Rising petrol and diesel prices in India has led to a renewed focus on alternative fuels, especially ethanol. Meanwhile, the government through a series of policy initiatives has accelerated efforts to achieve 10% ethanol blending in petrol by 2022 and 20% by 2030 respectively. Given the fact that as on 26th July, 2021, the average ethanol blending percentage in petrol for the ongoing Ethanol Supply Year 2020-21 stood at 8%, the targets do not appear unrealistic at all. While the blending of biodiesel in diesel at less than 0.1% still lags behind, the policymakers intend to reach 5% blending by 2030, as per the target set by National Policy on Biofuels 2018.

In such a backdrop, Milind S. Patke, Former Executive Director - Biofuels, Bharat Petroleum and Chemicals Limited (BPCL) explains the latest challenges and opportunities across the various levels of the ethanol ecosystem.

“For oil marketing companies (OMCs), there are increased complexities in storage and handling of multiple ethanol variants. The ethanol compatible dispensing units for higher blends/E100 are a challenge for them. They need to achieve optimum transportation cost in the wake of the mismatch of petrol seasonality and ethanol seasonality that leads to imbalance in demand and supply. The hygroscopic nature of ethanol is an issue that needs to be addressed apart from uniform distribution of ethanol blended motor spirit (EBMS) across length and breadth of the country,” said Patke while sharing his thoughts at a recent E-conference organized by the Indian Chemical News.

In terms of opportunities for OMCs, Patke believes that they have a key role to play in reduction of carbon footprint, building their own plants for ethanol manufacturing to improve reliability and reduce dependence on imported boosters. The use of ethanol for diesel blending is an opportunity they can tap too.

Sharing his views from the buyers’ perspective, Patke said, “90% of buyers will buy E-10 compliant vehicles up to 2025. The requirement will be 95% for E-10 and 5% for E-20. Therefore, the demand prediction of 1,000 crore litre for E-20 might not be realistic. By 2030, we might require 50% for each. Among the challenges are the uniform availability of E10 or E20 or E100 across the country. Deciding between an EV or E20 compliant vehicle as a better choice might be an issue for a few customers. They might also be wondering about the mileage and whether the flex fuel would be costlier? Opportunities for buyers include lower carbon emissions and improved power with E20 compliant vehicles.”

Patke feels the challenges including surplus position in rice and sugar will compel farmers to have a re-look at their options.

“Ethanol production 1G and 2G requires a large amount of water. This could come at the cost of water meant for irrigation. Among opportunities, maize farming is an option, with the government encouraging farmers to improve yield per hectare. Maize demands much less water. Higher ethanol demand will ensure better and faster remuneration for their produce,” added Patke.

On technology providers, Patke is of the opinion that apart from numerous opportunities to improve technologies, they have to offer solutions with lower capex and opex. As per Patke, the challenge before them is to optimize water consumption especially in 2G technology besides providing an integrated optimized solution for 2G and 1G and even CBG. They need to find ways to provide revenue streams of biochemicals. The patent related complications could be a challenge.

For existing ethanol producers, choice of feedstock is a challenge and so is the choice between Ethanol and ENA, said Patke, who believes they also are in a dilemma over the choice of technology besides tie-ups with OMCs and managing capacity addition in a surplus state.

“Among opportunities, they can go ahead and finalize expansion plans on single feed or dual feed and enhanced capacity. They can add new capacity in deficit states with grain as feedstock. The tripartite arrangement with OMCs/banks can help them to meet financial requirements,” added Patke. 

“For automakers, the challenge is the decision on engine up-gradation, its timing and strategy. They have to decide whether to prioritize E10, E20 or both. The decision on flex fuel vehicles and on the value proposition to customers is a challenge too. Development of E100 two wheelers lags ethanol availability. At the same time, there exist opportunities such as launching new variants, flex fuel vehicles, adoption of different value proposition, and recalibrating their strategy vis a vis electric vehicles,” opined BPCL’s former executive.

Listing out the challenges before central and state governments, Patke says, “The pricing of ethanol has to be done on the basis of feedstock. They have to ensure uniform blending percentage across the country and also create additional distillation capacity. Speedy approvals by the Pollution Control Board (PCB) are equally important and so is the implementation of the Industrial Development and Regulations (IDR) Act.”

As per Patke, there are a number of opportunities that government departments must look into. These include availability of surplus sugar after export subsidy is withdrawn in December 2023. That means surplus rice can also be diverted. He also calls for encouragement of maize farming, referring to India where it is 2.6 tonnes per hectare as compared to 10.7 tonnes per hectare in the USA. It would boost ethanol capacity to enable the government to advance E20 implementation.