Biomass exchange is emerging as a key factor in the progress of biomass energy sector in a particular country. The supply chain management in any biomass project is a big management conundrum. The complexity deepens owing to the large number of stages which encompass the entire biomass value chain. It starts right from biomass resource harvesting and goes on to include biomass collection, processing, storage and eventually its transportation to the point of ultimate utilization.
Owing to the voluminous nature of the resource, its handling becomes a major issue since it requires bigger modes of logistics, employment of a larger number of work-force and a better storage infrastructure, as compared to any other fuel or feedstock. Not only this their lower energy density characteristic, makes it inevitable for the resource to be first processed and then utilized for power generation to make for better economics.
All these problems call for a mechanism to strengthen the value chain. This can be done by considering the following:
- Assuring a readily available market for the resource providers or the producers
- Assuring the project developers of a reliable chain and consistent feedstock availability
- Awareness to the project developer of the resources in closest proximity to the plant site
- Assurance to the project developer of the resource quality
- Timely pick-up and drop of resource
- Proper fuel preparation as per technology requirements
- Removal of intermediaries involved in the process – to increase value for both, the producers as well as the buyers
- No need for long term contracts (Not an obligation)
- Competitive fuel prices
- Assistance to producers in crop management
The figure below gives a general understanding of how such a model could work, especially in the context of developing nations where the size of land holdings is usually small and the location of resources is scattered, making their procurement a highly uneconomic affair. This model is commonly known as Biomass Exchange
In such a model, the seed, fertilizer shops and other local village level commercial enterprises could be utilized as an outreach or marketing platform for such a service. Once the producer approves off the initial price estimate, as provided by these agencies, he could send a sample of the feedstock to the pre-deputed warehouses for a quality check.
These warehouses need to be organized at different levels according to the village hierarchy and depending on the size, cultivated area and local logistic options available in that region. On assessing the feedstock sample’s quality, these centers would release a plausible quote to the farmer after approving which, he would be asked to supply the feedstock.
On the other hand, an entity in need of the feedstock would approach the biomass exchange, where it would be appraised of the feedstock available in the region near its utilization point and made aware of the quantity and quality of the feedstock. The entity would then quote a price according to its suitability which would be relayed to the primary producer.
An agreement from both the sides would entail the placement of order and the feedstock’s subsequent processing and transportation to the buyer’s gate. The pricing mechanisms could be numerous ranging from, fixed (according to quality), bid-based or even market-driven.
The hurdles could be in the form of the initial resource assessment which could in itself be a tedious and time consuming exercise. Another roadblock could be in the form of engaging the resource producers with such a mechanism. Since these would usually involve rural landscapes, things could prove to be a little difficult in terms of implementation of initial capacity building measures and concept marketing.
The benefits of a biomass exchange are enumerated below:
- Support to the ever increasing power needs of the country
- Promotion of biomass energy technologies
- Development of rural infrastructure
- Increased opportunities for social and micro-entrepreneurship
- Creation of direct and indirect job opportunities
- Efficient utilization of biomass wastes
- Potential of averting millions of tonnes of GHGs emissions
In India alone, there has been several cases where biomass power projects of the scale greater than 5 MW are on sale already, even with their power purchase agreements still in place. Such events necessitate the need to have a mechanism in place which would further seek the promotion of such technologies.
Biomass Exchange is an attractive solution to different problems afflicting biomass projects, at the same time providing the investors and entrepreneurs with a multi-million dollar opportunity. Although such a concept has been in existence in the developed world for a long time now, it has not witnessed many entrepreneurial ventures in developing nations where the need to strengthen the biomass supply chain becomes even more necessary.
However, one needs to be really careful while initiating such a model since it cannot be blindly copied from Western countries owing to entirely different land-ownership patterns, regional socio-political conditions and economic framework. With a strong backup and government support, such an idea could go a long way in strengthening the biomass supply chain, promotion of associated clean energy technologies and in making a significant dent in the present power scenario in the developing world.