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

Key Highlights:

• Budding entrepreneurs in the compressed biogas (CBG) space in India are grappling with the viability of the sector despite government support.
• The CBG industry faces challenges such as feedstock availability, varying prices, and complex plant operations due to multiplicity of feedstock.
• The profitability of CBG production is impacted by fixed or one-off take prices irrespective of feedstock prices, leading to financial vulnerability.
• A fair and robust pricing mechanism for feedstock is crucial for the long-term availability and sustainability of the CBG sector.
• Sustainability involves creating a market for CBG and ensuring the sustainable disposal of the by-product, fermented organic manure (FOM).

Key Challenges:

• Feedstock Availability: Disparities in feedstock availability across regions pose a challenge, leading to the exploration of growing dedicated energy crops.
• Multiplicity of Feedstock: Handling multiple feedstocks adds complexity to plant operations, increasing capital and operating costs.
• Varying Feedstock Prices: The fixed or one-off take price of CBG regardless of feedstock prices makes the business financially volatile.
• Market Creation for FOM: Sustainability requires creating a market for FOM, the by-product, necessitating innovation in market development.

Key Terms and Phrases:

• Compressed Biogas (CBG)
• Feedstock Pricing Mechanism
• Fermented Organic Manure (FOM)
• Market Development Assistance
• Anaerobic Digestion
• Technology Selection
• Multiplicity of Feedstock
• Cluster Approach
• Community-Driven Models
• Voluntary Carbon Market

Key Quotes and Anecdotes:

• “Choice and availability of feedstock is one among many concerns, with entrepreneurs exploring the possibility of growing dedicated energy crops.”
• “Multiplicity of feedstock adds to the complexities in plant operation, resulting in larger investments towards capital and operating costs.”
• “Fair and robust pricing mechanism for feedstock is needed for the long-term availability and visibility of the feedstock supply chain.”
• “Sustainability involves creating a market for CBG and equally important sustainable disposal of the by-product, fermented organic manure (FOM).”

Key Statements:

• The CBG sector struggles with challenges such as feedstock availability, varying prices, and complex plant operations due to multiplicity of feedstock.
• The industry needs to shift from being cost-sensitive to cost-aware for long-term viability and operational sustainability.
• A proactive approach by industry stakeholders is crucial to developing a robust mechanism for feedstock pricing, off-take, and market creation for FOM.

Key Examples and References:

• The state of Uttar Pradesh is implementing a catchment area approach for CBG units, defining specific areas for supply chain coordination.

Key Facts and Data:

• The CBG sector requires a collective approach to address challenges and create a healthy competition among stakeholders.
• Entrepreneurs in the CBG sector need to exercise caution in technology and feedstock selection to ensure sustainability.

Critical Analysis:

• The CBG sector’s complexity lies in numerous variables along the value chain, requiring a shift from cost sensitivity to cost awareness for long-term viability. A fair feedstock pricing mechanism and innovative market development for by-products are essential for sustainability. Capacity-building initiatives are crucial for entrepreneurs to make informed decisions in this evolving sector.

Way Forward:

• Collaborative Approach: Industry stakeholders should collaborate to develop robust mechanisms for feedstock pricing, off-take, and FOM market creation.
• Cluster Approach: Adopting a cluster approach can provide visibility to feedstock availability, eliminating competing demands from neighboring CBG producers.
• Community-Driven Models: Community engagement and ownership of feedstock suppliers, such as farmer-producer organizations, can enhance sustainability.
• Technological Awareness: Entrepreneurs must prioritize awareness and proper guidance in technology selection to avoid compromising plant performance and product quality.
• Sustainability Focus: The CBG industry needs to focus on sustainable disposal and application of by-products to prevent environmental challenges and ensure further expansion.

The training program successfully achieved its objective of providing necessary considerations to entrepreneurs, indicating a need for more capacity-building initiatives in the CBG sector.