Crop Residues Based Pellets Market Opportunities in India

Ever increasing use of fossil fuels such as coal and oil, contributing significantly to global warming and a great deal of harm to the environment. It is of utmost necessity to develop green sources of energy not only to generate power but most importantly to reduce the impact of energy production on the environment. In addition to the climate challenges, we are now facing challenges related to high energy prices and the high risk of supply shortages. Energy and, in particular, the clean energy is an important topic that needs special attention by the scientific community World-wide and, more so, in the context of the developing countries. Renewable energy should be looked as the most important instrument for the socioeconomic development, eradication of poverty and unemployment and an instrument of rural development.

Amongst potential renewable energy sources, biomass can play an important role in achieving a net-zero carbon emissions and can be used to produce electricity, transportation fuels, or chemicals. Development of small to medium size technologies for power production in order to allow the exploitation of low value feedstocks, such as biomass residues from forest management, agro-industrial, agricultural sectors and wood industries, are of importance, especially in the context of the developing country, like India.

It is in the above context that to address many challenges, such like biomass collection, processing, storage and its transportation to the point of ultimate utilization an important idea to develop decentralized model involving Farmer Producer Organizations (FPOs), farmers cooperatives, etc. in production of crop residue pellets or terrified pellets at village level, has been discussed in the present paper.

India at the COP 26 summit in Glasgow made a commitment to achieve net-zero emissions by 2070. India also made a commitment to procure 50% of its energy requirements from clean and renewable energy sources by 2030. Biomass economy by 2070.

India's energy landscape is significantly shaped by its extensive network of thermal power stations, a vital component of the nation's power generation infrastructure. These stations primarily rely on the combustion of fossil fuels, such as coal, to produce electricity. With a growing demand for energy, India has strategically positioned numerous thermal power plants across the country, contributing substantially to its power generation capacity. These stations play a crucial role in meeting the nation's energy needs, providing a reliable and consistent power supply. In India, out of the total 465 GW installed power generation capacity, cumulative installed capacity of coal based thermal plants is about 216 GW [1].

Crop residue burning in Punjab, Haryana, and Uttar Pradesh, is practiced by farmers who alternate between long-duration rice and wheat. As per ICAR (Consortium for Research on Agro ecosystem Monitoring & Modelling from Space Indian Agricultural Research Institute. Monitoring paddy residue burning in India using satellite remote sensing during 2023) satellite remote sensing data available till November 30, 2023, the burning events reported are more than 42962 [2] in northwest states during the rice cultivation season.

The cumulative number of crops burning incidences reported in state of Punjab, Haryana & Uttar Pradesh is shown in figures 1,2 respectively. It is estimated that there are about 70-80 metric million tons of rice residue each year in this region. The release of a high volume of particulate matter has not only serious repercussions on health and the environment but is also a major cause of loss of nutrients and energy that could be tapped for more productive use.

Figure 1: Cumulative number of crop burning incidences reported in Punjab during 2023.
Source: The Consortium for Research on Agroecosystem Monitoring and Modelling from Space (CREAMS), Indian Council of agricultural research (Bulletin No. 77).

Figure 2: Cumulative number of crop burning incidences reported in State of Haryana and Uttar Pradesh during 2023.
Source: The Consortium for Research on Agroecosystem Monitoring and Modelling from Space (CREAMS), Indian Council of agricultural research (Bulletin No. 77).

Status of biomass resources and biomass power potential

As per the MNRE study report, about 774 Million Tons (MT) [3] of crop residue is generated per year in India. As a source of energy for rural households and industrial use, these residues are basically used for animal feed, soil mulch, and manure. The total yearly surplus crop residues are reported to be approximately 228 Million Tons (MT). Additionally, agricultural waste is produced from a broad range of subsectors, including agro-processing industries (paper and pulp production, rice mills, oil mills, sugarcane processing, distilleries, and other food and food processing industries). The State-wise annual production and its surplus quantity are given in table 1.

