Ethanol: Catalyst for a sustainable future

As the conversation on climate assumes greater significance by the day, so does the need for alternative energy resources. With the growing demand for energy in India, greener sources holds the key towards a sustainable future.

As the energy ecosystem is rapidly evolving there is an increasing thrust on ethanol-infused fuels that have emerged as a viable and promising alternative. Ethanol, a renewable biofuel derived primarily from plant feedstock, ensures significant environmental, economic, and energy security benefits. Introduction of ethanol blended motor spirit (EBMS)) in India has had a multifaceted impact on the economy, energy security, agricultural growth, and the broader green transition, highlighting its potential to spearhead a sustainable future.

India’s ethanol journey started in 2001 with a pilot project which became a global success story with over 433 crore litres of ethanol being used in FY 2021-22. This affirmative action has enabled the country to advance the 20% EBMS target to 2025-26 from earlier estimated 2030. In order to achieve the target of 20% blending by 2025, over 1,016 crore litres of ethanol are required or over 75% of total ethanol consumed in the country. This will entail over 1,700 crore litres of production capacity given the utilisation levels of around 80%. Considering current capacities of nearly 1,400 crores litres, there is an opportunity for many more plants to be executed.

The Indian economy is at the cusp of a golden era promising over 7% growth. In line with its decarbonisation goals, India has initiated the ethanol blended petrol (EBP) programme to blend biofuel with petrol, aiming to mitigate petrol consumption. India is currently the third largest ethanol producer in the world after the United States and Brazil. It is heartening to witness that our nation has successfully achieved its E10 target, resulting in petrol containing 10% ethanol. The E20 pilot programme is currently implemented in a minimum of 15 cities and is scheduled for a gradual nationwide rollout. For expeditious commissioning of ethanol plants, the government had provided an exemption for Public Hearing and Environmental Impact Assessment studies of these projects until March 31, 2024 by considering them under B2 category. Reinstatement of this positive directive will shorten the commissioning cycle time.

Ethanol production also has the potential to revitalise local economies, particularly in rural areas where agriculture is the primary livelihood. The ethanol economy encompasses the cultivation of biofuel crops, the production process, and the distribution of ethanol fuels. Each stage of this value chain generates employment opportunities and stimulates economic growth. These jobs contribute to local economies, increasing household incomes and bolstering community development at grassroot level.

Moreover, the construction and operation of ethanol plants require substantial investments, leading to economic stimulus in the form of infrastructure development and increased demand for local goods and services. The ripple effect of these investments can enhance regional economic stability and resilience.

Safeguarding energy security is a critical concern for nations worldwide and more so for India which imports over 85% of its crude requirements. As the fastest growing major economy, dependence on imported fuels exposes the country to geopolitical risks and price volatility and impact its’ growth trajectory. Ethanol-infused fuels offer a sustainable solution to enhance the energy security by diversifying the energy mix and reducing reliance on fuel imports.

The production of ethanol is intrinsically linked to agriculture, offering numerous benefits to farmers and rural communities. However, it is essential to balance the demand for biofuel crops with food security and environmental considerations. Ethanol production provides farmers with an alternative market for their crops. Traditionally grown for food, crops like corn and sugarcane are now being cultivated for ethanol production in many parts of the country, offering farmers an additional revenue stream. This diversification reduces the risk of dependence on a single crop market, enhancing farmers' financial stability.

The global transition to a low-carbon economy is imperative to combat the climate crisis. Ethanol-infused fuels play a pivotal role in transition by reducing greenhouse gas emissions and promoting cleaner energy alternatives. When blended with gasoline, ethanol reduces the overall carbon footprint of transportation fuels. Ethanol blends like E10 (10% ethanol, 90% gasoline) can reduce greenhouse gas emissions by up to 19% compared to pure gasoline. Higher ethanol blends, such as E20 and then to eventually onwards to E85 will further offer even greater emissions reductions.

While ethanol-infused fuels offer numerous benefits, several challenges and considerations must be addressed to maximise their potential and ensure a sustainable transition. The expansion of biofuel crops at times raises concerns about land use and food security as also food prices. However, when planned well, biofuels help alternative usage of agriculture waste or excess produce and limited storage scenarios which have been increasing the volatility in food prices and provide a mitigate to the farmers. It is crucial to adopt sustainable practices and prioritise advanced biofuels that do not compete directly with food crops. Research and development in this area can lead to more efficient and sustainable ethanol production methods.

The widespread adoption of ethanol-infused fuels requires substantial infrastructure investments. Ethanol-compatible vehicles, fuel pumps, and distribution networks must be developed and expanded. Government policies and incentives can play a crucial role in accelerating this infrastructure development, ensuring that ethanol fuels are accessible to consumers. By providing financial support in the form tax and capital subsidies, the government can stimulate market growth and accelerate the adoption of ethanol-infused fuels. Concessional interest rate for interest rate is already available for ethanol projects. Another key action area is promoting research and development on sustainable fuels and promoting skill development to create a manpower base ready for the future.

Ethanol-infused fuels present a compelling opportunity to advance the shift towards a sustainable future. By leveraging the economic, energy security, and agricultural benefits of ethanol, India can reduce its dependence on fossil fuels, enhance its energy resilience, and support rural development.

This article is authored by Prasad K Panicker, executive chairman, Nayara Energy.