Thinking of setting up a biofuel manufacturing plant? There's no time like the present to dive in.
According to experts from the International Energy Agency (IEA), biofuel demand is projected to witness a roughly 30% increase compared to the last five-year period, expanding total demand in the coming half-decade by 3 billion litres. By 2028, renewable diesel and biojet will supplement the growth in demand for ethanol and biodiesel, taking total biofuel demand to 200 billion litres.
Biofuels - be they ethanol, renewable diesel, biodiesel or biogas - play a critical role in the global energy supply. They offer an economical, reliable and sustainable supply of energy that fits well into a circular economy - much needed in a time of sky-high greenhouse gas emissions, air pollution, and climate change.
Most new demand for the production of biofuel comes from emerging economies like Brazil, Indonesia and India, where rising transport fuel demand, robust biofuel policies and large amounts of feedstock availability are driving the demand for green energy.
For India, particularly, biofuels represent a golden opportunity to not only combat climate change but also stave off energy security concerns, control increasing fuel import bills, and boost economic growth - particularly the rural economy.
If you're interested in setting up a biofuel manufacturing plant, this post is a great starting point to help you understand the market for biofuels in India and abroad, the process for the production of biofuel, and the steps you need to take to get started in the industry.
What are biofuels?
The term biofuels is used to refer to any fuel produced, directly or indirectly, from biomass or organic material. It includes bioethanol, biodiesel, sustainable aviation fuel, biogas, and more - each of these fuels differs in feedstock used, process of production, ease of production, properties, applications, efficiency, and environmental benefits. They are produced from diverse feedstocks which include plant- or animal-based materials, like used cooking oil (UCO), non-edible oils like jatropha oil, sugarcane, rice straw, wheat straw, cotton stalks, bagasse, bamboo, etc.
Since biodiesel can be derived from several non-edible vegetable oils, animal fats and their by-products, biodiesel production is a natural avenue for businesses already involved in edible oil production to explore. Primarily, it involves a transesterification reaction i.e. a reaction of the lipid or oil with an alcohol (in the presence of a catalyst) to produce esters and glycerine. Methanol is the most commonly used alcohol, while sodium methylate or sodium hydroxide are used as catalysts. Both the products, the esters and glycerine, are further treated to produce biodiesel suitable for vehicles and glycerine suitable for pharma applications, respectively.
Depending on the feedstock and the alcohol used to produce it, biodiesel may have different technical names, like soybean methyl ester, palm oil methyl ester, or canola ethyl ester. Collectively, the biodiesels produced using methanol are referred to as fatty acid methyl esters, or FAME, for short.
Why set up a biofuel manufacturing plant? The biofuels market in India
According to Coherent MI, the biofuels market in India was worth an estimated USD 2.56 billion in 2023. By 2030, the market is predicted to reach USD 10.31 billion, demonstrating an astounding CAGR of 22% over that period. Ethanol and biodiesel, used in a blended form as transportation fuel, are currently the most widely produced green fuels in the country. This growth is being driven largely by increasing energy demand, rural development, environmental benefits, and targeted governmental policies.
Take Bharat Petroleum, for instance. In October 2021, the public sector undertaking launched MAK Biodiesel B100. This 100% biodiesel is made from non-edible oil and can be blended up to 20% with diesel to fuel automobiles.
Or the Global Biofuels Alliance. Launched in September 2023 with the leaders of Singapore, Bangladesh, Italy, the United States, Brazil, Argentina, Mauritius and the UAE, the India-led Global Biofuels Alliance is expanding the deployment of sustainable biofuels with the goal of reaching net zero emissions.
Already, India is the third largest producer and consumer of ethanol as a green fuel. In 2018, the country's National Policy on Biofuels set blending targets at 20% ethanol blending and 5% biodiesel blending by 2030. By establishing guaranteed pricing, long-term ethanol contracts, and technical standards and codes, in 2022, India was encouraged to bring its 20% ethanol blending target forward by five years to 2025-2026. It now has the opportunity to extend this success to other biofuel types, including biodiesel.
With a similar mix of policies to that which are in place for ethanol, India will be poised to expand biodiesel use in diesel automotives and as biojet fuel. Its 5% biodiesel blending target for 2030 means that India will see a demand of nearly 4.5 billion litres of biodiesel per year. Additionally, its biojet fuel blending target of 2% by 2028 will require almost 100 million litres of biojet fuel annually.
Feedstock supply, especially residue oils like used cooking oil (UCO) and vegetable oils grown on marginal land, will be critical to meeting the demand for both biodiesel for automotives and biojet fuel. This presents a wonderful opportunity for players already in the edible oils business to set up a biofuel manufacturing plant and claim a share of the rapidly growing biofuels market in India.
In short, over the past few years, India has quickly scaled up its efforts to promote the use of biofuels. It has emerged as a major producer and consumer of biofuels due to coordinated policies, high-level political support, and an agrarian economy that provides a large supply of feedstocks. In the coming half-decade, it is on track to almost triple production and consumption by encouraging higher blends of ethanol and supplementing biodiesel and jet fuel supply.
If you're convinced about the potential for biofuel, especially biodiesel in India in the coming years, read on to the next section of this post. From setting up infrastructure to downstream value addition, it covers it all. It's your essential checklist to navigate the biofuels market in India.
