Transcript National & International Experiences on Alternative Fuels

Indian Ethanol Scenario Opportunities & Challenges
by
Jai Uppal, Consultant
B.Sc. Chem. Engg., M.S.E. (Michigan, USA)
F.I.E.. L.M.I.I.Ch.E., L.M.I.M.A.
(Advisor -Renewable Energy)
(Winrock International India)
jaiuppal @ yahoo.com
(M)+919811171121
Petrofed – April 13, 2006
Indian Scenario – Historical
• The Indian Ethanol Program started
during World War II - there was a
shortage of petrol (gasoline) & ‘Power
Alcohol’ was encouraged by the British.
• The ‘Oil Shock’ of mid 70s saw a revival of
interest in Ethanol. Successful trials in 1979
- IOC/IIP on 15 cars found Ethanol (10% &
20% blends) suitable
• Large number studies, reports, trials
Indian Initiatives
• Finally (April 2001) 3 successful Pilot Projects using
E5 – 2 Maharashtra & 1 UP – mixing at oil depots and supply
to nearly 300 petrol pumps with supply from U.P. – 1500km
• Announcement of December 10, 2001




Policy announced to blend 5% ethanol with petrol
Inter Ministerial Task Force constituted
Rs 4 Cr.(US$ 1 Mill.) for R&D on Ethanol diesel blends
Amend Sugar Development Act for financing Ethanol
• Announcement of March 20, 2002

Dr SJ Chopra Technical Committee Report - Ethanol most
appropriate oxygenate for India
Indian Initiatives
– Auto fuel Policy of August 2002
– “ The development of technologies for producing
ethanol and bio-fuels from different renewable
sources can play a major role in commercialization of
bio-fuels vehicle in the country, which should be
encouraged by providing R&D & other support through
suitable fiscal incentive.”
– September 13, 2002 Notification making 5%
Ethanol blending in gasoline mandatory in 9 States
(Sugar producing States)& 4 UTs by January1, 2003
- a notice period of just 3.5 months.
Indian Initiatives
• Amendment to the Sugar Development
Fund to enable access to fund for producing
Ethanol from Alcohol at interest rate of 6% 2002.
• Budget of Feb 2003 -Excise duty concession
of Rs 0.30 per litre valid till Feb 29, 2004 –
year to year validity
Indian Initiatives
• Program Operated in FY 2003-04 –290 mill L
Ethanol blended in 5.8 bill L of petrol in 9 States
• ED incentive lapses March 2004 and oil Companies
stop purchases
• Draught & shortage leads to price rise of
molasses/Ethanol in Maharashtra, Karnataka, AP
etc. Oct 2003 onwards
• No other Feedstock developed
• ED incentive not taken up the interim budget of
Mid 2004 & not introduced in any subsequent
budget – after New Government takes over
Indian Ethanol Status
• Notification regarding mandatory
provision made conditional with new
notification Oct 2004– blending subject to
availability, market forces & import parity price
• ED incentive again not introduced in Feb
2005 and in Feb 2006
• MOU in 2005 of Oil Cos. with ISMA as
nodal body representing Ethanol
Manufacturers to start the program and price
fixed at Rs. 18.75 per litre
Indian Ethanol Status
• Task Force set up to study the Ethanol Blending
Program
• Tenders again floated in December 2004 kept
pending
• At present Blending on in UP, Punjab, Karnataka,
Tamil Nadu (partial).
• Price of crude touches above $60 a rise of 6 times
since end of 90s but not ready to give any increase
to Ethanol manufacture
• Imports of crude rise to $ 44 billion 2005-06 (70%
import)
Indian Ethanol Status
• More than 300 units with total installed Alcohol
capacity is 3.5 billion L with 40% to 45%
utilization before Ethanol was introduced. Main
use of alcohol was Potable and ABC. The health
of independent alcohol units was not good.
• Substantial Progress made - nearly 1500 mill L
Ethanol capacity built up since 2003 with an
investment of About Rs 10,000 mill. This capacity
can meet the demand of 15% blend.
Challenges
• Vision and policy lacking in for Renewable Biofuels
• Important because with imports of crude oil at
nearly $44 billion and BOP becoming increasingly
adverse at an average of less than $60/bbl
• It has been predicted that Indian economy will be
seriously jeopardized if prices go above $80.
• With announcement of Iran on Uranium enrichment
on April 11, 2006 the prices will harden.
• Any pre-emptive action or political instability can
easily push the prices to $ 100 barrier
• Investment in Biofuels is a risk management option
Challenges
• Catch 22 situation
• Low capacity (adverse economies of scale)due to low
demand – higher cost of production.
• Policies regarding sugarcane limiting direct use of
sugarcane for Ethanol
• Changing policies regarding land holding limit the
potential
• Open / liberal policies of State Governments
regarding movement of alcohol and feedstocks
• Increase coordination between stakeholders
Ethanol cost "learning curve"
( US $/ m3 )
1000
900
1980
800
700
600
500
400
300
200
1998
100
1
10
100
e t ha no l c umulat ive c o ns ump t io n ( in millio n c ub ic me t e rs )
1000
Drivers for Brazilian & US
Ethanol Program
• Energy Security, Rural Employment & Environment
• USA
– Provides excise incentive to Ethanol -US$ 0.50 per gallon
– Banning of MTBE & replacement with Ethanol as oxygenate
mandatory
• Brazil
– does not provide any subsidy to Ethanol Program as it is
competitive to Gasoline if crude oil price is US$ 26 per bbl
because of competitive cane prices – 50% of Indian Prices.
– Mandatory blending of 20 to 25% of Ethanol with petrol
Ethanol Potential in India
• The ethanol program in India is dependent on
molasses from sugar industry – major constraint
• India has lots of rotten and out of date food grain.
• 4 mill tonnes of grains can produce 1.5 bill L of
Ethanol per year
• Sugar occupies about 4 mill ha of land which is less
than than 7% irrigated land
• An increase of 1 mill ha will produce 75 mill T of
sugarcane that can give additional 5.0 bill L of Ethanol
• This can also be achieved by raising the yield to
100T/Ha
Ethanol Potential/Benefits - India
• Once Biomass to Ethanol is commercialized it can
become a source of almost limitless source of Biofuels.
• Ethanol with a consumption of 4 to 5 Bill. L (20-25%
blending by 2015)
• Can have a retail turn over of Rs 140,000 million per
year
• Export Potential of 4 to 5 bill L.
• Total Potential of Ethanol – 10 bill. L by 2015
• India has developed alcohol technology which is sold
all over the world – dehydration technology licensed
Benefits to Indian Economy
• Enhancing Energy Security – management of
risk
• Rural employment and development of
economy
• Large multiplier/low capital intensity/higher
employment per unit capacity
• Decentralized
• Environment and Climate change
• Increases octane number
• Safer/cheaper Oxygenate as it replaces MTBE