India paves the way for a sustainable future: Deloitte’s fuels of the future report

• The adoption of Natural Gas (NG) and Liquified Petroleum Gas (LPG) will eventually decline due to the increasing availability of less-import-dependent alternatives with better sustainability profiles.
• Domestic production of biofuels and Green Hydrogen (GH) at its nascent stage may rise with adequate policy support and technological advancement.
• A strong adoption momentum of Electric Vehicles (EVs) can potentially delay the adoption of alternative fuels.

National, 20 June 2024: Deloitte India today launched a report on "Fuels of the future: Exploring alternative fuel options for transport," emphasizing India's accelerating shift towards sustainable energy solutions and the steps on cleaner, safer and greener fuel transitioning strategy creating newer avenues of collaboration amongst the ecosystems.

The report highlights the increasing adoption of EVs as a formidable competition to alternative fuels, particularly in the two-to-four-wheeler segments, over the next two decades. This transition is pivotal as India strives to meet its interim goal of reducing greenhouse gas (GHG) emissions by 2030. The government has allocated INR 2671.33 crore for the FAME III scheme in this year's Interim budget, with more details expected in the main budget in July 2024.

While the priority is achieving carbon neutrality and reducing fossil fuel dependence, EVs remain the first choice. Despite COVID-19 supply chain disruptions, global EV sales surpassed 10 million units in 2022; BEVs accounted for nearly 70 percent. The outlook remains robust, with annual EV sales projected to hit 31.1 million units by 2030, per Deloitte.

Deloitte’s new report articulates various alternative fuels, including Natural Gas (NG), Liquified Petroleum Gas (LPG), Biofuels, Green Hydrogen (GH), and Electric Vehicles (EVs) for India Inc. to evaluate environmental benefits, scalability and infrastructure requirements.

Key findings and projections from the report

• Electric Vehicles (EVs):

1. EV penetration could rise significantly in the medium term, driven by supportive government policies and decreasing production costs. This trend is expected to maintain a strong presence until 2040–2045. Along with BEVs, PHEVs and HEVs will also drive the consumer shift from traditional fuels in the short term.
2. Deloitte’s analysis anticipates a decline in EV adoption post-2045 as greener fuel options such as Green Hydrogen will become more prevalent and technological advancements will enhance fuel efficiency.

• Biofuels and Green Hydrogen (GH):

1. Although currently at a nascent stage, the domestic production of biofuels and GH is expected to surge, with notable increases in biofuel adoption anticipated from 2025 onward. Government support and technological advancements will be pivotal in this transition, leading to a significant uptake of these fuels.
2. Deloitte’s analysis expects that GH, especially as a combustible fuel, will outpace EVs in the long run.

• Natural Gas (NG) and LPG:

1. The adoption of natural gas and LPG will increase shortly.
2. Deloitte’s analysis anticipates it to peak by 2040 and starts declining within a decade due to high competition from less import-dependent alternatives with better sustainability profiles becoming increasingly available.

As India aims to become a multimodal logistics hub, transitioning to alternative fuels is essential to cut fossil fuel imports and mitigate environmental effects. The report emphasizes the need for strategic, coordinated efforts to achieve a greener, sustainable future for India's transportation sector.

EVs: A growing focus on battery-operated solutions

• Benefits:
  

1. Significant reduction in GHG emissions compared to internal combustion engines (ICE)
2. Lower operating and maintenance costs over the vehicle's lifetime
3. Growing infrastructure for charging stations and increasing the range
   of EV models

• Challenges:

1. High upfront costs for EVs and battery replacements 
2. Dependence on non-renewable energy sources for electricity
   generation
3. Limited charging infrastructure in certain areas and longer refuelling times compared to conventional fuels

• Outlook:

1. EV adoption is expected to rise, supported by government incentives and advancements in battery technology, despite the challenges of high costs and infrastructure needs. 

GH: The future of zero-emission vehicles

• Benefits:

1. Zero tailpipe emissions, with water vapour as the only by-product
2. High energy efficiency and potential for use in various sectors, including heavy-duty transport
3. Can be produced from renewable energy sources, enhancing energy security

• Challenges:

1. High production and distribution costs due to the need for advanced technology
2. Limited refuelling infrastructure and storage challenges
3. Current reliance on non-renewable sources for hydrogen production

• Outlook:

1. Although in its nascent stage, green hydrogen is anticipated to become a cornerstone of India’s sustainable transport strategy as technology advances and costs decrease.

NG: Leading alternative fuel market

• Benefits:

1. Lower GHG emissions compared to petrol and diesel
2. Cost-effective due to abundant domestic reserves and lower prices
3. Supported by extensive infrastructure and government incentives

• Challenges:

1. Limited refuelling infrastructure in rural areas
2. Variability in fuel quality and supply disruptionsInitial investment costs for converting vehicles to NG

• Outlook:

1. India's NG consumption is projected to increase by 9 percent annually in 2024, driven by supportive policies and increasing adoption in urban areas.

Biofuels:The sustainable fuel with high growth potential

• Benefits:

1. Produced from renewable resources such as agricultural waste, reducing environmental impact
2. Can be blended with conventional fuels, providing a seamless transition for existing engines
3. Helps in waste management and supports the agricultural economy

• Challenges:

1. Supply chain logistics and variability in raw material availability
2. Competition with food production for feedstock
3. Higher production costs compared to conventional fuels

• Outlook:

1. Biofuels are expected to scale up significantly with improved technologies and increased governmental support, contributing to reducing carbon emissions.