss-making, which effectively protects the normal production
and operation of fuel ethanol pilot enterprises. According to the circular of
the Ministry of Finance, the subsidy for the sale of fuel ethanol was USD
201.9 per ton in 2007 and 2008.

According to the goals set in the “Mid-Long term Development Plan for
Renewable Energy” by the National Development and Reform
Commission, by 2020, the use of biofuel ethanol will reach 12.7 billion
litres, automotive ethanol gasoline (E10) usage will be 100%, and annual
consumption of biodiesel will reach 2.3 billion litres (NDRC, 2007a). The
plan further acknowledges that it is necessary to proactively develop
biofuel technology taking cellulosic biomass as raw materials. The Ministry
of Finance stated that “for the production of alcohol out of cellulose, the
state encouraged the combination of production, study and research, and
the expansion of the industrialisation pilots. The State financial and
taxation support policy will integrate and use the existing funds channels,
focusing on a number of key technology breakthroughs.” However, clear
support polices for second-generation biofuels have yet to be introduced.

India

India is committed to the use of renewable sources to supplement its

energy requirements. The country is among only a few countries that
have a separate ministry for new and renewable energy to address the
development of biofuels along with other renewable energy sources. In
2003, the Planning Commission of India brought out an extensive report
on the development of biofuels (Planning Commission, 2003). The
National Biodiesel Commission was set up to look exclusively into issues
pertaining to biodiesel and the development of Jatropha curcas as the
feedstock for biodiesel production (Planning commission, 2003). The
blending targets for ethanol and biodiesel were proposed to be set at 10%
and 20% respectively by 2011/12.

The National Biofuels Policy was recently approved by the government.

However, there have been no concrete specific steps defined in the policy.
It is a general line of action that has been prescribed. These are to be
taken up subsequently by the committees that would be formed as per
the policy. The action plan needs to be developed quickly and effectively
to take more effectively the benefits of sustainable fuels.

Participation

India also has a lot of companies working towards the development of

sustainable fuels. But these companies are predominantly small
companies which are involved in small projects or merely provide
consultancy services. The major projects are taken up mainly by state
governments or government companies. Till now there has been a low
level of participation from the private sector in the development and
production of sustainable fuels. To exemplify this fact, there are small
projects taken up by different people in a scattered manner. These kinds
of forays prove to be cost ineffective. There are companies like Ecogreen,
etc. which offer professional consultancy services to such small projects.
The major players involved are government owned oil companies like IOC
or state governments like the State Government of Maharashtra who have
established some large scale projects or provide financial assistance to
agricultural universities or institutions related to biotechnology to carry
out research in this area. However, there is a lack of proper monitoring
mechanism.
In contrast, in many of the developed countries there are special
institutions set up for research in this area. This is evident from the
examples mentioned related to China in the above paragraphs.

Areas of Improvement
As is evident from the comparison above, the differences between the
initiatives in the different countries, there are areas in which India can
adopt better measures for the development of sustainable fuels.

Firstly, there is a lack of a collaborative effort. All the projects are carried
out in a scattered way spread across different areas of the country. This
has led to cost inefficiency. As a result, the sustainable fuels prove to be
expensive in application. It is only through a collaborative approach and
large scale projects that economies of scale can be achieved and it can be
made more economically feasible to produce and use biofuels.

Secondly, the reason for a low interest of the cultivators in biofuels is

related to food security and lack of proper information about these. As
regards to the food security, there is lack of cultivable land in the country.
In case of some food crops, the supply is far less than the demand for
these leaving less scope for the cultivation of alternate non food crops for
oil. Also, some oil crops like jatropha can be grown in less fertile areas
which otherwise cannot be used. The cultivators need to be systematically
educated about these and cultivate them in a manner which is not
straining on the available land resources. This is one of the ways in which
truly India can harness its true biofuel potential.

There are other aspects which are also important like roping in more
private companies, and establishing a proper monitoring mechanism for
the funds allocated. It is through increased involvement and control of the
authorities that the development in the field of sustainable fuels can take
place that can help India to reach the Numero Uno position or at least
near to that by reducing woes related to conventional fuels. It should be
realised that it is not the fault of policies that holds development back but
it is the implementation of these which makes a difference.
Bibliography / References

IEA Sustainable Production of Second Generation Biofuels–Information

Paper–Feb.2010

BP Statistical Reviewof World Energy – June 2009

IEA – Key World Energy Stats – 2009

Cutivation of Jatropha - Unknown

Weblinks :

www.mnre.gov.in

www.oilgae.com
www.biofuelsmissionmp.com

www.bpedia.com

www.jatrophaseeds.com

www.agricultureinformation.com