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Bio-diesel Energy Systems and Technology – India

GENERAL INFORMATION

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Implementing Institution: Indian Institute of Science

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Head of Institute: Professor P. Balaram, Director

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Details of Institution: Address: Indian Institute of Science, Bangalore 560 012, India Tel.: (+91) 80 2360 2378/2741 or (+91) 80 2293 2337 Fax: (+91) 80 2360 0683 or (+91) 80 2360 0535 E-mail: [email protected] Website: www.iisc.ernet.in

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Implementation Period: Started 1 August 2006. Phase 1 to last three years; phase 2 to continue for eight years.

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Costs: The total estimated cost is $12,230,000. It is expected that 50 per cent will be contributed by the Ministry of Non-conventional Energy Sources. The balance of the contributions is expected to be provided by the Karnataka State Council for Science and Technology, Bio-diesel Energy Systems and Technology, Rotary Electronics Pvt. Ltd., and the Indian Institute of Science, Bangalore.

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SUMMARY The Bio-diesel Energy Systems and Technology initiative is a start-up venture that was launched in 2006 by the Indian Institute of Science in Bangalore, Karnataka State, India. The aim of this initiative is to build scientific, technological and human capacity for the generation and use of bio-diesel as an alternative to petroleum-based fuel products. The strategic advantages of using bio-diesel are many: it is a renewable source of energy (derived from inedible vegetable oils), it is ecologically friendly and less polluting than petrol, and it could make a significant contribution to energy security in India. Some States in India (e.g., Andhra Pradesh, Chattisgarh and Orissa,) have already launched efforts to produce bio-diesel. A unique approach in the Bio-diesel Energy Systems and Technology entrepreneurial venture has been the creation of a sustainable privatepublic partnership between Bio-diesel Energy Systems and Technology, the Karnataka State Council for Science and Technology, the Ministry of Nonconventional Energy Sources and Rotary Electronics Pvt. Ltd., Bangalore, a small/ medium-sized enterprise that exercises corporate social responsibility. The Bio-diesel Energy Systems and Technology project aims to identify and evaluate the value chain and to develop a viable business plan that considers the potential political, economic and trade risks involved in the steps to be taken towards the sustainable generation and

use of bio-diesel as an alternative “clean” fuel. Such steps include: • the acquisition of land for plantation and cultivation of oilseed feedstock; • the development of efficient technologies for the conversion of the vegetable oils extracted from the oilseed to bio-diesel via an esterification process; and • the assessment of the economic, social and environmental impact of large-scale production of biodiesel through public distribution and private for-profit channels.

BAC KG RO U N D A N D J U S T I F I C AT I O N Most countries are net importers of oil and depend on countries with indigenous resources of fossil fuels that exceed national demand to satisfy their energy requirements. In view of the increasing scarcity and cost of non-renewable sources of energy (primarily petroleumbased oil products), many countries around the world are gradually shifting to renewable fuels. In this scenario, biodiesel is an important component in the mix of energy sources being considered by many countries.

BIO-DIESEL CHARACTERISTICS Bio-diesel is a clean-burning alternative fuel produced from the seeds of various crops. It is thus a renewable energy resource.

Bio-diesel Energy Systems and Technology – India

Chemically, bio-diesel is a fatty acid alkyl ester that can be used as an alternative fuel in compression-ignition (diesel) engines with little or no modification since its physical and chemical characteristics are very similar to those of conventional diesel. In fact, the oxygen content of bio-diesel (approximately 10 per cent) has been shown to improve the combustion of and reduce emissions from blended fuel (a mixture of bio- and conventional diesel) compared with conventional diesel alone. The amount by which emissions – including carbon monoxide, hydrocarbons and particulate matter – are reduced depends on the relative levels of constituents of the blend. Although emissions of oxides of nitrogen (NOX), which contribute to smog formation, may increase slightly when bio-diesel is used at blend levels of more than 5 per cent, fuel additives may be able to resolve this issue.

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European Union and in Switzerland ranged from 500 to nearly 780,000 tonnes per year.

Bio-diesel is also simple to use, biodegradable, non-toxic and essentially free from sulphur and aromatic hydrocarbons, the combustion of which makes an important contribution to the greenhouse effect.

