Ethanol - Global Production, Capacity, Impact of Biofuel and Ethanol Blending Trend

Ethanol - Global Production, Capacity, Impact, and Ethanol Blending Trend

Twitter Handle: @shuchi_nahar

In continuation with the previous Ethanol blog here is an extended version with more new Insights!

With a view to give a boost to the agriculture sector and to reduce environmental pollution, the government of India had launched pilot projects in 2001 wherein, 5% ethanol blended petrol was supplied to retail outlets. Apart from field trials, R&D studies were also simultaneously conducted. The success of these field trials and studies paved the way for EBP in India. The Government of India vide its Resolution dated 3rd September 2002 decided to launch Ethanol Blended Petrol (EBP) Program in January 2003 for sale of 5% ethanol blended petrol in nine States and four UTs.

 

The global production of fuel ethanol touched 110 billion liters in 2019 showing an average growth of 4% a year per year during the last decade. The United States of America (USA) and Brazil contribute for 92 billion liters (84% of global share) followed by European Union (EU), China, India, Canada, and Thailand. In order to increase the availability of ethanol for transport use, many initiatives have been taken by various countries across the world.

Currently the annual ethanol production capacity in India is around 6.5 billion liters. The majority of the ethanol production is based on sugary feedstock mainly cane molasses and a small but growing proportion of starchy feedstock. Oil Marketing Companies (OMCs) have contracted about 3.3 billion liters for the 2020-21 marketing year, including about 0.4 billion liters from the starchy feedstock. 

This would enable India to have ethanol blending of 8.5% for the ethanol supply year Dec 2020- Nov 2021. India has recently announced the advancing of a 20% ethanol blending target by 5 years, from 2030 to 2025. This is expected to create the opportunity for additional 10 billion liters per annum ethanol capacity.

 

The country’s recent move to allow the direct sale of ethanol as a fuel for compatible automobiles is further expected to support the higher ethanol demand. This will significantly create and build opportunities for ethanol plant capacity expansion. Currently, the majority of the ethanol production in the country is dominated by three states namely Uttar Pradesh, Maharashtra and Karnataka produce ethanol using sugary feedstock.

In a significant move to encourage countrywide ethanol production, India expanded the basket of feedstock with the inclusion of starchy feedstock. Several enabling factors such as interest subvention for projects, five-year buying visibility, upward price revisions, quick environmental clearance, etc. are introduced to attract investments in the sector.

Impact on Consumer, vehicle manufacturer and component manufacturer by using Biofuel

Impact on the consumer

1. Fuel Efficiency: While using E20 fuel, there will be a drop in fuel efficiency by nearly 

(a) 6-7% for 4 wheelers designed for E0 and calibrated for E10,

(b) 3-4% for 2 wheelers designed for E0 and calibrated for E10

(c) 1-2% for 4 wheelers designed for E10 and calibrated for E20. 

However, with the modifications in engines (hardware and tuning), the loss in efficiency due to blended fuel can be reduced.

2. Startability: In the E20 project, the results indicated that the test vehicles passed stability and drivability tests at hot and cold conditions with E0 and E20 test fuel. In all the cases, there was no severe malfunction or stall observed at any stage of vehicle operation.

 

Impact on the vehicle manufacturer

The following changes in the production line will be necessary to produce compatible vehicles.

1. Engines and components will need to be tested and calibrated with E20 as fuel.

2. Vendors need to be developed for the procurement of additional components compatible with E20. All the components required can be made available in the country.

3. No significant change in the assembly line is expected.

 

Impact on the component manufacturer

1. There will be no major structural change in the components in migrating from E10 to E20.

2. There will be changes in the material of piston rings, piston heads, O-rings, seals, fuel pumps etc., all of which can be produced in the country.

 

Quantity Supplied (Ethanol) and %Blending Trends

As starchy feedstock is available across the nation, it will help build up a robust ecosystem for the nationwide production of ethanol. The ethanol industry structure in the country is undergoing a radical shift with changes across dimensions of ownership, feedstock, and geographical location for the production of ethanol.

India’s requirement of ethanol for petrol blending will increase from 173 crore liters in 2019-20 to 1,016 crore liters in 2025-26. To meet this demand, the ethanol production capacity will have to be increased from 684 crore liters in 2019-20 to 1,500 crore liters in 2025-26. This includes a production capacity of (i) 740 crore liters of grain-based ethanol, and (ii) 760 crore sugar-based ethanol.

Ministry of Petroleum and Natural Gas should notify a plan for availability of E10 fuel (blend of 10% ethanol and 90% petrol) by April 2022. Further, the Ministry should notify a plan for the continued availability of fuel for older vehicles. Fuel blended with 20% ethanol (E20) should be launched in a phased manner from April 2023 to ensure availability of E20 by 2025. The rollout of higher ethanol blends may be done in a phased manner, starting with the states with surplus production of ethanol.

Source: NITI Aayog

Praj Industries Annual Report and Conferences

Bloomberg Quint

Twitter Handle: @shuchi_nahar

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