Biomass densification

Densification has aroused a great deal of interest in recent years as a technique of beneficiation of residues for utilization as energy source. Many biomass residues cannot be used efficiently, as they have low bulk densities. For example, the bulk density of majority of the agro-residues lies in the low range of 50-200 kg/m3 as compared to high bulk density of coal (800 kg/m3 of the same size).

This necessitates huge storage space, creates difficulty in handling, and higher transportation cost. All these factors make them economically unviable for their widespread utilization over longer distances. Also, low bulk densities and loose nature of available biomass are associated with faster burning of fuels, resulting in lower operating thermal efficiencies and emissions in the form of fly ash or particulates in the atmosphere. This makes them poor quality biomass fuel. To improve the quality and exploit this renewable and sustainable source of energy, pre-processing becomes necessary. Densification of biomass by using briquetting or pelletizing technology is the good option to improve the quality of biomass, which compresses loose biomass into briquettes or pellets.

This increases the bulk density of biomass and reduces transportation and storage cost and improves the quality of biomass so that it could be used as a better combustible fuel. Thus, briquette/pellet produced from biomass is a fairly good substitute for coal, lignite, and firewood and offers several advantages.

The benefits of densified fuel

The moisture content of pellets is substantially lower (4% to 8% water compared to 20% to 60% for raw biomass). Less moisture means higher calorific value and easier handling, especially in freezing situations with green raw biomass materials. The density of pellet fuel is substantially higher than raw biomass (640 kg/m3 vs. 160-400 kg/m3 in raw material form). More fuel can be transported in a given truck space, and more energy can be stored at the site. Pellets are more easily and predictably handled. Their uniform shape and size allows for a smaller and simpler feed system that reduces costs. This high density and uniform shaped pellets can be stored in standard silos, transported in rail cars and delivered in truck containers.

A tremendous amount of unusable material remains on the grounds of forest, and the materials rejected by wood-based product manufacturing industries can be a perfect resource for commercial pellet manufacturers.

Densified biomass fuels market potential

There are two distinct market segments for briquettes/pellets in India namely, variety of industrial/commercial users and thermal power plants.

Industries: In India, there are large number of large, and MSMEs, spread across different geography. Most of these MSMEs rely on fossils fuels like coal, furnace oil and diesel for meeting their process heat requirements. Due to recent increased prices of these fuels and other environmental considerations industries are looking for alternate options such as briquettes and pellets for meeting this requirements. The prevailing market price of briquettes are Rs 6000-8000 per ton depending on type and quality of briquettes whereas wood pellets prices are Rs 10,000 to 14000 per ton. There is growing market of biomass briquettes/pellets in India while sustain supply and production constraints are critical challenges in meeting this requirement.

Thermal power plants: The Ministry of Power, Government of India (GoI) has initiated National Mission on use of biomass in coal based thermal power stations (SAMARTH) through co-firing in pulverized coal-fired boilers and mandated all the coal-based power plants to use 5% blend of biomass pellets along with coal. This has been initiated with an objective to create market for biomass pellets and torrefied pellets in India and to achieve the national goal to address the issue of air pollution due to farm stubble burning and to reduce carbon footprints of thermal power generation. This aims to further support the energy transition in the country and achieve its targets to move towards cleaner energy sources. The proposed National Mission on biomass will also contribute in the National Clean Air Programme (NCAP).

Approximately, 2.5 to 3.0 lakh tonnes of biomass pellets are required for 7% blending in a thermal power plant of 1000 MW capacity. The existing India’s coal based electricity production capacity is about 214 GW and annually about 980 million tonnes of coal is used in the power generation application (2022-23). To meet 5% co-firing target, there is annual requirement of 50 million tons of biomass pellets in TPPs across States.