In the United States, bio-diesel is commercially available in most oilseedproducing States. In 2004, almost 30 million US gallons (110 million litres) of commercially produced bio-diesel were sold. Owing to increasing pollutioncontrol requirements and tax relief, the market in the United States is expected to grow to 4 thousand million to 8 thousand million litres by 2010. Many farmers who grow oilseed use a bio-diesel blend in tractors and other agricultural equipment as a matter of policy to foster production of bio-diesel and to raise public awareness. Likewise, some agrobusinesses and other businesses with ties to oilseed farming use bio-diesel for public relations reasons. Some tax credits are available for using bio-diesel in the United States. The price of bio-diesel decreased from an average of $0.92/litre in 1997 to $0.54/litre in 2007. These prices are comparable with current petro-diesel prices, which, in early 2008, varied from $0.92/litre to $1.12/litre.

GROWTH

T H E S I T U AT I O N

IN THE

USE

OF

BIO-DIESEL

The European Union has set guidelines requiring that all Member States increase the proportion of renewable fuels in total fuel mixtures from 2 per cent in 2005 to 5.75 per cent by 2010 and to more than 10 per cent by 2020. In 2001, national production of bio-diesel from vegetable oils (mainly sunflower oil, rapeseed oil and frying oil) in various countries of the

IN

INDIA

In India, oil accounts for about 34 per cent of total energy consumption and the share of oil in the fuel mix used has been growing gradually in recent years. While the production of oil in India was 837,000 barrels per day in 2005, at that time, India had net oil imports of nearly 1.7 million barrels per day. With the recent and projected rapid growth of the

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Indian economy, oil consumption is expected to increase to 3.1 million barrels per day by 2010. The increasing demand for oil in India, the ongoing depletion of national resources and the rising cost of importing oil (leading to an increasing deficit in the balance of trade) are important macroeconomic factors that are encouraging a shift to bio-diesel. On a micro level, the generation of employment in rural areas, the productive reclamation of wasteland (of which India possesses more than 6 million square kilometres) and positive contributions to the environment through reductions in vehicular emissions and a reduction of soil erosion through the cultivation of bio-diesel crops are some of the factors driving the consideration of bio-diesel fuel for large-scale use. Bio-diesel can be made from any feedstock oil or fat, the cost of the feedstock being the most important constituent in the economics of bio-diesel production. In the United States and the European Union, bio-diesel is being made commercially from edible oils such as sunflower or rapeseed oil. Because of the growing demand for food by the rapidly growing population of India, alternatives to edible oils are a more reasonable and feasible option. Of the inedible oils available, oil from honge or karanj (Pongamia pinnata, a leguminous tree) and from jatropha (a genus containing approximately 175 succulent plants, shrubs and trees) are the most feasible alternatives. Jatropha has been selected as the plant of choice in this project because of its biological characteristics.

Jatropha curcas, a member of the Euphorbia or spurge family, is a hardy plant that is well adapted to harsh soil and climatic conditions, growing on even the poorest stony soils and in rock crevices. Its water requirements are extremely low and it can withstand long periods of drought. It is easily propagated by seeds or cuttings and grows rapidly. Growing to more than five metres in height, it may be trimmed as desired and is suited to cultivation as a hedge plant. In India, J. curcas is found in almost all States and is generally grown as a living fence for protecting agricultural fields. The bean-like seeds of jatropha contain viscous, inedible oil that can be used for the production of high-quality soap, as a raw material for cosmetic products, as fuel for cooking and lighting, and as a substitute for diesel fuel. The hydrocarbon chains (triglycerides and fatty acids) in jatropha oil, when mixed with alcohol in the presence of a catalyst, form a mono-alkyl ester that is bio-diesel. The Central Salt and Marine Chemicals Research Institute in Bhavnagar, India, has developed a process for refining oil from jatropha seeds at a reasonable cost without the intensive use of energy. After extended analysis and consideration, a government policy on bio-diesel purchasing was initiated on 1 January 2006. This policy includes the setting of minimum support prices and blending timelines. With the Ministry of Rural Development as the nodal ministry, the National Mission on Bio-diesel was established under the chairmanship of

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Bio-diesel Energy Systems and Technology – India

the Member Planning Commission. The Mission has formulated a programme, the first phase of which is to cultivate jatropha on about 0.4 million hectares of wasteland across the country, while the second phase is to increase this to 11 million hectares and to achieve 20 per cent blending of bio-diesel with conventional diesel. States such as Andhra Pradesh, Chattisgarh, Rajasthan, Tamil Nadu and Uttaranchal have formed nodal agencies for the development of bio-diesel and have announced draft policies. On the part of industry, automobile companies such as DaimlerChrysler and Tata Motors Ltd. have been conducting trials with bio-diesel in addition to doing research and development on process technology.

