Biofuel Paper

8/3/2019 Biofuel Paper

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RENEWABLE ENERGY SOURCE FOR NEWGENERATION


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TABLE OF CONTENTS

CHAPTERS PARTICULARS PAGE NO.

Acknowledgement 4

Certificate 5

Abstract 6

1. Introduction to biofuel 7

2. Classification of biofuel 7

2.1 Bioethenol 8

2.2 Benefit of bioethenol 9

2.3 Biodiesel 9

2.4 Benefit of biodiesel 11

3. Business potential in the global market 12

4. Major players in the world 14

5. India market scenario 155.1 Business prospects 17

5.2 Key achievements 16

6 India biofuel drivers 17

6.1 Ministers involved in biofuel sector 18

7. Biofuel market conditions 19

7.1 Current production scenar io 19

8. Conclusion 23

9. References 24


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ACKNOWLEDGEMENT

I extend my sincere thanks to Mr K. Narendran, Lecturer

(Extension and Plantation Technology), IIPM, Bangalore for

providing me an opportunity to think beyond the classroom and

explore the recent happenings in Agribusiness Industry.

I also thank Dr V.G. Dhanakumar, Director, IIPM, Bangalore

who has always been a source of inspiration for us.

My deepest gratitude to my parents and my friends for their

moral support.

SANDEEP KUMAR

09PGDM035

PGDM (ABPM) 2009-11


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CERTIFICATE

It is my proud privilege to express my devout gratitude &

indebtedness to my erudite Mr. K. Narendran, professor of

PLANTATION AND AGRI-COMMODITY PRODUCTION,

IIPM, Bangalore. For his invaluable guidance, c onstant

inspiration, keen interest, kind help & untiring efforts during

the course of this paper work.

I also convey thanks to my colleagues for there

camaraderie & all persons who are directly or indirectly

instrumental in completion of the paper work .I find no word to

quantify my love & gratitude towards my parents, my family,

well wishers.

Place: IIPM, Bangalore (Mr. Sandeep kumar)

09PDGM035

Date: 21/12/09 PGDM(PGP -ABPM)


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ABSTRACT

Biofuels are renewable fuels made from biomass that can be used to supplem ent or replacethe fossil fuels, including petroleum and diesel, used in transport. Biofuels have becomeone of the fastest growing markets in the world at 15% growth a year. They are beingpromoted by European governments hoping to meeting Kyoto targets and by GeorgeBush wanting to replace some Middle Eastern oil imports. With oil prices steady above $60a gallon, biofuel has become competitive. Whilst it attracts subsidies in Europe and the US,Brazil have shown that a mature biofuel industry can now compete with petrol on the freemarket.

This paper looks at fuels gained from energy crops w hich have been grown either forbiomass burning - to produce heat and energy - or for transport fuel. It also discuss the

production of biogas from organic waste, the burning of waste products from existingagriculture for heating or electricity, or the use of waste vegetable oil as biodiesel. Gainingenergy from waste can make a positive contribution to reducing greenhouse gas emissions,and should definitely be supported.

In this paper the comparison between biofuels and diesel or petrol is made .This paperfocuses on the importance of biofuel to meet the demand of energy in the future where thenon-renewable source of energy about to over and finally this paper enlighten the hugemarket potential of biodiesel in coming future.


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1. Introduction to biofuel

Fig- 1(Biodiesel plant) Fig-2 (Bio-ethanol car in Europe)

Biofuel is defined as solid, liquid or gaseous fuel obtained from relatively recently lifelessor living biological material and is different from fossil fuels, which are derived from longdead biological material. Also, various plants and plant -derived materials are used forbiofuel manufacturing .

Biofuels are renewable fuels made from biomass that can be used to supplementor replace the fossil fuels, including petroleum and diesel, used in transport.

Biofuels have become one of the fastest growing markets in the world at 15%growth a year. They are being promoted by European governments hoping to meetingKyoto targets and by George Bush wanting to replace some Middle Eastern oil imports.

With oil prices steady above $ 60 a gallon, biofuel has become competitive. Whilst itattracts subsidies in Europe and the US, Brazil have shown that a mature biofuel industrycan now compete with petrol on the free market.

Many environmental NGOs strongly su pport biofuels as one of many renewabletechnologies needed to reduce our dependence on hydrocarbons and to avert the worst ofclimate change. They want targets to greatly increase the use of biofuels whilst ensuringthat all supplies have to be certified as coming from sustainable sources. Meantime,governments around the world are introducing the targets without the environmentalsafeguards. A European Union Directive, for example, mandates the use of biofuels in 5.75 and possibly even 8% of all road transport fuel. A 20% target is stated for 2020.

2. Classification of biofuels

There are two main types of biofuels for transport: 1) Bioethanol, which is alcohol derivedfrom sugar or starch, for example from sugar beet, cane or from corn, and 2)biodiesel,derived from vegetable oils, for example from rapeseed oil, jatropha, soy or palm oil.