Over past few years, there has been growing trend in use of pellets by TPPs as shown in figure 3. It can be seen about 1,61,873 MT of pellets are already co-fired in TPPs in till date of FY 2023-24 against total of 50,091 MT of pellets used in FY 22-23, in various TPPs across India. Also, cumulative capacity of Biomass co-fired is 477000 [4] MT achieved in FY 23-24 (as on 25 March 2024). As per SAMARTH portal data, out of total 269 TPSs in India about 50 thermal power plants have successfully implemented the co-firing policy and started firing pellets along with coal.

Figure 3: Year-wise quantity of Pellet Co-fired in Thermal Power Stations (TPSs).
Source: Sustainable Agrarian Mission on use of Agri-Residue in Thermal Power Plants (SAMART) Biomass Mission – Ministry of Power, Government of India.

The overall potential market size of agro-residues based pellets is estimated to be more than 40000 crore industry.

To facilitate the seamless implementation of this policy, the Government has initiated various measures. The Ministry of New and Renewable Energy (MNRE) and Central Pollution Control Board (CPCB) have introduced Finance Assistance Schemes tailored for biomass pellet manufacturing units. The Reserve Bank of India (RBI) has accorded approval, designating 'Biomass pellet manufacturing' as an eligible activity under Priority Sector Lending (PSL).

Financial subsidies and schemes

CPCB [5] Financial Support: For Non-torrefied plant setups, financial support under Environment Protection Charge (EPC) funds entails a one-time assistance of Rs. 14 Lac per ton of production capacity per hour, capped at Rs. 70 Lakhs. For Torrefied plant setups, a one-time capital support of Rs. 28 Lac per ton of production capacity per hour is provided, with a ceiling of Rs. 1.40 Crores. A designated corpus of Rs. 50 crores have been earmarked for utilization following the stipulated guidelines.

MNRE [6] Bio energy schemes: Under the MNRE Bio Energy Schemes, pellet manufacturing plants stand to receive Rs. 9 Lakh per Metric Ton Per Hour (MTPH) or Rs. 45 Lakhs per plant as Central Financial Assistance.

To bolster the procurement and availability of biomass pellets, the Ministry of Power has undertaken multifaceted initiatives. The Ministry has also rolled out awareness programs and advertisement campaigns to promote the use of biomass pellets in Thermal Power Plants.

Due to the fact that agro-residues based pellets is in nascent stage and is evolving market conditions for different stakeholders, including thermal power plants, pellet manufactures, farmers, bankers etc. Ministry of Power (MoP) has decided to benchmark the prices of biomass pellets used for co-firing in Thermal Power Plants (TPPs).

The benchmark price take into account the business viability, impact on electricity tariff, efficient and faster pellet procurement by power utilities. The price benchmarking of pellets also aims to enable the TPPs as well as pellet producers to establish a sustainable supply mechanism for co-firing of pellets.

As per the directives issued by Ministry of Power, Govt. of India pellet price of Rs 2.32/1000 Kcal [6] is being set for NCR and adjoining area within 300 km radius of Delhi. The price of Rs 2.27/1000 Kcal [7] is set for Northern region of India covering states like Uttar Pradesh, Rajasthan, Uttarakhand, Haryana, Punjab, Himachal Pradesh, J&K and Ladakh and price of Rs 2.24/1000 Kcal [8] is set for western states of India covering states like Madhya Pradesh, Gujrat, Maharashtra, Chhattisgarh.

This results into pellet base price of Rs 6272 to 9280 depending on pellets quality and GCV, with the price excluding GST and transportation cost at the pellet manufacturing plant site.

In India, biomass is already a significant source of energy and its dependence on energy needs is expected to rise in the future, so the contribution of biomass to the energy mix is projected to increase. As fossil-based fuel supplies dwindle, biomass will increasingly also be in demand as a substitute for fossil fuels and petrochemicals.

The total demand for biomass can be expected to soar in the coming years. The issues of agroresidues include biomass collection, processing, and storage. Its transportation to the point of ultimate utilization due to the dispersed and voluminous nature of this resource and lack of robust institutional and market mechanism for efficient procurement of the required quantity of agroresidues in a short span of time add additional challenges to the management of this resource.