BIO-DIESEL ENERGY SYSTEMS A N D T E C H N O LO G Y P R O J E C T

DESCRIPTION I D E N T I F Y I N G A N D E VA L U AT I N G T H E VA L U E C H A I N F O R B I O - D I E S E L The value chain is a chain of activities involved in the production of any product whereby each activity adds value to the final product. The value chain for bio-diesel manufactured from renewable sources of energy in India, i.e., non-edible oils, would consist of the following phases (fig. 1): • acquisition of land for plantations; • cultivation of the oilseed crop;

(a)

(b)

(c)

(d)

The objectives of the Bio-diesel Energy Systems and Technology project are to: • identify and evaluate a value chain that is relevant to the national economy, that could be implemented in rural areas, that could generate employment, and that could also be environmentally responsible; • develop a viable business plan based on the sustainable generation and use of bio-diesel; • identify the economic and political risks involved in such a venture; and • create a workable public-private partnership to implement the above scheme.

(e)

(f )

Figure 1 Steps in the production of bio-diesel from jatropha: top row (a and b): crop production; middle row (c and d): seed harvest and extracted oil; and bottom row (e and f ): conversion to the bio-diesel product.

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• extraction of the vegetable oil from the seeds; and • conversion of the extracted vegetable oil into alkyl ester and glycerol via esterification. Acquisition of Wasteland

Wasteland can be acquired via purchase, contract or lease. Usually, the purchasing of land would occur only when the landowner is in financial distress or when the land has been lying idle for extended periods. Large initial outlays of capital, the acquisition of small tracts of land from several individual owners and the aggregation of these purchases into a single large holding are characteristic of this option. Concerning contracts, the owners of large tracts of wasteland must be convinced (perhaps through financial incentives) of the potential benefits of this enterprise and they should be brought into the venture as partners. Profit-sharing on the basis of investments by all parties concerned should be agreed early in the contracting process. With regard to leases, different State governments should be approached with the business plan and large tracts of land should be leased for nominal annual payments either on a fixed-sum or a profitsharing basis. The incentives for the State governments would be primarily the environmental and societal benefits. The financial returns would also be useful for the government as an additional income from land that has been lying idle for a long time.

Under plans proposed by the National Rural Employment Guarantee Scheme (NREGS), local communities will also benefit from jatropha production, being paid to plant, tend and harvest the crop on common land. Cropping Jatropha

Under the Bio-diesel Energy Systems and Technology project, the crop chosen for the production of oil for bio-diesel is jatropha, an indigenous plant that is hardy, easy to grow and especially suited to wasteland (thus it does not require the use of valuable agricultural land). Jatropha oil is a promising and commercially viable alternative to diesel oil since it has physico-chemical and performance characteristics that resemble those of conventional diesel. The agricultural practices required to grow jatropha, including pest and disease control, are well known. Generation of Bio-diesel

The final part of the value chain involves setting up a production plant to extract oil from the jatropha seeds and to convert the oil into bio-diesel and glycerol. After crushing the seeds, the oils and fats are filtered and preprocessed to remove water and contaminants. In a process known as transesterification, the vegetable oils are chemically reacted with an alcohol (usually methanol) and a catalyst (usually potassium hydroxide) to produce fatty acid methyl esters. Bio-diesel is the name given to these esters when intended for use as

Bio-diesel Energy Systems and Technology – India

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fuel. Glycerol (used in pharmaceuticals and cosmetics, for example) is produced as a co-product. The esters and glycerol are then separated and purified.

project is being prepared in conjunction with, and for possible funding by, the Ministry of Nonconventional Energy Sources; and

The details of the process of extracting and converting jatropha oil to bio-diesel are presented in figure 2.

• a unique system of public-private partnership is being created, involving the Indian Institute of Science, Bangalore; Bio-diesel Energy Systems and Technology; the Karnataka State Council for Science and Technology; the Ministry of Non-conventional Energy Sources; and Rotary Electronics Pvt. Ltd. The details of this partnership are provided in the “Partnerships” section.

D E V E LO P M E N T O F BUSINESS PLAN

A

VIABLE

The following steps in the implementation process have already been initiated in order to fulfil the four-step value chain described earlier: • a 10-hectare piece of land has been procured on the premises of Rotary Electronics Pvt. Ltd., Bangalore, to cultivate jatropha for oil extraction and esterification; • a proposal for the involvement of and funding by the Karnataka State Council for Science and Technology has recently been approved; • a proposal for a national-level

The core idea is to create a business enterprise involved in creating bio-diesel from jatropha oil. The enterprise would be involved in the entire value chain of bio-diesel production. The long-term target is the acquisition by the enterprise of more than 20,000 hectares of land in Karnataka State that will be under jatropha cultivation within 10 years from the start of the venture.