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The US are the worlds largest bioethanol producer, and this accounts for 99% of

their biofuel for road transport. The European Union is so far t he worlds largest biodieselproducer, and use considerably more biodiesel than bioethanol.

2.1 BIOETHENOL

The principle fuel used as a petrol substitute for road transport vehicles is bioethanol.

Bioethanol fuel is mainly produced by the sugar fermentation p rocess, although it can alsobe manufactured by the chemical process of reacting ethylene with steam.

The main sources of sugar required to produce ethanol come from fuel or energy crops.These crops are grown specifically for energy use and include corn, maize and wheat crops,waste straw, willow and popular trees, sawdust, reed canary grass, cord grasses, jerusalemartichoke, myscanthus and sorghum plants. There is also ongoing research anddevelopment into the use of municipal solid wastes to produce et hanol fuel. Ethanol orethyl alcohol (C2H5OH) is a clear colourless liquid, it is biodegradable, low in toxicity andcauses little environmental pollution if spilt. Ethanol burns to produce carbon dioxide andwater. Ethanol is a high octane fuel and has r eplaced lead as an octane enhancer in petrol.

By blending ethanol with gasoline we can also oxygenate the fuel mixture so it burns morecompletely and reduces polluting emissions. Ethanol fuel blends are widely sold in theUnited States. The most common blend is 10% ethanol and 90% petrol (E10). Vehicleengines require no modifications to run on E10 and vehicle warranties are unaffected also.Only flexible fuel vehicles can run on up to 85% ethanol and 15% petrol blends (E85).

Sugar Fermentation ProcessThe hydrolysis process breaks down the cellulostic part of the biomass or corn

into sugar solutions that can then be fermented into ethanol. Yeast is added to

the solution, which is then heated. The yeast contains an enzyme called invertase,

which acts as a catalyst and helps to convert the sucrose sugars into glucose andfructose (both C6H12O6).

The chemical reaction is shown below:

The fructose and glucose sugars then react with another enzyme called zymase,which is also contained in the yeast to produce ethanol and carbon dioxide.

The chemical reaction is shown below:


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2.2 Benefits of Bioethenol

Bioethanol has a number of advantages over conventional fuels. It comes from a renewableresource i.e. crops and not from a finite resource and the crops it derives from can growwell in the UK (like cereals, sugar beet a nd maize). Another benefit over fossil fuels is thegreenhouse gas emissions. The road transport network accounts for 22%(www.foodfen.org.uk) of all greenhouse gas emissions and through the use of bioethanol,some of these emissions will be reduced as the fuel crops absorb the CO2 they emitthrough growing. Also, blending bioethanol with petrol will help extend the life of theUKs diminishing oil supplies and ensure greater fuel security, avoiding heavy reliance on

oil producing nations. By encouraging bi oethanols use, the rural economy would alsoreceive a boost from growing the necessary crops. Bioethanol is also biodegradable and farless toxic that fossil fuels. In addition, by using bioethanol in older engines can help reducethe amount of carbon monoxide produced by the vehicle thus improving air quality.Another advantage of bioethanol is the ease with which it can be easily integrated into theexisting road transport fuel system. In quantities up to 5%, bioethanol can be blended withconventional fuel without the need of engine modifications. Bioethanol is produced usingfamiliar methods, such as fermentation, and it can be distributed using the same petrolforecourts and transportation systems as before.

2.3 BIODIESEL

Biodiesel is a natural and renewable domestic fuel alternative for diesel engines made fromvegetable oils, mostly soy and corn. It contains no petroleum, is nontoxic andbiodegradable.

Biodiesel burns clean, which results in a significant reduction of the types of pollutants thatcontribute to smog and global warming and emits up to 85% fewer cancer-causing agents.It is the only alternate fuel approved by the Environmental Protection Agency ( EPA), haspassed every Heath-Effects Test of the Clean Air Act and meets the requirements of theCalifornia Air Resources Board (CARB).

Biodiesel is made using an alcohol like methanol and a chemical process that separatesglycerine and methyl esters (biodiesel) from fats or vegetable oils. Glycerine is used inmany common products including soap and is highly marketable; therefore there is littlewaste in the process. That said, growing crops requires time and significant investment, and

the fuel must be made and shipped to a local station. For these reasons biodiesel is moreexpensive than petroleum, gallon for gallon. This must be considered against the manyeconomic advantages, however, that arise from a domestic form of fuel, a cleanerenvironment, an improvement in air qua lity, and a reduction of cancer -causing agents.

A "bootleg" form of biodiesel can be made from discarded cooking oils as collected fromrestaurants. The cooking oil must be put through a p rocess before it can be used as fuel, buthome-brewed biodiesel is not a legal form of the fuel as it isn't subject to standards .
http://www.foodfen.org.uk/http://www.foodfen.org.uk/http://www.foodfen.org.uk/


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Biodiesel has been rigorously and independently tested in virtually every type of dieselengine by a number of agencies in the laboratory and on the road. The National BiodieselBoard (NBB) reports the tests combine to account for over 50 -million street miles plusintense off-road and marine use. Performance is said to rate comparably to petroleum in allareas from power to efficiency, hauling and climbing. It can be used in its pure form orblended with petroleum fuel. The most common mix is 20/80, referred to as "B20"containing 20% biodiesel by volume, and 80% petroleum.