Before you set up your biofuel manufacturing plant, you will need to undertake several preparatory steps. This section is dedicated to guiding you through getting started with the production of biofuel.
Step 1. Choose the type of biofuel you will manufacture. There are several varieties of biofuels. There is hydrotreated vegetable oil (HVO), there is biodiesel. Not to forget bioethanol and biogas. Each of these renewable fuels has different feedstock requirements, production processes, and use cases. Governments in different countries also have diverse policies and subsidies promoting the use of some of these. Accordingly, the market for each of these is also varied. The first step to entering the renewable fuels space is to decide which fuel you want to manufacture.
For instance, the biodiesel production process is fairly straightforward. It involves the steps of feedstock pretreatment, transesterification, and distillation. Biodiesel manufacturers keen on supplying raw materials to pharmaceutical or other industries may also refine the crude glycerine that is a by-product of biodiesel production. Owing to government policies, the market for biodiesels in India is likely to see a steady upward trajectory. The situation for other renewable fuels like, say, sustainable aviation fuel, will vary.
Step 2. Conduct market research. In conjunction with identifying the particular renewable fuel you will manufacture, study its demand and potential in the region where you intend to market it. Conduct extensive market research to identify the appropriate feedstocks you should use, the gaps that exist in the industry, competitors for your product, and potential customers for it. These factors will vary depending on the particular biofuel you are producing and where you are producing it.
Step 3. Craft a business plan. Creating a business plan is an essential part of diving into any venture. In the biofuels industry, your business plan should document your business goals, target market, production capacity, startup costs, pricing, the schemes and subsidies you will apply for, and more.
Step 4. Finalise a budget. As part of your business plan for your biofuel manufacturing plant, you should create a detailed budget. This should include the costs of land, construction, equipment, raw materials, licenses and permits, labour and other capital and operating expenses. Use this budget along with your business plan to pitch to potential investors.
Step 5. Obtain the necessary licenses and permissions. Your biodiesel manufacturing plant in India will require all the licenses and documentation that any other business does, like a GST registration and trade license from the relevant local and/or regional authority. Additionally, you will also need a factory license, an explosive license to store and use chemicals like methanol, a pollution control board clearance, and more.
Step 6. Set up your biodiesel manufacturing plant. Establishing your biodiesel manufacturing plant will involve identifying and renting or purchasing land, constructing a factory, equipping it with the required machinery, and employing a skilled workforce. Your choice of location and facility must be made based on your desired production capacity and any plans for expansion in the future.
As for selecting the appropriate machinery? That is a highly technical process that calls for you to employ the services of a skilled and experienced partner like Kumar. You will have to decide between batch and continuous processes. Accordingly, you will also need mixers, filters, pumps, storage containers and more beyond the biodiesel manufacturing machine itself, for which you can rely on our multi-feedstock biodiesel plant. Not only does it produce biodiesel which meets EU (EN 14214) and BIS 15607:2005 standards, but it also offers the benefits of a high conversion rate, low methanol, energy and utility consumption, and low soap and effluent generation.
Step 7. Source raw materials. To ensure that your final product is sustainable, you need to have visibility into every part of your biodiesel value chain. Once your factory is well-equipped, you can start to source raw materials. We always encourage our customers to find suppliers whom they trust to cultivate the product in question sustainably. Once you've found the right partner, establish strong relationships with them to ensure a reliable supply of raw materials. Jatropha oil and jatropha seeds are commonly used feedstocks for biodiesel production. Used cooking oil is also gaining in popularity because it fits into a circular economy.
With these steps, you're ready to start production! Make sure you also have a robust, well-crafted marketing and distribution strategy to make sure you target the right customers and recover your biofuel manufacturing plant cost.
Biodiesel plant setup cost in India
Speaking of biodiesel manufacturing plant cost, we would be remiss not to touch upon the investment you will have to make to enter the biofuels market in India as a manufacturer.
Your investment in a biodiesel manufacturing plant will depend on several factors including your location, infrastructure, production capacity, choice of feedstock, logistics and more. When crafting your budget, make sure to account for the following major costs: land acquisition and lease costs, the cost of facility setup or construction, permits and regulatory documentation, equipment, utilities, raw materials including feedstock, catalysts, cleaning products and other reagents, workforce payments, and other capital and operational expenses as per your business plan.
Since each of the above factors will vary from project to project, it is difficult to give you a specific number. But in general, the biodiesel plant setup cost in India can be around INR 3.5 crores for a 10 KLPD plant. If you want to set up a larger facility of, say, 100 KLPD, your investment can be as high as INR 15 crores, owing to your need for more land, more sophisticated machinery, more manpower, and higher operating expenses. Nonetheless, with a larger production capacity, you can leverage the economies of scale to produce biodiesel at a lower cost per unit.
No time to lose: Set up your biofuel manufacturing plant now
There's no time like the present to enter the biofuels market in India. Given the increasing need to switch to greener fuel alternatives and strong governmental support for the renewable fuel market, you should dive right in to make the most of the exponential growth that is expected.
We at Kumar would be privileged to partner with you on this journey. Our innovative engineering solutions and superior manufacturing standards help you optimise operating costs and improve efficiency. We dedicate ourselves to every project we take on to ensure a successful outcome for your company. Let us help you deliver your biodiesel project successfully.
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