While EVs are touted as the future of Indian mobility, analysts Rudranil Roysharma and Aditya Ravindran of Feedback Business Consulting point out the benefits of using methanol as a green fuel source.
The growing shift in emission norms and current disruption in the form of EVs has made it obvious that the auto industry is hard-pressed to look for cleaner, greener energy alternatives to power vehicles. However, while EVs will take a while to phase out the internal combustion engine and the damage done by fossil fuels is continuing to persist, there is an alternative source for ICE engines in the form of methanol.
Rise of Methanol as a fuel
In the aftermath of the first oil crisis in 1973, the potential of methanol was being explored as a liquid fuel to satisfy US transportation demand. Since at that time, sustainability angle was not looked at, gasification of hydrocarbon feedstocks such as natural gas and coal were considered
as the most attractive solution for its production.
The market’s initial interest in this fuel aroused when it was used as an octane booster during the phasing out of leaded fuels in 1976. Subsequently, a trial programme was run in California between 1980 and 1990 to convert petrol vehicles to run on M85 – a blend containing 85 per cent methanol and 15 per cent additives. The programme clearly established the methanol blend as a comparable, if not a superior alternative to motor spirit. However, the limited number and poor location choice of the methanol refueling stations meant that the users ended up being frustrated and eventually having to move away from the programme. To counter this, early in the 1990s, automakers introduced flexible-fuel vehicles (FFV) which could be run on a variety of fuels. By early 2000s, ethanol had been introduced in the market which, with the help of strong advocacy groups, ended up replacing methanol. By the year 2005, California stopped the use of methanol as fuel.
However, methanol continued to be used as a high-performance safe fuel in racing, such as in USAC Indy car competitions, Champ Car races, midget, sprint cars and speedway bikes, drag racing, as well as in Monster Truck racing. Soon afterwards, the underlying potential of methanol was uncovered when renewable sources such as biomass were identified as a potential source of the fuel. The ultimate approach – through recovery of CO2 from the atmosphere was identified in 2005.
Methanol’s fit into India’s energy ecosystem
The Indian government acknowledges India’s heavy dependence on fossil fuels – around 29 billion litres of petrol and 90 billion litres of diesel per year, making it the sixth biggest consumer in the world, and is expected to become the third largest by 2030. In fact, the government has been trying to tackle this with the use of another alternative fuel since 2003 – ethanol. The ethanol blended petrol (EBP) Programme was started off with 5 per cent blending, which was to be increased to 20 per cent level by 2017. However, the oil marketing companies (OMCs) have been able to achieve less than 3 per cent blending due to non-availability of ethanol. The government has even been pricing ethanol purchase under an administered price mechanism to incentivise sugar mills to produce ethanol to meet the targets.
On this backdrop, the Indian government has been considering introducing methanol, its blends, and its variants like dimethyl ether (DME) to substitute the fossil fuel derivatives in India. Methanol can replace both petrol and diesel in transportation, and as DME, it can replace LPG, wood, kerosene in cooking fuel. It can also replace diesel in railways, marine sector, gensets and power generation. Methanol-based reformers could be the ideal compliment to hybrid and electric mobility.
As claimed by the government, M15 – a blend of 15 per cent methanol in petrol will reduce pollution by 33 per cent and diesel replacement will reduce it by more than 80 per cent. Methanol can also be easily produced from natural gas, Indian high ash coal, Bio-mass, MSW, stranded and flared gases, through which India can achieve methanol production at as low as Rs 19 per litre. There is also the more sophisticated technology of methanol production through CO2 recovery. Currently the country has a capacity to produce 2 MMT of methanol from five fertiliser plants, which produces close to 1.5 MMT, all of which is used as chemical and pharma industry feedstock. NITI Aaayog’s roadmap on Methanol estimates that to substitute 10 per cent of crude imports by 2030, by methanol alone, approximately 30 MMT of methanol would be required.
Methanol can be implemented within next 2 years
There has been a remarkable show of interest from the government for promotion of EV till a few months back, with a strong intent to have only electric cars in India by the year 2030. However, the government has been unable to back up these intentions with sufficient policy measures. As a result, this has left some space for methanol as an alternative fuel under the government’s green mobility initiatives, instead of a hard shift to EVs.
Such a hard shift to EVs would bring along with it a myriad of woes for the auto industry, as well as for the general public. Even if the government foots the price differences between EVs and fossil-fuelled vehicles through incentives to keep the industry’s’ volumes at their current level, the auto-makers would require a good five to six years to research and develop EV variants across its portfolio. Apart from this, the companies would also run out of options to thoroughly monetise any of its young vehicle platforms, which would mean a loss of investment. Then there is also the question of how the used car market, which sells close to 3.5 million vehicles annually, generating close to Rs 1 trillion in revenue, stand up to such changes.
Besides, shifting to EV will require large investment in setting up of vehicle charging infrastructure throughout the country. Obsolescence of existing refueling stations will also add to this cost. There is also the looming threat to cobalt supplies which make up a significant input to the manufacturing of Li-ion batteries.
Being in its early stages of development, there is also risk of failure depending upon how the EV technology would pan out in the years to come. Even in countries that have seen high EV adoption like USA, people now lease nearly 80 per cent of battery-electric vehicles and 55 per cent of all plug-in hybrids. Most of this has been due to the reluctance of the customers to commit to ranges and charging times which might become inferior in next three years, and the abysmal resale value which drops to around 23 per cent of the original price within three years. With so many key industries at stake, shifting to EVs may cause significant damage to the growth of the economy which is totally unwarranted. For the time being, methanol appears as a more sensible option towards achieving the mission of green mobility. Methanol can be easily plugged into the current auto environment with little changes to the existing vehicles. This can help incorporate a wide variety of methanol blends starting from M5 to M85, depending on the availability of the fuel. This would require the auto industry to contribute a small amount of effort into incorporating methanol, while they contribute the rest of their resources on R&D for future technologies, which may be EVs, hydrogen-powered or some other groundbreaking technologies.
This would ensure that the industry gets a level playing field, which is the biggest thing they demand from the government. The markets would also be much more accepting of these changes provided that there is a consensual and organic branch out into the newer fuels.
Rudranil Roysharma is the GM & Head-Power, Oil & Gas, AC&R Practice at Feedback Business Consulting Services Private Limited
Aditya Ravindran is the Senior Consultant – Energy Practice at Feedback Business Consulting Services Private Limited
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