Biodiesel can be used in any diesel engine with few to no modifications. The main effect issuper-lubrication which has the benefit of acting like a solvent to clean the engine. If theengine has been previously running on conventional diesel th is can result in an initial needto change fuel filters until sludge left by petroleum fuel is purged. This effect is morepronounced when using B100 (100% biodiesel), and may be less so with B20.Precautionary measures should be taken however, by checking the fuel filter after initialhours of running blended or neat fuel (100% biodiesel).

When using B100 exclusively, the lubrication could degrade certain types of rubber overtime, which may require replacement of fuel hoses or fuel pump seals. This isn't as much of

a concern with newer engines that contain parts designed for low -sulphur diesel (known as#2 diesel), as these parts are also compatible with biodiesel. The use of B20 did not resultin the need to replace hoses or seals in the many miles of tests previously mentioned.

Like conventional diesel, biodiesel will cloud and gel at very cold temperatures, but blendslike B20 are only slightly more sensitive than #2 diesel in this respect. Therecommendations are the same regardless of blend: park the vehicle in or near shelter ifpossible; use optional fuel heaters; or mix with #1 diesel.

Biodiesel should not impact or void the manufacturer's warranty of any compression-ignition motor (diesel), however, it's always safest to check your warranty first. Call the

manufacturer if unsure.

Biodiesel Defined

The technical definition of biodiesel is: The mono alkyl esters of long fatty acids derivedfrom renewable lipid feedstock such as vegetable oils or animal fats, for use in compressionignition (diesel) engines (National Biodiesel Board, 1996). In simple terms, biodiesel is arenewable fuel manufactured from methanol and vegetable oil, animal fats, and recycledcooking fats (U.S. Department of Energy, 2006).

The term biodiesel itself is often misrepresented and misused. Biodiesel only refers

to 100% pure fuel (B100) that meets the definition above and specific standards given bythe American Society of Testing and Materials (ASTM) International (D 6751) . However itis often used to describeblends of biodiesel with petroleum diesel. Such blends aregenerally referred to as B2, B5, B20, etc., where the number indicates the percent ofbiodiesel used.

The most common method to produce biodiesel is through a process calledtransesterification, which involves altering the chemical properties of the oil by using


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methanol (Fangrui and Hanna, 1998). Transesterification of plant oils with methanol is arelatively simple process that yields high conversions with only glycerin as a byproduct.

The properties of biodiesel differ depending on the source of plant oil/fat source.This is mainly related to their chemical structure, such as the number of carbons and thenumber of double bonds in the hydrocarbon chain.

2.4 Benefits of BiodieselThere are several significant advantages and limitations of using biodiesel to replacepetroleum-based diesel (U.S. Department of Energy, 2006).

Advantages

1.) B100 can be produced from renewable, domestic resources.

2.) B100 is energy efficient. (The total fossil fuel energ y efficiency ofbiodiesel is 320% vs. 83% for petroleum diesel.) (National Biodiesel Board,

1998)

3.) B100 can be used directly in most diesel engine applications.

4.) B100 can reduce global warming and tailpipe emissions ( -41%) (Hill,Nelson, Tilman, Polasky, & Tiffany, 2006).

5.) B100 is nontoxic and biodegradable.

Limitations1.) B100 contains approximately 8% less energy per gallon.

2.) B100 generally has a higher cloud and pour point (will freeze at a highertemp) than conventional diesel.

3.) B100 is not compatible with some hose and gasket materials, which maycause them to soften, degrade, and rupture.

4.) B100 is not compatible with some metals and plastics.

5.) B100 may increase nitrogen oxide emissions.


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3. Business potential of biofuels in the global market

Global demand for oil is rising at two percent every year. Since 1985, the energy use hasincreased by about 30 percent in Latin America, 40 percent in Africa and 50 percent inAsia. Over the next 20 years, the demand for ener gy is expected to rise by about 50 -60percent worldwide. Though Europe has started research on biodiesel in 1970s, industrialproduction began in the year 1992. Today the EU produces about 48.45 lakh tonnes ofbiodiesel of which Germany is the largest prod ucer with 21.80 lakh tonnes per year. TheUS shifted its focus towards biodiesel in early 1980s, and it began its production in early1990. The biofuels demand is expected to increase to 33 million tonnes by 2010.

Global biodiesel demand to double in 5 ye ars

The driver for biofuels usage is not limited to the United States and Europe, but is alsogrowing in the Asia-Pacific and Latin American regions, according to Tammy Klein,executive director of global biofuels services for Hart Energy Consulting. She spoke about

the global biofuels outlook on the opening day of the Canadian Renewable Fuels Summitheld Dec. 1 and 2 at Vancouver, British Columbia.