Similarly, from the lower energy density characteristics and life cycle emission perspective, it is inevitable to use these resources at decentralized scale rather than transport them to long distances. The lack of policies and investment in crop residue collection and aggregation business is a critical missing link in value chain creation.

The key research questions that still need to be addressed are: “How much sustainable biomass can be supplied from the agriculture ecosystem considering complex interactions between its availability and human needs?” “What is the availability of biomass, and what factors does society need to consider in managing it sustainably?”

For addressing the challenge of crop residues management, it is crucial that district/block-level-specific plans be developed with an emphasis on crop residues production and surplus quantity, demand of energy (fuels, electricity, and drying/ cooling applications) in agricultural industries and HH sectors, besides the use of crop residues for soil incorporation purpose.

A more innovative and integrated policy approach by combining in situ and ex situ approaches is needed for a scalable and long-term solution to this problem. This can play an important role in achieving a net-zero carbon emissions economy by 2070. Also, achieving the national goal of reducing GHG emissions and decarbonizing the power sector in India.

The complexity of agroresidues includes biomass collection, processing, storage and eventually its transportation to the point of ultimate utilization due to dispersed and voluminous nature of this resource, lack of robust institutional and market mechanism for efficient procurement of the required quantity of agroresidues in short span of time add additional challenge in management of this resource. Similarly, the lower energy density characteristics and life cycle emission perspective, it inevitable to use these resources at decentralized scale rather than transportation it to long distance.

One of the critical challenges to scale up these efforts on ground is that project developer’s perceived risk primarily due to feedstock challenges in terms of availability and pricing. The lack of policies and incentive in crop residues collection and aggregation business coupled with access to efficient farm machineries to handle these residues during harvesting seasons, are critical missing link in value chain creation.

To address these challenges, it is important to develop decentralized model involving Farmer Producer Organizations (FPOs), farmer’s cooperatives, etc. in production of crop residue pellets or torrefied pellets at village level to utilize crop residues to meet the growing demand of fuel in power generation.

A 2 TPH capacity biomass pellet plant can utilize about 7500 tonnes of crop residues annually and can support 70 direct and indirect sustainable jobs in rural areas through this project, in addition to income from supplemental activities.

The socio-economic benefits of something like this could range from reduction of air pollution to increased farmer income. This has the potential to make the farmers not only self-reliant but also provide opportunity to become agro entrepreneurs.

It could also promote local entrepreneurship development and employment opportunities in rural areas. To address the challenge of crop residues management, it is important that district/block level specific plans to be developed with emphasis on crop residues production and surplus quantity, demand of energy (fuels, electricity and drying/cooling applications) in agricultural, industries and HH sectors, beside use of crop residues for soil incorporation purpose. More innovative and integrated policy approach by combining in-situ and ex-situ approaches are needed for scalable and long term solution of this problem.

This can play important role to achieve a net-zero carbon emissions economy by 2070 and to achieve the national goal to reduce GHG emissions and decarbonize power sector in India.

Environmental benefits

Biomass co-firing can contribute to reducing greenhouse gas emissions compared to burning fossil fuels alone. Biomass is considered a renewable energy source, and its combustion typically releases carbon dioxide, but the carbon is part of the natural carbon cycle, making it a more sustainable option compared to fossil fuels.

Reduced GHG emissions

Co-firing biomass in thermal power plants emerges as a potent strategy to mitigate Greenhouse Gas (GHG) emissions, presenting a stark contrast to the environmental impact of burning fossil fuels alone. Biomass, recognized as a renewable energy source, undergoes combustion, releasing carbon dioxide; however, this carbon is integral to the natural carbon cycle. In contrast, the combustion of fossil fuels releases carbon that has been sequestered for millions of years, contributing to a net increase in atmospheric carbon dioxide.

