EROI perspective on post-2021 energy policies in India
Do ethanol, as a biofuel, and green hydrogen provide energy security and resilience to energy consumers in India?
This article is Part 2 of the EROI series. If you are not familiar with the concept of EROI and its implications, we recommend reading Part 1 first. To briefly introduce the term, EROI (Energy Return on Investment) is a fundamental metric used to evaluate the quality of an energy source. The higher the EROI, the better the energy quality.
Through the lens of EROI, let’s analyse some of the recently implemented energy policies and announcements by the central and state governments in India. These policies are assessed in terms of whether they provide long-term energy security and resilience for the Indian public.
Ethanol blending with petrol
Ethanol is a biofuel derived either from the fermentation of sugar by yeast or through petrochemical processes. Sugar mills procure sugarcane from farmers, extract juice from the cane, and process the residual molasses as feedstock in distilleries (some of which are in-house) to produce ethanol. This ethanol is primarily blended with petrol (gasoline) to reduce the amount of petrol needed to run a vehicle, thereby lowering the overall dependency on crude oil.
Since the BJP government led by Narendra Modi came to power in 2014, there has been a gradual increase in the ethanol blending percentage (v/v %). The central government set a target of 1.5% blending in 2014, which increased to 5% in 2018 and then to 10% in 2022. The current plan is to raise this to 20% by 2025.
The pros of ethanol blending:
A major advantage of ethanol blending is improved energy self-sufficiency (‘Atmanirbhar’) by reduction in foreign oil imports, while also giving a boost to sugar industries, which supply the feedstock for ethanol.
Other major benefits – claimed but are highly debatable – are the higher octane number of ethanol and reduced emissions from the blended ethanol.
Let's understand this in detail.
Scientifically, the octane number is a measure of a fuel's ability to resist knocking (premature ignition) in internal combustion engines. Ethanol has 109 for RON (Research Octane Number) and 90 for MON (Motor Octane Number), which overall translates to a higher octane number, making an effective octane booster when blended with petrol.
A higher octane number allows engines to burn fuel more efficiently, provided that engine tuning (spark timing) and adjustments for a higher compression ratio are already in place. These two modifications are easier in newer vehicles, whereas older vehicles need retrofitting and recalibration. Additionally, high compression ratio engines in newer vehicles may face failure due to engine knocking when operated with low or no ethanol content (i.e., pure petrol). Similarly, older vehicles designed for zero ethanol content in gasoline may experience lower fuel economy when used with higher ethanol blends, as the engines are not optimised to take advantage of it.
Hence, the theoretical benefit of a higher octane number is not as advantageous in the real world due to pre-existing engine constraints.
When talking about the emissions performance of ethanol-blended petrol, EROI comes into play. When looking at isolated cases, combusting ethanol-blended petrol emits 20–30% lower emissions on average. However, it is important to recall that ethanol has a lower EROI than petrol, which makes ethanol-blended petrol less fuel-efficient from a mileage perspective. One megajoule of energy (MJ) invested in fuel production yields a mileage of 5.8 km from pure petrol, compared to 3.2 km from pure ethanol derived from sugarcane. Hence, the effective mileage from 20% ethanol-blended petrol would be 5.28 km, around 9% lower. Due to this reduced mileage, vehicles will end up consuming more litres of blended petrol, thereby nullifying the emission reduction and increasing the cost for the end consumer.
The cons of ethanol blending:
Firstly, ethanol production in India relies predominantly on sugarcane molasses as feedstock. Other grain-based feedstocks, such as leftover rice, corn, and maize, are considered “low quality” due to their much lower EROI compared to sugarcane. To meet the domestic ethanol requirement for a 20% blending target (which was achieved in July 2025), more arable land had to be allocated for sugarcane cultivation. Given sugarcane’s high water demand, this allocation raises serious concerns for both food and water security.
Rather than expanding sugarcane production for ethanol, using that land to grow pulses and vegetables would deliver greater nutritional benefits for the population, reduce sugarcane monoculture, and support biodiversity. Alternatively, dedicating the land to solar farms could generate a far higher EROI.
Secondly, the government is providing subsidies to the sugar and ethanol industries to increase the ethanol blending percentage, but without offering any assistance to farmers. Sugar mills can divert all their sugarcane feedstock entirely to ethanol production in their in-house distilleries to take advantage of the subsidy and increase their profits. Sugarcane farmers in Maharashtra, who are paid the Fair Remunerative Price (FRP) for their produce, argue that it is insufficient to meet the increased cost of living and cultivation, and that surplus revenue sharing from sugar mills under the new ethanol blending programme would be fair.