Thirty countries are implementing biofuels targets in 2010 alone, she said, with many ofthese countries in the developing world encouraging biofuels as a means of building energysecurity and improving their rural economies. Biodiesel demand is expected to doublebetween 2009 and 2015, while supply is expected to grow threefold. Currently there is

massive overcapacity on a global basis in the biodiesel industry and utilization rates aregenerally below 50 percent, she added. Current global biodiesel capacity is already large

enough to supply the demand projected for 2015 of 10 billion gallons per year.

Currently, 30 countries worldwide are blending biodiesel, with the typical B5 beginning toinch upward. Several countries in Europe are moving towards B7, with Brazil movingtowards higher blends and Indonesia considering B10. In 2009, developing countriesrepresented 17 percent of biodiesel demand and almost 50 percent of global supply. That isexpected to grow to 42.6 percent of biodiesel demand and 59.2 percent of global supply by2015. Much of that demand among developing countries will be for domestic use , sheadded. African nations are looking towards biofuels for job creation, economicdevelopment and domestic energy supply and are not likely to become internationalplayers. In the Asia-Pacific region, the big four Indonesia, Malaysia, China and thePhilippinesrepresent 74 percent of biodiesel demand in the region. Brazil is likely toproduce biodiesel to satisfy its internal markets and continue to raise blending limits to

absorb capacity.

Europe is expected to see the greatest penetration of biodiesel into the diesel market by2015, although the pending implementation of sustainability standards for its RenewableEnergy Directives is raising questions. We dont know how Europe will meet its RED

requirements, Klein said. With U.S. imports restricted b y countervailing duties and theBrazilians using their biodiesel internally, it may leave Argentina and the Asia -Pacificproducers to supply Europe, driving an expansion of the Asia -Pacific industry in particular.


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Europe will remain the largest consumer of biodiesel at about 44 percent of worldconsumption, but Asia-Pacific will come close with a 39 percent share by 2015, sheprojected.

Klein urged the group of Canadian Renewable Fuels Association members to be proactiveabout involvement in policy develo pment and the work being done on sustainabilitystandards, not only in dialoguing with nongovernmental organizations but also engagingwith governments and organizations like the Roundtable for Sustainable Biofuels. The

complaint from the RSB is they don t have enough industry participation, and not enoughproducer involvement, she said.

She also predicted that the anticipated EU sustainability standards for biofuels will bechallenged in the World Trade Organization as a protectionist trade barrier. At a recentinternational meeting, she reported, the change in tenor was astonishing from the EC

representative who openly admitted they would have to consider WTO implications in thedevelopment of the RED. Brazil is watching the EC closely, she said. And Brazil has ahistory of winning WTO cases. If a WTO suit successfully challenges Europes

sustainable biofuels policy, it could also impact U.S. policy as well, she added.

BioFuel Africa begins commercial jatropha production

Fig-3 (Jatropha plant)

Biofuel Africa Ltd. announced it is the first in West Africa to commercialize jatropha oil.The Ghanaian corporation that is wholly owned by Norwegian -based Solar Harvest AS has1,630 acres in cultivation on leased land, in addition to its research far m. The company istesting jatropha for use as a straight vegetable oil fuel in Ghana, saying that in hot climatesusing straight vegetable oils will facilitate easier processing for local fuel production.

Biofuel Africa has adopted a Food First Principl e, according to CEO Steiner Kolnes,

giving food production a priority while simultaneously developing jatropha production.The project has grown from 55 acres planted to food crops tended by 25 farmers in 2008, to540 acres last year. The company plans to expand that to 6,300 acres of corn, rice andsoybeans in 2010. The company received approval last year from the Ghana EnvironmentalProtection Agency to develop close to 60,000 acres of jatropha in a program that is toinclude environmental, social and economic activities that assure positive impacts for local


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communities.

Biofuel companies that combine local fuel production with generation of a renewable

local food source are proving that jatropha is an attractive and viable commodity fordeveloping economies plagued with food security issues, exorbitant fuel prices andinfrastructure lapses, the company said.

4. Major players in world

Making biofuel has become a big business as biofuel production continues to increasethroughout the world. Biofuel is an alternative fuel that is made from veget able oil. Belowwe break down the major biofuel industry players.

1. Dyniol - This company is currently building the worlds largest refinery ofbiodiesel in Houston, Texas with an estimated capacity of 1.5 billion gallons of biodiesel in

a single year.

2. Dominion Energy Services - Dominion is currently building acombined ethanol and biodiesel refinery in Canada. This one of a kind refinery willapparently have a maximum output of 300 million gallons per year.

3. Brasil Eco Energia - This company is currently building a what they hope tobe the biggest biodiesel plant in the world specializing in using soybeans for makingbiofuel. They hope biofuel production will be upwards of 225 million gallons of biofuel peryear.

