CBG certificates are digital certificates issued against the green attributes of CBG produced or injected into the grid, which represent the "green" value of biogas
Countries all over the world are focusing on a self-sustainable circular economy. The government of India has also formulated several policies to steer the country towards becoming a circular economy that is environmentally and economically sustainable.
Promoting the use of CBG as an alternative fuel is one of the significant initiatives of the Ministry of Petroleum and Natural Gas. The Ministry of Petroleum and Natural Gas introduced Sustainable Alternatives for Affordable Transportation (SATAT), an ambitious and promising programme, in October 2018.
This scheme on Compressed Biogas (CBG) encourages entrepreneurs to set up CBG plants and produce and supply CBG to OMCs (Oil Marketing Companies) for sale as automotive and industrial fuel.
The scheme envisages targeting the production of 15 MMT (million metric tonnes) of CBG from 5,000 plants and generating millions of direct and indirect jobs. The CBG produced can be used as an alternative fuel and help cut the country’s natural gas expenditure by at least 40 percent. Moreover, it will consume 1.3 million metric tonnes of crop stubble per year, tackling the issue of air pollution.
For SATAT to be successful, the government needs to move at lightning speed to implement the 4100 LoIs received. The other crucial steps include guaranteed offtake of CBG, already provisioned in SATAT; guaranteed offtake of biofertilizer (fermented organic manure); ensuring a lucrative sale price for CBG; subsidising CNG kits and CNG vehicles similar to subsidies given for electric vehicles; and increasing the overall share of CBG in the gas mix. It is essential to ensure an attractive sale price for CBG.
Currently, the CBG sale price has been indexed to the prevailing CNG retail price. The retail price of CBG may vary between INR 56 and INR 78, whereas the retail price of CNG may be between INR 75 and 100. Efforts are also being made by energy exchanges, like IGX, to monetize the green attributes of compressed biogas in the form of CBG certificates.
CBG certificates are digital certificates issued against the green attributes of CBG produced or injected into the grid, which represent the "green" value of biogas.
CBG certificates would provide an additional revenue stream to CBG producers, as certificates could be sold as a tradeable instrument independent from the physical CBG commodity.
In addition, to address the prevailing tax disparity between CNG (excise/VAT applicable) and CBG (GST applicable), the Finance Ministry has notified an exemption in excise duty on blended CNG to the extent of GST paid on blended compressed biogas.
However, the recently introduced domestic gas pricing strategy is a deterrent to the CBG industry, as the margin economics of gas procurement for any CGD (City Gas Distribution) company (the procured price of domestic gas versus CBG) play a significant role in determining the feed-in of CBG into the gas grid.
The CGD companies claim that their margins have severely eroded over the past few months due to higher domestic gas prices. The domestic gas price increased from $1.6/MMBTU to $8/MMBT in the past year due to global volatility.
With the recent government announcement to reduce and limit domestic gas prices, it is even less advantageous to acquire CBG. The procurement price difference between CBG and domestic gas will continue to widen due to the price cap on domestic gas.
Moreover, under the CGD-CBG synchronisation scheme devised by India’s largest gas utility, GAIL (India) Limited, the pricing of compression charges and transport charges in addition to the UBP (uniform base price) of CBG is even more worrisome for CGD players who wish to incorporate CBG into their gas mix.
The compression charges will increase further as a result of the PNGRB's letter to BIS requesting an increase in the percentage of methane from 90 percent to 95 percent. Therefore, in the interest of the gas-based economy, it is essential to bring parity between CBG and CNG prices to attract investments to the CBG sector and significantly strengthen the sector.
(Dr. A R Shukla, President, Indian Biogas Association.)