ALCOHOL ALCOHOL RECOVERY

JATROPHA PLANTATION SEED COLLECTION

BIO-DIESEL OIL EXPELLER

REACTOR

JATROPHA OIL

SETTLER

MINERAL ACID

WASHING

NEUTRALIZATION DISTILLATION

PURIFICATION

SETTLER

EVAPORATION

EVAPORATION

CATALYST

GLYCEROL FATTY ACIDS

Figure 2

Production of bio-diesel from jatropha.

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The annual cost of cultivation (materials and labour) is estimated to be about $175 per hectare in the first year, falling to $60 per hectare in the second year. The estimated outflow of private funds for paying for land and first- and second-phase cultivation, together with funds contributed by the government, is expected to reach $22,000 in the first year, rising to more than $3 million in year 10 but falling to about $856,000 in year 11, when the targeted area of land has been purchased. Yield is expected to be an average of 2 kilogrammes per plant from the second year onwards (yield in the first year is expected to be 60 per cent of the potential yield, i.e., 1.2 kilogrammes per plant).

P AT E N T I N G A N D C O M M E R C I A L I Z AT I O N With the government of Karnataka guaranteeing a minimum assured purchase price of 4.5 rupees ($0.10) per kilogramme of seed, the inflow of cash is expected to be $6,800 from the first year, rising to $10,768,000 by year 11. Within three years, it is estimated that the project will become a net producer of funds and that the net cash flow (including the costs of land acquisition, cultivation, government payments and the sale of seed produced) is likely to exceed $10 million.

PA R T N E R S H I P S A unique approach in this entrepreneurial venture has been the creation of a sustainable private-public partnership with the following stakeholders: • the Indian Institute of Science, Bangalore: is responsible for innovation and system design; • the Karnataka State Council for Science and Technology: sponsors the project and provides assistance with technology transfer; • the Ministry of Non-conventional Energy Sources, New Delhi: provides national support for infrastructure and assistance with technology transfer; • Bio-diesel Energy Systems and Technology, a small start-up venture founded by an alumnus of the Indian Institute of Science with a master’s degree in business administration: is responsible for basic project implementation and the entrepreneurship scheme; and • Rotary Electronics Pvt. Ltd., Bangalore, a small/medium-sized enterprise: has corporate social responsibility.

REPLICABILITY In view of the global depletion of nonrenewable energy resources, bio-diesel represents a novel and economically and environmentally viable source of renew-

Bio-diesel Energy Systems and Technology – India

able energy for all countries with unexploited land resources. J. curcas, found in the tropics and subtropics, having a low water requirement and adapted to a wide range of climates and soil types, is suitable for cultivation in other developing countries. Jatropha bio-diesel is already used in countries such as Argentina, the Dominican Republic, Kenya and Mozambique and its potential is being investigated in countries such as Indonesia, Myanmar and the Philippines. Indeed, enquiries about the Bio-diesel Energy Systems and Technology project have been received from Bangladesh, Malaysia and South Africa.

P O L I C Y I M P L I C AT I O N S Bio-diesel has been promoted as a viable alternative to petroleum-based diesel via the formulation of a bio-diesel purchase policy with minimum support prices, initiatives by the central government in setting bio-diesel blending targets with timelines, and initiatives by State governments in promoting the cultivation of bio-diesel feedstock on wastelands. For example, some States in India (e.g., Andhra Pradesh, Chattisgarh and Orissa) have introduced legislation to encourage the use of bio-diesel. The National Bio-diesel Policy, formulated in March 2006, now encourages other States to do likewise. The major risk in this project has been assessed to be a political one: the likelihood that State and federal govern-

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ments will change their energy and agriculture policies to make bio-diesel less attractive. In the worst-case scenario, the governments may even discourage or prohibit the use of inedible oils for energy purposes. The greatest economic risks arise from the volatility of the international energy markets, including price fluctuations that may arise from the introduction of a new energy technology. Moreover, if the cost of conventional energy should fall, the price of bio-diesel would become less competitive. There is always competition for agricultural land and associated forest land. If the programme proves successful, the promoters and regulators of bio-diesel may begin to encourage the large-scale conversion of agricultural land to jatropha cultivation, placing enormous competitive pressure on land-use patterns. For example, wastelands are often used as common land and supply the poorest rural peoples with food, fodder, fuel wood and medicine.