4. Agri-Source Fuels - This Florida based company is a major player in thebiofuel industry specializing in B100 type biofuel. They currently opened up another plantin Pensacola, Florida

5. Imperium Renewables - This Grays Harbor, Washington plant has aproduction capacity of over 100 million gallons a year. It has been in operation for overtwo years and specialize in making biodiesel from canola oil.

Even though the biodfuel industry has fallen on difficult times due to economic shifts andhigh prices the large companies continue making biofuel in hopes of surviving the roughtimes. As technology becomes more advanced and biofuel infrastructure is put in placelook for it to play a more prevalent role in fueling the world.


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5. INDIAN MARKET SCENARIO

In India, the biodiesel industry is in the nascent stage. However, there has been greaterawareness on biodiesel in India in the recent times due to shortage and escalating prices ofpetrol and diesel. With the government introducing the biofuel blending mandate, the

demand for biodiesel will see a steady rise in the years to come.Indian government is very keen and if the National Biofuel Policy is approved we can beone of the most potential countries in the world. There is lot of awareness about biofuels inthe country. Availability of land for biofuel crops cultivation and low cost of productionhave made India as one of the most potential countries for biofuel production. The scopefor producing biodiesel from non-edible seeds like jatropha and pongamia is an advantageto India when compared to rest of the world. India's biodiesel processing capacity isestimated at 600,000 tonnes per year. The government is now likely to fix a price of Rs 34a litre for purchase of biodiesel by oil marketing companies.

5.1 the business prospects of biofuels from Indias perspective

India has a huge potential for biofuels production. The favorable subtropical climate, hugestretches of culturable marginal lands and the natural resource wealth of the country standtestimonials to the fact that the country has good scope for biofuel production. India haswitnessed a steep rise in energy consumption in the recent years and is today the worlds

sixth largest energy consumer with the demand growing at an annual rate of 4.8 percent.The demand for diesel is estimated to grow at an annual rate of 5.8 percent till 2030.Current oil and gas reserves in India are not adequate to fulfill this growing demand. Ind iaproduces about 30 percent of its annual crude oil requirement of approximately 105 milliontonnes. For the balance 70 percent, the country relies on imports.

The transportation sector accounts for almost 50 percent of the total crude oil consumed.This has increased the risk exposure of the country to the high price of the crude oil in theinternational market. Considering this demand -supply mismatch, the Government of Indiahas undertaken two strategic measures of accelerating the exploration and prod uctionactivities in the oil and gas sector; and promoting the consumption of alternate fuels.Blending mandate of 20 percent by the end of the year 2017 and the support packageextended by the government in terms of tax sops and incentives are some of the eminentdrivers of the industry. Other than the aforesaid factors, the country having 70 percent of itspopulation in the rural areas, ought to focus on the production of green fuels especially forrural electrification programs. The industry is still in its nascent stage in the country and

expected to take off when an organized industry status is given to the sector by bringingbiofuel policy in place.Estimated Jatropha cultivation requirement [in million hectares (mn ha)] to meet biodieselblending dem and in India.


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5.2 The key achievements of biofuels research in India

Eminent organizations and institutions involved in the research and development ofbiofuels are ICRISAT, Hyderabad; CRIDA, Hyderabad; and ICAR, New Delhi. Other than

these research-focused organizations such as, TNAU, Coimbatore; TERI, New Delhi andFRI, Dehradun; are also engaged in the extensive research of biofuel crops. The key areasof research so far are for the feedstock development and for the processing of the produceinto biofuel. The raw material or the feedstock development includes the crop developmentthrough varietal improvement and hybridization, and locational trials for adaptation of thespecies. The research on processing technology focuses on evolving cost -effectivetechnology for the betterment of all the stake -holders.The Department of Science and Technology (DST) is the committee member in producinghigh yield varieties for jatropha along with the coordination of the Ministry of New andRenewable Energy (MNRE) as well as the Ministry of Agriculture. Department ofBiotechnology (DBT) is working on production of quality planting material of jatropha,

and they have called for proposals for initiating the multi -locational trials of jatropha.Nandan Biomatrix has been selected by DBT for the project of mass multiplication of

jatropha curcas saplings through vegetative cuttings since they were convinced with theR&D work taken up by us on jatropha for the past several years. DBT selected us and gave25 percent of the work order in India.

Estimated Jatropha cultivation requirement (in million hectares ) to meetbiodiesel blending demend in India

YEAR AT 5% BLENDING AT 10% BLENDING AT 20% BLENDING

2004-05 1.18 2.35 4.7

2005-06 1.24 2.48 4.95

2006-07 1.57 3.14 6.27

2007-08 2 3.99 7.98


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6. INDIAS BIOFUEL DRIVERS

The cornerstone of Indias energy security strategy is to focus efforttoward energy self-reliance and developing renewable energy options like

biofuels vis-a- vis fossils fuel. Adoption of environmentally friendly bio-fuels to meet improved vehicle

emission norms.

