Here’s why methanol could be a cheaper fuel for India

Methanol is the cheapest alternative fuel, compared to ethanol and petrol (gasoline), the findings from a NITI Aayog working paper released in September 2021, reveal.

According to the paper, Methanol: A Competitive Alternate Fuel, by VK Saraswat and Ripunjaya Bansal, “The cost of (petrol) gasoline including taxes is Rs 94.49 per litre and the cost of ethanol, including taxes on an energy equivalent basis with gasoline is Rs 69.9. Whereas the cost of methanol on an energy equivalent basis with gasoline is Rs 37.6.”

Thus, methanol is more economical compared to ethanol and petrol. The calorific value of ethanol is more than that of methanol, so 1.28 litres of methanol would be required to produce as much energy as a litre of ethanol. “...on an energy equivalent basis, 1.28 litres of methanol will cost Rs 25 to replace a litre of ethanol,” the analysis from the report reveals.

Production of methanol from coal is said to be the “most economically viable option” for the country, with other sources being natural gas, naphtha, biomass etc. Coal reserves are abundant in India and relatively cheaper compared to natural gas or crude oil, a significant proportion of which is imported.

The report also notes that the government is yet to formalise a tax structure for methanol as there is no commercial plant in the country. Even if a tax of Rs 58.50 is added on methanol, it will cost Rs 96.12 on an energy equivalent basis with petrol, very much in the range of existing petrol prices in the country.

“Unlike ethanol (which is derived from molasses and sugarcane juice), methanol will not ignite a food vs fuel security debate. Rather, using coal to produce methanol will help India monetise its domestic resources to reduce crude oil imports,” the report adds.

Why methanol could be a prudent fuel option

The report emphasises on use of coal to derive methanol as against natural gas. The latter is a scarce resource with 85 percent of it being imported. Whereas, India has 326 billion tonnes of coal reserves, of which 50 percent is commercially viable for production and likely to last for 140 years, based on the 2019 rate of consumption.

Also, about 90 percent of India’s methanol requirement is met through imports, as the chemical locally produced through natural gas is not competitive compared to imported methanol, the report states.

Going forward, the share of coal in India’s energy mix is likely to fall given the emphasis on low carbon emissions. “Therefore, using domestic reserves of coal sustainably, gasifying it along with using Carbon Capture and Storage (CCS), provides an opportunity for India to use its natural resource at a relative discount to other fuels such as oil or natural gas. Coal gasification produces 31 percent less CO2 emissions, 98 percent less SOx (sulphur oxide) emissions, and 84 percent less NOx (nitrogen oxide) emissions relative to a coal fired power plant,” the report highlights.

The dividends

The report calls for the formulation of a National Coal Gasification Mission to assess the status of coal gasification in India and to set up methanol plants (preferably deploying carbon capture and storage) to use methanol as an alternate fuel for blending.

Blending of 15 percent methanol in petrol can help reduce the import of petrol/crude oil by 15 percent and blending 20 percent Di-methyl Ether, a derivative of methanol, in LPG could save Rs 6,000 crore annually. This will help the consumer in saving between Rs 50-100 per LPG cylinder.

Methanol production and distribution services could also generate nearly 5 million jobs as well as improve air quality by bringing down GHG emissions by 20 percent in terms of particulate matter - NOx, and SOx.