I M PA C T The validity of the basic concept of this project and its feasibility have been demonstrated. Its success at later stages will be measured by the following parameters: • the progressive rate of conversion of arid land and wasteland to the cultivation of jatropha and other similar plants producing inedible vegetable oils;

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• the annual increase in the production of seed from which inedible vegetable oil can be extracted to make bio-diesel;

areas where the jatropha will be grown, the remainder of the downstream processing occurring in urban and semiurban areas.

• the successful implementation of low-cost processes and technologies for esterifying the vegetable oil to produce bio-diesel;

The Bio-diesel Energy Systems and Technology project represents an economically and environmentally viable option in view of the increasing demand for renewable domestic energy supplies in the face of the depletion of national resources and efforts to attain energy security, and central and State government involvement in the promotion of bio-diesel cultivation and use. The project is highly sustainable because it exploits wasteland that would otherwise lie idle and not generate income. It can potentially generate a significant amount of rural employment and possibly allow the accumulation of carbon credits (a key component of national and international emissions trading schemes to offset emissions of greenhouse gases).

• the increasing generation of rural employment for farmers and social entrepreneurs engaged in the cultivation of jatropha and other oilseed crops; • the production, marketing, distribution and use of bio-diesel as a substitute for conventional petroleum-based diesel; and • the national social benefits generated overall through the bio-diesel project, including the creation of energy security. A preliminary assessment of the potential of the Bio-diesel Energy Systems and Technology venture to generate employment shows that at least 2 million jobs will be created in the State of Karnataka in the next 20 years. This would represent a 5 per cent increase in employment levels in the State (which currently has a work force of about 40 million people in the organized sectors). There will also be an indirect effect on another 10 million people who stand to benefit as tertiary suppliers and ancillary units involved in the bio-diesel supply chain. Most (an estimated 60 per cent) of the jobs created will be for the semiskilled and unskilled labour force in rural

LESSONS LEARNED Among the obstacles faced during this project to date has been the reluctance of local farmers to sell or lease land for the cultivation of jatropha, especially in the absence of clear government policies. This problem has been partially overcome by offering to involve the farmers as participants in a social entrepreneurship project with the formation of a profit-sharing cooperative. Environmental concerns have been raised concerning the effect on biodiversity

Bio-diesel Energy Systems and Technology – India

of large-scale monoculture with jatropha or honge. In order to address these concerns, suitable multiple-cropping strategies have been proposed (for example, a combination of cereal crops with jatropha). The political will of the central government to develop and implement sustainable policies for the promotion and incentive-based growth of bio-diesel fuels was recognized as a limiting factor with respect to the widespread success of the project. Developing appropriate marketing and distribution policies and strategies that will ensure the uniform availability of bio-diesel across a large country such as India is also a significant challenge. With regard to technical issues, it will be necessary to develop more economical means of extracting oil from the jatropha seed and to develop economic strategies for the esterification process by which bio-diesel is produced from the vegetable seed oil. The preparation of public perception for the acceptance of bio-diesel as a viable alternative to petroleum-based diesel has yet to be undertaken. The success of this part of the venture will depend largely on the efforts of governmental and non-governmental organizations to inform the public of the social and economic benefits of using bio-diesel in the agricultural, industrial and transport sectors.

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FUTURE PLANS Efforts are now being concentrated on creating the infrastructure necessary for successful implementation of the Biodiesel Energy Systems and Technology bio-diesel project in Karnataka State.

P U B L I C AT I O N S Mandal, R. (2004). Energy – Alternate Solutions for India’s Needs. Planning Commission, Government of India. Manjunath, K. C. (2006). Generation of biodiesel using inedible oils: Value chain analysis and business plan. MBA thesis. Department of Management Studies, Indian Institute of Science, Bangalore. Case Study Prepared by: Parameshwar P. Iyer Principal research scientist Address: Department of Management Studies, Indian Institute of Science, Bangalore 560 012, India Tel.: (+91) 80 2293 2448 E-mail: [email protected], [email protected] Project Participants: Parameshwar P. Iyer, innovator and system designer, Indian Institute of Science, Bangalore. K. C. Manjunath, innovator and system designer, Department of Management Studies, Indian Institute of Science, Bangalore.

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Karnataka State Council for Science and Technology and Indian Institute of Science, Bangalore: Project sponsors and technology transfer assistance. Ministry of Non-conventional Energy Sources, New Delhi: National support for infrastructure and project technology transfer. Bio-diesel Energy Systems and Technology: Basic project implementation and the entrepreneurship scheme. Rotary Electronics Pvt. Ltd., Bangalore.