Developing an alternative usages for crops like sugarcane and itsbyproducts as feedback for bio-fuels to support farm income.

Improve utilization of wastelands and other unproduct ive land forcultivation of biofuel feed stock.

Enhance rural employment and livelihood opportunities by promotingproduction and marketing of bio -fuel feed stocks.

With a rapidly growing economy and rising population, India is the fifth largest and on e ofthe fastest growing petroleum oil consumers in the world. With limited domestic crude oilreserves, India meet over 72% of its crude oil and petroleum products (petrol, diesel,aviation fuel, etc. ) requirement through imports. Energy demand in the tr ansport sector isgrowing relatively high due to the growing economy and rising private vehicle ownership,particularly 4-wheelers. India is increasingly dependent on imports to meet its petroleumdemand.

India is one of the world s leading producers of sugarcane and sugar.Sugar molasses, a byproduct of the sugar industry, is used for production of most of therectified spirits (alcohol) produced in India, including ethanol for fuel. Due to the cyclical

nature of sugarcane and sugar production in India, sugarcane farmers and the processingindustry experience periodic market gluts of sugarcane, sugar and molasses productionimpacting prices and farm incomes. The GOI has been focusing on encouragingsugarcane juice/sugar molasses usage for ethanol production to bring stability in farmincomes.

Bio-diesel production efforts are focused on using non -edible oils fromplants (Jatropha curcas, Pongamia pinnata and other tree borne oilseeds) and animal fatslike fish oil. The focus is to encourage the use of wastelands and other unproductive land

for the cultivation of these relativel hardy new bio-fuel crops. The GOI does not wantbio-fuel feedstock crop cultivation to compete with food crops for scarce ag ricultural landand water. An estimated 55.3 million hectares are considered wasteland in India, which

could be brought into productive use by raising bio -diesel crops. The GOI policy is alsodriven by the fact that bio-fuel crop cultivation in wastelands would provide additionalemployment to the vast rural population in India.

There is some question as to the definition of wastelands as some grazing or less

intensive dry land farming may be taking place on these wastelands . Nevertheless, bio-diesel production from non-edible oilseeds, etc. is still in the research and developmentstage in India.


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6.1 Ministries Involved in the Bio-fuels Sector

India has been pursuing a two-fold strategy for promotion of bio-fuels by : a)providingbudgetary support for research, development and demonstration of technologies; and b)promoting private investment through fiscal incentives. Several mi nistries are involved in

policymaking, regulation, promotion, and development of the bio -fuels sector in India.

Ministry Role

Ministry of New andRenewable Energy

Overall policymaking role for promotingdevelopment of bio-fuels. Also support research andtechnology development for production of bio -fuels.

Ministry of Petroleum and

Natural Gas

Responsible for marketing bio-fuels as well asdevelopment and implementation of pricing andprocurement policy

Ministry of Agriculture Research and development for production of bio-fuelfeedstock crops (sugarcane/sweet sorghum, etc. forethanol; and Jatropha and other non -edible oilseedspecies for bio-diesel)

Ministry of RuralDevelopment

Responsible for promotion of Jatropha plantationson wastelands

Ministry of Science andTechnology

Supports research in bio-fuels crops, especially in thearea of biotechnology


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7. BIO-FUEL MARKET CONDITIONS

Motor Vehicle Petroleum Based Energy Market

Indias petroleum-based energy demand by the transport sector is the fastest growingenergy consuming sector and will continue to grow steadily in the coming years due tostrong growth in the economy, rise in income levels, and an increase in the availability andchoice of vehicles. Petroleum product consumpti on has gone up from 100 million tons inIndian fiscal year (IFY) 2001/02 (April/March) to 134 million tons in IFY 2008/09 [9] .Energy demand by the transport sector is expected to grow by 6 -8 percent per year duringthe 11th five-year plan (2007-2012). Diesel and gasoline (petrol) contribute 98 percent ofthe energy consumed in the transport sector.

Over 80 percent of passengers and about 60 percent of freight are transported by road inIndia. With the growth in the economy and the rise in personal incom es there is increasingdependence on personal modes of transport such as cars and two wheelers. Industrysources report that that the total number of vehicles has increased more than five fold,from 21.3 million (including 14.2 million 2 -wheelers) in 1991 to 109 million in 2008 [10]. The motor vehicle population grew by 10 -12 percent in the last few years, and isexpected to continue to grow around 8 -10 percent in the next few years.

7.1 Current Production Scenario

Ethanol Production

The ethanol supply for the EBP program during MY 2008/09 has been severely impactedby the short supply of sugar molasses and continued strong demand for alcohol from othercompeting industries. Consequently, ethanol for blending with petrol in Indian sugarmarketing year 2008/09 (October/September) is estimated at 100 million liters, against thetarget of 600 million liters. With market prices of alcohol ranging between Rs. 26 to Rs.30 per liter since October 2008, most ethanol suppliers preferred diverting their supplies tothe potable liquor and chemical industries instead of supplying ethanol at the current priceof Rs. 21.50 per liter for the EBP program.Despite the forecast improvement in the sugarcane and sugar production in MY 2009/10, asharp drawdown in carryover stocks and expected strong demand from the chemical andpotable liquor industry will constrain alcohol supplies. Consequently, supply of ethanolfor fuel is forecast lower at 50 million liters. However, ethanol supplies to the EBP

program may improve if petroleum companies agree to a major hike in the procurementprice from the current negotiated price.


