Rise Of Biofuels & Green Hydrogen: Deloitte's "Fuels Of The Future" Report

Abhijeet Singh
21 Jun 2024
08:30 AM
2 Min Read

The report mentions the increasing adoption of electric vehicles (EVs) and the competitive landscape of alternative fuels in India.

Rise Of Biofuels & Green Hydrogen: Deloitte mobility outlook

Everybody has been banging all about the climate and greenhouse emissions for a considerable amount of time now. This has made one thing very clear: if we are to combat rising vehicular emission, there are more alternatives than just zero-tailpipe (not zero-emission, because they still have brake dust, tyre and VOC emission not taken into account by marketing teams) emitting battery-powered vehicles. Ethanol blending and Green Hydrogen (GH) may need more attention at a broader level than only pushing electric vehicles and hybrid powertrains as agendas soon.

Deloitte India's report titled 'Fuels of the Future: Exploring Alternative Fuel Options for Transport,' highlights the country's accelerating shift towards sustainable energy solutions.

Decline Of Natural Gas & LPG

A decline in the adoption of Natural Gas (NG) and Liquefied Petroleum Gas (LPG) is due to the emergence of more sustainable and less import-dependent alternatives. Compressed Natural Gas (CNG) has witnessed strong demand due to its lower cost and reduced greenhouse gas (GHG) emissions compared to conventional fuels. However, the adoption of NG is expected to peak by 2040, followed by a decline as other sustainable fuels become more prevalent.

Although LPG faces similar challenges, it is economical and has a lower carbon footprint than petrol and diesel. Its use is largely confined to specific vehicle segments, primarily three-wheelers, due to higher production costs and safety concerns.

Increased Focus On Biofuels & Green Hydrogen

Currently in their nascent stages, biofuels and hydrogen are anticipated to grow substantially with adequate policy support and technological advancements. The government's initiatives, such as the National Hydrogen Mission and the establishment of bio-CNG plants, are pivotal in this transition.

Bioethanol is expected to significantly influence India's sustainable energy future. The government has set targets for ethanol blending with petrol, aiming to reach 20% blending by 2025. Similarly, the production and adoption of GH are projected to surge, especially in the heavy-duty vehicle segment, as technology advances and production costs decrease.

Electric Vehicles

Electric Vehicles (EVs) are poised to lead the transition towards sustainable transportation in India. Despite the challenges posed by supply chain disruptions during the COVID-19 pandemic, global EV sales surpassed 10 million units in 2022. Battery Electric Vehicles (BEVs) accounted for nearly 70% of these sales. Deloitte projects annual EV sales to reach 31.1 million units by 2030, driven by supportive government policies and decreasing production costs.

The Indian government has shown strong support for EV adoption through initiatives like the FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme. With an allocation of INR 2671.33 crore for the FAME III scheme in this year's interim budget, the government aims to bolster the EV ecosystem, enhance domestic research and development, and expand component manufacturing.

Challenges & Opportunities

While EVs offer significant environmental benefits, their adoption faces several challenges. The high cost of EVs, dependency on imported lithium-ion batteries, limited charging infrastructure, and concerns about battery safety are significant hurdles. However, the government's continuous efforts to reduce import dependency and promote local manufacturing are expected to mitigate these challenges over time.

Alternative fuels like bio-CNG and LNG also present promising opportunities. The government's push to establish bio-CNG plants and LNG stations across the country is crucial in driving adoption. For instance, the recent inauguration of a bio-CNG plant in Indore, capable of producing 19,000 kg of bio-CNG per day, highlights the potential of this renewable fuel.

This report presents a scenario analysis of the likely adoption of alternative fuels in the long term. The adoption of EVs is expected to dominate until 2040-2045, after which greener fuels like may take precedence. The domestic production of biofuels and GH is projected to rise significantly from 2025 onwards, with government support and technological advancements playing critical roles.

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