The efficacy of biomass co-firing in reducing GHG emissions becomes evident as it acts as a suitable method to curtail net emissions of Carbon Dioxide (CO2), Particulate Matter (PM), Sulphur Dioxide (SO2), and often Nitrogen Oxides (NOx) in comparison to coal combustion. This process not only addresses the imperative need for sustainable energy practices but also contributes significantly to the reduction of harmful pollutants associated with traditional coal-fired power generation.

Reduction in coal dependency

It reduces the over reliance on coal for Power generation.

Impact on agricultural residue burning

If the policy encourages the use of agricultural residue (such as crop stubble) as part of the biomass for co-firing, it could potentially provide an economic incentive for farmers to collect and sell their residue to power plants rather than burning it in the fields. This could contribute to a reduction in the harmful environmental effects of open-field burning, such as air pollution and soil degradation [9].

Energy mix and diversity

Introducing biomass co-firing adds diversity to the energy mix, promoting a more balanced and sustainable approach to power generation. This can contribute to energy security and resilience by reducing dependence on a single energy source.

Regulatory compliance

The implementation of biomass co-firing may be in line with government regulations and policies aimed at increasing the share of renewable energy in the overall energy mix. Compliance with such regulations may lead to financial incentives or penalties, depending on the jurisdiction.

Investment and infrastructure

Power plants may need to invest in modifications to accommodate biomass co-firing. This includes changes to combustion systems, fuel handling, and emission control equipment. The financial implications would depend on the existing infrastructure and the specific technology used for co-firing.

Supply chain and biomass availability

A successful implementation would require a reliable and sustainable supply chain for biomass feedstock. This may involve establishing partnerships with biomass suppliers, ensuring a consistent and affordable supply of biomass.

Economic viability

The economic viability of biomass co-firing depends on factors such as the cost of biomass compared to traditional fuels, government subsidies or incentives, and the overall market conditions for renewable energy.

Job creation and local economic impact

The biomass sector, including the production and supply of biomass feedstock, could potentially create jobs and have positive economic effects in the regions where biomass is sourced.

Public perception

Public perception and acceptance of biomass co-firing may influence the success of the initiative. Education and communication about the environmental benefits and safety aspects of biomass co-firing may be important.

It's important to note that the success of biomass co-firing depends on careful planning, effective policies, and collaboration between the government, industry stakeholders, and the public. Additionally, the specific details of the implementation and the local context will play a crucial role in determining the outcomes.

The Ministry, recognizing the immense potential of biomass as a sustainable energy source, has been actively promoting biomass power generation. Biomass resources such as surplus agricultural residues, wood from energy plantations, industrial wood waste, agro-based residues, forest residue, weeds, palm leaves, coconut shells, and husk are being harnessed for energy recovery.

1. Central electricity authority- Dashboard. 2023.
2. Monitoring paddy residue burning in India using satellite remote sensing during. 2023. 
3. MNRE report, evaluation study for assessment of biomass power and bagasse cogeneration potential in India. Final Report. 2021
4. Samarth biomass mission. 2024.
5. Guidelines for grant of one-time financial support under Environment Protection Charge (EPC) Funds for establishment of palletisation & torrefaction plants to promote utilization of paddy straw. CPCB.
6. MNRE biomass programme (Scheme to Support Manufacturing of Briquettes & Pellets) under the umbrella scheme of national bioenergy programme for duration of FY 2021-22 to 2025-26.
7. Benchmarking of price in NCR Region. Doc: F. No. LLt8,6/zOt7'Th.II (C.No 23A797), Ministry of Power, Govt of India.
8. Benchmarking of pellet price in northern region (except NCR). Doc: F. No. LL / 86 / 2Or7 -Th.II (C.No 238797), Ministry of Power, Govt of India.
9. Benchmarking of price in Western region. Doc: F. No. LL / 86 / 2ot7 -Th.II (C.No 238797), Ministry of Power, Govt of India.