The clean energy landscape is rapidly changing, with major capacity additions, technology advancements and evolving market dynamics. These are also being driven by ambitious government policies and significant investments across all segments. Furthermore, several segments that were earlier considered underdeveloped, such as ethanol blending, biogas and bio-fertilisers, and green hydrogen, are now receiving significant government and industry attention.
Ethanol blending
India’s ethanol blending programme (EBP) has made remarkable progress, with blending levels reaching 16.23 per cent in December 2024, compared to 14.6 per cent in October 2024 at the end of the ethanol supply tear (ESY) 2023-24. The programme targets 20 per cent of blending in petrol till ESY 2025-26. The government plans to further raise the blending percentage after achieving this target. Moreover, it has proposed blending targets of 1 per cent for 2027 and 2 per cent for 2028 (initially for international flights) for sustainable aviation fuel.
Ethanol production capacity has doubled in the past four years to 16.23 billion litres, contributing to Rs 1,086 billion in foreign exchange savings since 2014, according to government data as of September 2024. Public sector oil marketing companies (OMCs) have introduced E20 petrol (20 per cent ethanol) at over 17,400 retail outlets nationwide. Over the past decade, the EBP has contributed to a net reduction of 557 land-based mitigation technologies (lmt) of carbon emissions and facilitated Rs 924 billion in payments to farmers, highlighting the government’s commitment to achieving the 20 per cent blending target. Additionally, OMCs have made disbursements of Rs 1,459.3 billion to distillers and Rs 875.58 billion to farmers, further bolstering the agricultural economy and promoting rural income.
The Pradhan Mantri JI-VAN Yojana has been instrumental in driving ethanol production. With Rs 908 billion allocated for second-generation ethanol projects, the scheme promotes the use of lignocellulosic biomass and agricultural residues. The amendments in August 2024 extended the scheme to FY 2028-29 and included advanced biofuels produced from lignocellulosic feedstocks, such as agricultural and forestry residues, industrial waste, synthesis (syn) gas and algae in place of 2G ethanol, in the new aforementioned blending targets.
Green hydrogen
The production of green hydrogen and its derivatives, green ammonia and green methanol, is set to scale up in India, supported by enabling government provisions and interest from the public and private sectors. This, again, has been supported by a host of policies. For instance, the Ministry of New and Renewable Energy (MNRE) has issued guidelines for pilot projects in the mobility, steel and shipping sectors. The demand for green hydrogen will surge with its greater uptake in these critical industries. The ministry has also waived the Approved List of Models and Manufacturers (ALMM) requirement for solar projects and the Revised List of Models and Manufacturers requirement for wind projects for green hydrogen production. In addition, the government has introduced funding guidelines for green hydrogen testing facilities as part of the National Green Hydrogen Mission (NGHM), with a total budget of Rs 2 billion till 2026.
India’s green hydrogen ambitions hold substantial potential for meeting its climate goals, reducing reliance on fossil fuel imports and positioning the country as a leading exporter. To this end, several prerequisites are essential, especially regarding cost competitiveness, access to financing and setting common standards.
Going forward, to become a global green hydrogen leader, India must collaborate with key importing countries to establish common standards and certification programmes. Work is already under way in this space, with the MNRE releasing a draft Green Hydrogen Certification Scheme to establish a framework for measuring, monitoring and certifying green hydrogen production.
If government and industry efforts continue, India can build a resilient green hydrogen economy that meets domestic demand, achieves price competitiveness and potentially taps into export markets. Thus, the country can aim to become both a major consumer and producer in the global green hydrogen space.
Biodiesel
Biodiesel is a critical component of India’s strategy to diversify its energy mix and reduce dependence on crude oil imports. The government targets a 5 per cent blending of biodiesel in diesel by 2030, as per the National Policy on Biofuels. To this end, the government has introduced several key initiatives such as the reduction of goods and services tax on biodiesel to 5 per cent and the promotion of non-edible oilseeds, used cooking oil and other alternative feedstocks. These incentives have helped to increase the uptake of more biodiesel by OMCs. Between April and November 2024, public sector OMCs procured 366.8 million litres of biodiesel, an increase from 292.5 million litres during the same period in 2023.
Biogas and compressed biogas
The bioenergy sector in India is rapidly evolving, driven by proactive policy measures by the government. Over the years, the total installed capacity of cleaner alternatives has steadily increased. As of September 2024, India had a total installed capacity of 9,802.67 MW and 921.79 MW of biomass (bagasse cogeneration) and biomass cogeneration (non-bagasse) respectively. Under the GOBARdhan scheme, 1,407 biogas plants have been registered, with 972 functional plants, 85 completed plants (yet to be functional) and 240 plants under construction.
The compressed biogas (CBG) segment has, however, received much more policy and industry focus over the years. The central government’s Sustainable Alternative Towards Affordable Transportation (SATAT) scheme, launched in October 2018, has been instrumental in promoting CBG production. As of November 2024, around 77 CBG plants had been commissioned, contributing to 17,801 tonnes of CBG to the energy market during financial year 2024-25.
The government has further expanded support for CBG integration through the CBG-CGD Synchronisation Scheme. Under this scheme, GAIL has been mandated to operationalise synchronisation, ensuring that CBG, commingled with domestic gas at a uniform base price, is supplied to city gas distribution (CGD) entities. According to GAIL (India) Limited, as of September 2024, 74 CBG producers and 31 CGD entities were active under the Synchro Scheme, facilitating the sale of approximately 97,000 scmd (2,131 mt) of biogas.
To further provide confidence to CBG developers and investors, the National Biofuel Coordination Committee recommended the implementation of a CBG blending obligation (CBO), mandating CGD entities to blend CBG at prescribed rates in the CNG (transport) and PNG (domestic) segments. This obligation, which was voluntary until the last financial year, has become mandatory with gradual blending targets: 1 per cent in 2025-26, 3 per cent in 2026-27, 4 per cent in 2027-28 and 5 per cent from 2028-29 onwards. Furthermore, under the updated guidelines released in July 2024, the MNRE has continued the issuance of concessional customs duty certificates for the establishment of CBG projects, another key incentive for CBG developers.
Given the policy push in the CBG space, several developments have taken place in the past year. For instance, Bharat Petroleum Corporation Limited (BPCL) formed joint ventures with Sembcorp Green Hydrogen and GPS Renewables to develop CBG projects and meet its CBO. Overall investments worth Rs 18.5 billion have been committed. In addition, BPCL and the Chhattisgarh Biofuel Development Authority, along with the municipal corporations of Raipur and Bhilai, signed an MoU for the production of CBG in Chhattisgarh. As per the agreement, BPCL will lead the setting up of CBG facilities in Raipur and Bhilai, investing around Rs 1 billion in each plant.
Some of the production technologies being used for CBG production are pressure swing adsorption (PSA), vacuum swing adsorption (VSA), water scrubbing, chemical scrubbing – monoethylammine (MEA) system, and membrane separation.
In sum
Bioenergy is considered a key solution to meet the country’s renewable energy and climate goals, and at the same time promote the rural economy and mitigate waste woes. India, being an agrarian economy, has a huge surplus of biomass waste that can be utilised for renewable energy generation.
The country’s biofuel and CBG segments are poised for significant growth, driven by strong policy support, private sector participation, technological advancements and international collaborations. These segments will remain integral to the country’s renewable energy strategy, having the potential to significantly contribute to its green energy goals, reduce dependence on fossil fuels and decarbonise the oil and gas sector.
