<article><p class="lead">Indian biomass demand is expected to increase in 2022 amid a policy for utilities to burn more wood pellets and reduce coal consumption, though the increase is unlikely to have any impact on the seaborne market beyond a possible rise in demand from coastal users.</p><p>India is aiming to reduce its reliance on fossil fuels in its journey to <a href="https://direct.argusmedia.com/newsandanalysis/article/2269466">reach net-zero emissions by 2070</a>. It has accordingly mandated utilities to co-fire biomass with coal. This will raise demand for biomass in the coming years but ample domestic supplies mean that consumers are unlikely to turn to the seaborne market, at least in the foreseeable future.</p><p>Indian utilities <a href="https://direct.argusmedia.com/newsandanalysis/article/2262323">must co-fire at least 5pc biomass pellets</a> within the next one year, according to a recent policy by the country's federal power ministry, aimed at reducing coal consumption and curbing pollution. Co-firing should be raised to 7pc from October 2023 for two categories of power plants, namely those with a bowl mill or with a ball and race mill. </p><p>The policy for co-firing will be valid for 25 years or until the useful life of a power plant, whichever is earlier, the ministry said. The biomass pellets must be primarily made up of agricultural residue and the policy encourages local sourcing.</p><p>State-controlled utility NTPC's Dadri was the first Indian power plant to co-fire biomass with coal after trials that used 10pc biomass in the overall fuel mix. Dadri provides power for the national capital region (NCR), which includes Delhi and its surrounding districts, and has a coal-fired generation capacity of 1,820MW and gas-fired capacity of 817MW.</p><p>NTPC has further placed an order for 930,000t of biomass pellets that will lift its co-firing in 2022 and beyond. The largest Indian utility is also executing a tender to procure another 20mn t of biomass, which will enable the firm to co-fire 5mn t/yr of pellets at its 17 power plants. </p><p>Outside the power sector, there are other industries looking to consume biomass to meet their individual goals on emissions. Indian cement makers are aiming to turn their operations carbon neutral well before the country's target of 2070. </p><p>Key cement maker Dalmia Bharat has set a <a href="https://direct.argusmedia.com/newsandanalysis/article/2274161">target to be carbon negative by 2040</a>, and for a complete replacement of fossil fuels with biomass and alternative energy sources by 2035. India's largest cement maker UltraTech aims to cut emissions by 25pc by 2030 and produce carbon-neutral products by 2050. The company aims to meet 100pc of its electricity requirement through renewable sources by 2050.</p><p>UltraTech in October signed an agreement with a domestic biomass aggregator to partly replace coal and petroleum coke in its cement kilns. The aggregator, Punjab Renewable Energy Systems (PRESPL) also subsequently signed an agreement with JK Cement to help the firm expand use of biomass and alternative fuels towards replacing fossil fuels.</p><p>FMCG and pharmaceutical companies are also eyeing biomass as a replacement fuel. Hindustan Unilever, the Indian subsidiary of FMGC major Unilever, has eliminated coal usage across its operations, replacing it with green alternatives such as biomass and biodiesel as a part of its broader plans to achieve zero emissions in operations by 2030, the company said recently. All its coal-fired boilers have been modified to use biomass and other renewable fuels. </p><h3>Ample domestic supplies</h3><p class="lead">India is estimated to be using less than 5mn t/yr of biomass, although potential availability is much higher at 500mn t/yr, Rohit Dev, chief operating officer at PRESPL told <i>Argus</i>. "We have a mid-term window of opportunity to export biomass pellets until local consumption takes off in a big way," said Dev. At the same time, India could import wood chips from the US and Canada to serve coastal consumers and bridge the gap between domestic supply and demand to scale up biomass use even faster, he added. </p><p>PepsiCo India, the Indian subsidiary of the American beverage firm, is using 100pc biomass in its boilers, said Dev. Significant demand for biomass is coming from such industrial boilers. Besides this, state-controlled refiner IOC is setting up biomass-based compressed bio-gas plants to produce transportation fuels, and is expected to support demand in 2022. </p><p>Two issues need to be addressed to support small-scale units that want to get into biomass briquettes or pellets, said another market participant. "You need to develop storage infrastructure and facilitate the granting of hassle-free bank financing for biomass projects," he added. </p><p>Asian traders of wood pellets and palm kernel shells (PKS) outside of India remain highly skeptical of seaborne demand growth under the new mandate. Traders have previously received enquiries from Indian buyers before the announcement of the new mandate, but discussions ended without any deals being concluded as seaborne biomass prices did not make economic sense at that point. </p><p>But even with the new mandate pushing utilities toward biomass, the majority of wood pellet and PKS traders are not optimistic about the growth of seaborne biomass demand in India. The country usually relies on domestic material and only buys when seaborne prices are relatively low. Moreover, the focus on domestic sourcing is providing utilities with little incentive to seek seaborne cargoes. </p><p class="bylines">By Ajay Modi and Deborah Sun </p></article>