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Table 2: India's Production & Distribution of Molasses and

Alcohol/Ethanol in Sugar Marketing Year (October/September)

(All units in

Million Litersunlessmentionedotherwise)

Item\Year

2006/07 2007/08 2008/09 2009/10 (F)

Total

MolassesProduction

(Million tons)

13.11 11.31 6.88 8.60

Molasses for:-AlcoholProduction

(Million tons)

9.50 7.90 4.30 5.90

Animal Feed

& Other Uses(Million tons)

3.61 3.41 2.58 2.70

Total AlcoholProduction

2,280 1,890 1,032 1,420

OpeningStocks

700 1,269 1,254 706

Imports 39 5 200 200Total Supply 3,019 3,164 2,486 2,326Alcohol Use for :-IndustrialUse

650 700 700 720

Potable 800 850 880 950


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LiquorEthanol for

BlendedGasoline

200 280 100 50

Other Use) 100 110 100 110CarryoverStock of

alcohol

1,269 1,254 706 496

Total

Distribution3,019 3,194 2,486 2,326

Source: FAS/New Delhi Estimates based on information from Trade Sources

The progress of the second phase of the EBP has been slow as ethanol usage is subject tocommercial viability. Besides irregu lar molasses availability, a plethora of high taxes andlevies has adversely impacted ethanol blending in several states, particularly sugar/alcoholdeficit states. Most states have a labyrinth of rules and regulations (inter -state movement,high excise duties, storage charges, etc.) to control alcohol for the potable liquor industry,

and these regulations are equally applicable to ethanol for blending purposes. The GOI isactively engaged in working with state governments to resolve the underlying issuesconstraining adoption of the EBP program in other states.The current shortage in supplies of ethanol has been due to high prices of sugar molasseswhich makes it unviable to supply ethanol to petroleum companies at the negotiated prices[13] . The sugar industry continues to pressure the government to ask the petroleumcompanies to raise the negotiated sales price, while the petroleum companies haveopposed increases in ethanol prices, especially given that crude oil prices have eased sincemid-2008.In years of bumper sugarcane production, the sugar industry may prefer to produce ethanoldirectly from sugarcane juice to avoid the sugar market glut and declining prices. There is

considerable scope for increasing sugarcane yields from the existing acreage, wh ich canalso offer additional sugarcane for production of ethanol directly from juice. There is

limited scope to increase area under sugarcane as the crop is water intensive and India sirrigation water supplies are increasingly limited.Since the production of ethanol directly from sugarcane juice requires additionalinvestments for technological modifications, most mills are closely assessing the market

demand for ethanol and the efficacy of the governments ethanol policy before making thenecessary investments. Industry reports suggest that a petroleum marketing company hasacquired two sugar mills for production of ethanol from sugarcane juice on anexperimental basis, and with co mmercial production expected in MY 2009/10. There arecurrently no foreign players in the Indian sugar industry, as it is one of the most controlledagribusiness-sectors in the country (see policy section of Sugar Annual IN9049).However, the increased consumption of ethanol by oil companies, and the production ofethanol from sugarcane juice by local companies may attract foreign investment in thefuture


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7.2 Bio-Diesel Production

Indias commercial production of bio-diesel is very small and what is produced is mostlysold for experimental projects and to the unorganized rural sector. While the governmentdiscourages the use of edible vegetable oil for production of bio -diesel, it is also not

economically feasible to produce bio-diesel from vegetable oils due to high edible oilprices in the domestic market. The small quantities of Jatropha and other non-edibleoilseeds procured by traders are mostly crushed for oil, which is used for lig hting lampsand other non-edible uses.Several entrepreneurs have established small plants (less than one ton per day) to extractbio-diesel, but the product is mostly sold in the unorganized sector mainly for operatingirrigation pumps and other agricultural uses. There are about 20 large capacity plants (oneto fifty tons per day) that produce bio -diesel from edible oil waste (unusable oil fractions),animal fat and non-edible oil. Automobile and transport companies mostly buy bio -dieselfor R&D trials on their vehicles. Indian Railways and other state -owned transportcompanies have set up experimental projects for bio -diesel production. Reliable production

information on Indian bio-diesel is not available as commercial production is yet to take offin an organized manner, with estimates ranging anywhere between 100 to 200 million litersper year.Most Jatropha plantations are far from bio-diesel producing units, and lack of efficientmarketing channels result in high inefficiencies leading to high produc tion costs. Industrysources estimate current bio-diesel finished production costs at anywhere between Rs. 32 to40 (67 cents to 83 cents) per liter, much above the government advised purchase price ofRs. 26.5 (55 cents) per liter. Consequently, there has been no commercial sale of bio -diesel

