Words Abhijeet Mukherjee
As concerns about climate change and energy security grow, the potential for biogas as a key player in the energy market is increasingly recognized. However, to fully realize this potential, the prospective sentiments for the biogas industry must be improved which shall then lead to promoting investor confidence followed by increased allocation of Capital. Investor’s confidence is buoyed by advancements in biogas technology, long-term government policies, and emphasis on environment sustainability initiatives like targeted reduction of emissions and carbon footprints across the business fraternity. These elements shall collectively drive the stock valuation of CBG projects, making the biogas industry an attractive prospect for investors.
Of course, such an anticipated scenario can only be achieved through a gradual reduction of some of the prevailing uncertainties or risks spanning the industry. Typically for biogas plants, these risks may include operational or technical failures, supply chain disruption, and unstable policy regimes, and inappropriate financial management. Indeed, a lot of effort has already gone in toward making the sector credible and lucrative but, as a continued saga of improvement, there lies room for some of the above-mentioned aspects to be further honed upon. Here is an attempt to figure out how some of these factors are pivotal in improving the credibility and stock value of biogas entities.
Technological Innovation
Technological advancements in biomethane production can significantly enhance operational efficiency and yield. Higher efficiency translates to higher biogas yields and lower production costs, making biogas a more competitive energy source. For example, advancements in anaerobic digestion (AD) and feedstock pre-treatment can cumulatively increase biogas yields by up to 30%. Implementing advanced monitoring and control systems can further enhance operational efficiency by significantly reducing lost revenues and operational and maintenance cost due to unplanned plant shutdowns, inefficient operations and capacity utilization. Companies are investing in research and development to optimize the anaerobic digestion process, and feedstock pre-treatment methods, and developing better microbial strains can reduce production costs and improve profitability.
In addition, upgrading technologies play a crucial role in converting raw biogas into high-quality biomethane. Advanced separation technology, can achieve higher methane purity levels of more than 99% with maximum recovery of methane. Investing in such technologies can command higher market prices. More particularly, in current industry parlance, a purer form of biomethane, when inserted into the gas grid, fetches a higher premium as the realization is based on calorific value.
Another idea that’s gathering traction is integrating biomethane production with other renewable energy systems, like solar or windmill set up or a bio refinery can enhance overall energy efficiency. A bio refinery offers significant cost advantage by efficiently converting biomass into a spectrum of marketable products and energy, akin to how a petroleum refinery processes crude oil. The catch however is such integrations are more viable when operated at a higher scale or capacity. Nevertheless, such an integrated approach maximizes overall profitability of the set up and going forward it might very well be the trend that would attract a multitude of investors.
Ensuring policy certainty in the long run
CBG industry through a slew of initiatives in recent years in the form of Capital subsidy schemes to the tune of INR 4 crores / 4.8TPD CBG plant for setting up CBG projects, procurement of farming implements, setting pipeline infrastructure. Other market promotion and development scheme includes SATAT scheme-which underwent several amendments to finally benchmark CBG prices to CNG, the introduction of CBG-CGD synchronization scheme to streamline insertion of CBG into the city gas grid, exemption on excise duty in blended CNG to the extent which is equal to GST paid on inserted biogas/ CBG, and providing market development assistance for sales of Fermented organic Manure.
In this context, it must be noted that a majority of these polices underwent several overhauls/amendments to provide a long-term assurance of continuation of these policies to the project developers. Indeed, clear and consistent government policies, provides the much-needed predictability and longer rope for investment and growth of the Indian Compressed Biogas (CBG) industry.
In addition, increased awareness about the environmental and economic benefits of CBG among policymakers, industry personnel, and the wider public including the farmers can drive demand and support for biogas projects. As more stakeholders recognize the value and potential of CBG, market acceptance and adoption will grow, attracting further investments. Equally important in this context is to emphasize upon continuous training and development programs for industry personnel to ensure they are adequately skilled and knowledgeable about the latest operational procedures and safety protocols.
Optimization of Financial Resources
Financial optimization is critical to increasing the value of the Compressed Biogas (CBG) sector by improving profitability, market sentiments, and investment appeal. CBG companies can significantly reduce production costs by carefully managing costs and optimizing operational efficiency. This involves improving feedstock procurement upon organizing and consolidating the current fragment biomass supply chain, implementing contemporary and rightly mapped technology to increase process efficiency and biogas generation, as well as diversifying revenue streams from sales of by-products such as biogenic CO2, elemental sulphur, value-added fermented manure, and carbon offsets.
Careful financial planning can help to maximize access to existing government subsidies and incentives, increasing returns even further. Financial optimization also includes utilizing economies of scale, resulting in a lower per-unit spread of overall expenses leading to larger margins. Improved financial health and demonstrable profitability for a larger but diversified (based on feedstock, technology, business model, etc.) number of successful CBG projects shall make the industry more appealing to a wider pool of investors, resulting in higher valuations and funding prospects.
Nurturing Strategic Partnerships
Forming partnerships with important stakeholders such as feedstock suppliers, technology providers, and distribution networks can help to streamline overall operations, lower costs across the value chain, and ensure a consistent supply of needful raw materials. Collaborations with research institutions and technology companies can drive innovation, resulting in more efficient production methods and better biogas outputs. Market expansion, both domestic and international, enables CBG producers to generate additional revenue sources and broaden their customer base. Furthermore, strategic alliances with government entities and participation in public-private partnerships can help unlock the needful resources, and increase profitability and growth potential. We are already seeing an increased trend in PPP through the latest MoU entered by the (Oil and Gas Marketing Companies) OGMCs, like GPS and IOCL, TruAlt Bioenergy and GAIL, Praj Industries and HPCL, Everenviro and ONGC, to list just a few. Leveraging upon each other strengths through such alliances, CBG companies can achieve economies of scale, improved usage of resources, and increased competitive stance, all of which augurs well for more success stories in the industry thus stirring the vicious cycle of increased investor confidence and improved industry valuation.
About the Author
Abhijeet Mukherjee, Director, Indian Biogas Association.