at the GOIs bio-diesel purchase centers. Some of the state transport agencies and Railwaysprocure biodiesel for experimental trials of their vehicles.Many Indian corporations, including petroleum marketing compani es, are venturing intobio-diesel production by having a memorandum of understanding with state governmentsto establish Jatropha plantations on government wasteland or contract farming with smalland medium farmers. Several state governments have announce d policies to encourageJatropha cultivation, setting up bio-diesel plants and supply chains in their respectivestates.Although the nascent bio-diesel industry has been lobbying the government to allow dutyconcessions on imports of vegetable oils (palm, soybean, etc.) and their derivatives tocaptive consumption for bio-fuel production at their units, there are no positive indicationsfor approval of such proposals. Some local and foreign collaborative projects forproduction of bio-diesel for exports are being set up near the ports as export-oriented-units

that could boost the countrys bio-diesel production capacity to 1.0 to 2.0 million tons perannum in the next few years. There is no commercial production of bio -fuels from other

biomass, except for some experimental trials by research organizations .


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23

CONCLUSIONS

Biofuels are renewable fuels made from biomass that can be used to supplement or replacethe fossil fuels, including petroleum and diesel, used in transport. Biofuels have becomeone of the fastest growing markets in the world at 15% growth a year. Biofuel is definedas solid, liquid or gaseous fuel obtained from relatively recently lifeless or living biological

material and is different from fossil fuels, which are derived from long dead biologicalmaterial. Also, various plants and plant -derived materials are used for biofuelmanufacturing .

There are two main types of biofuels for transport:1) Bioethanol, which is alcoholderived from sugar or starch, for example from sugar beet, cane or from corn, and2)biodiesel, derived from vegetable oils, for example from rapeseed oil, jatropha, soy orpalm oil.

Global demand for oil is rising at two percent every year. Since 1985, the energyuse has increased by about 30 percent in Latin America, 40 percent in Africa and 50percent in Asia. Over the next 20 years, the demand for energy is expected to rise by about50-60 percent worldwide. Currently, 30 countries worldwide are blending biodiesel, with

the typical B5 beginning to inch upward. Several countries in Europe are moving towardsB7, with Brazil moving towards higher blends and Indonesia considering B10. In 2009,developing countries represented 17 percent of biodiesel demand and almost 50 percent ofglobal supply. That is expected to grow to 42.6 percent of biodiesel demand and 59.2percent of global supply by 2015. Making biofuel has become a big business as biofuelproduction continues to increase throughout the world. Biofuel is an alternative fuel that ismade from vegetable oil.

In India, the biodiesel industry is in the nascent stage. However, there has beengreater awareness on biodiesel in India in the recent times due to shortage and escalatingprices of petrol and diesel. India has a huge potential for biofuels production. The favorablesubtropical climate, huge stretches of culturable marginal lands and the natura l resource

wealth of the country stand testimonials to the fact that the country has good scope forbiofuel production. Eminent organizations and institutions involved in the research anddevelopment of biofuels are ICRISAT, Hyderabad; CRIDA, Hyderabad; an d ICAR, NewDelhi. Other than these research-focused organizations such as, TNAU, Coimbatore; TERI,New Delhi and FRI, Dehradun; are also engaged in the extensive research of biofuel crops.

Indias commercial production of bio-diesel is very small and what is produced is mostlysold for experimental projects and to the unorganized rural sector. While the governmentdiscourages the use of edible vegetable oil for production of bio -diesel, it is also noteconomically feasible to produce bio-diesel from vegetable oils due to high edible oilprices in the domestic market. The small quantities of Jatropha and other non-edibleoilseeds procured by traders are mostly crushed for oil, which is used for lighting lamps

and other non-edible uses. Many Indian corporations, including petroleum marketingcompanies, are venturing into bio -diesel production by having a memorandum ofunderstanding with state governments to establish Jatropha plantations on governmentwasteland or contract farming with small and medium farmers . Several state governmentshave announced policies to encourage Jatropha cultivation, setting up bio-diesel plants andsupply chains in their respective states. So,there are huge oppurtinities for the biodieselmarketing in rhe country as well as in th e world.


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REFERENCES

Fangrui, M.; Hanna. M. A. Biodiesel production:A Review. Bioresource Technology, 1-15(1998)

Hill, J.; Nelson, E.; Tilman, D.; polasky, S.;Tiffany.

D. Environmental, Economic, and Energetic costs

and Benefits of Biodiesel and Ethano l Biofuels.

National Biodiesel Board. Biodiesel report

(March 1996)

U.S. Department of energy. Biodiesel Handling andUse Guidelines. ( March 2006)

Alexander Farrel et al, Ethanol can contribute to

energy and environment goals science vol -113

Internet

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