This raises the question of whether the pros outweigh the cons. There are uncertainties around this policy, as it gives a business boost to sugar and ethanol-producing industries at the expense of slightly higher petrol costs for the masses. The decision seems more pro-big industries than pro-masses, like most decisions from the central government.
Whether consumers and farmers are getting the financial upside from this policy is in contention, and if ethanol blending in petrol is taken beyond 20% in India, it should raise bigger questions.
For lack of a better analogy, ethanol blending can be compared to chicory-mixed coffee: chicory provides supplementary benefits (reduced bitterness, colour, and aroma enhancement) to your coffee, but you are paying primarily for the coffee beans!
Gas cylinder subsidy in India
India still imports almost half of its domestic gas requirement making the nation highly sensitive to global natural gas price fluctuations. Moreover, LPG (cooking gas) rates are also influenced by macro factors such as government subsidies or short-term supply manipulation in the market. However, the EROI trendline of natural gas serves as a more stable and reliable inverse indicator of long-term price trends.
The graph in Figure 1, taken from a recent research paper on the historical and long-term EROI modelling of natural gas, shows a decline in the global EROI of natural gas since 1950 (black line in the graph). This decline is expected to continue until around 2030–2035, after which it is projected to plateau. When the EROI of any fuel declines, it means we get less energy output for the same input, thereby increasing the cost of procuring and transporting the fuel to the end consumer.
This indicates that gas cylinder prices could rise by 10–30% by 2035 and then remain at that level for the foreseeable future. No matter which political party is in power or what campaign promises are made, the Indian government cannot reverse this trend. Subsidy interventions can only provide temporary relief, briefly stabilising prices. Indian households will need to brace for sustained higher gas cylinder costs due to the inevitability of the declining EROI trend.
If you are wondering about the flat coloured lines in the graph, they represent deep offshore exploration, which has been relatively untapped compared to surface-level gas fields. Their EROI has remained almost constant so far, but it is expected to decline once they start being tapped around 2030.
Green hydrogen promotion in India
The National Green Hydrogen Mission was launched by the Indian government in January 2022 to make an initial roadmap to develop hydrogen fuel production for decarbonization, energy self-sufficiency (‘Atmanirbhar’), and job creation. Unlike the previous two policies, the green hydrogen policy is not yet fully operational, with only a few demonstration projects currently underway to test its feasibility.
Before we analyse the EROI of green hydrogen, it would be useful to know the three types of hydrogen fuel. Based on their methods of extraction, hydrogen is classified into three types of fuel, namely Grey, Blue, and Green.
- Grey hydrogen: Produced through coal or lignite gasification, or via steam methane reformation (SMR) of natural gas, which are all largely carbon-intensive processes.
- Blue hydrogen: Produced through natural gas or coal gasification combined with carbon capture and storage (CCS) or carbon capture and utilization (CCU) technologies to reduce carbon emissions.
- Green hydrogen: Produced via the electrolysis of water using electricity from renewable energy sources. The carbon intensity ultimately depends on the grid mix; the greater the share of renewables in the grid, the “greener” the hydrogen.
It should be noted that the Hydrogen fuel industry is nascent, with its EROI mostly being estimated and not validated from real-world operational data. EROI estimates of the three types of hydrogen, taken from a recent research paper is shown below along with their emission intensities:
The above combination of EROI and emission intensity values explains why green hydrogen is preferred over its counterparts. However, the EROI of green hydrogen is still lower than the average EROI range of 15–20 for conventional oil or natural gas at current global reserve levels. This indicates that while green hydrogen can help decarbonize certain industrial processes, such as replacing grey hydrogen in fertilizer production or substituting coke as a feedstock in steel production, it is not a complete substitute for fossil fuels.
Smog tower installation in Delhi
A smog tower, essentially an industrial-scale unit to purify air, is not an energy production technology to be evaluated under the lens of EROI. Still, it is worthwhile to briefly discuss its efficacy and whether allocating energy and resources to building and scaling such units is justified to combat air pollution in Delhi or in other Indian cities.
Two 25-meter-tall smog towers were installed in Delhi in 2021. These towers vacuum particulate matter from the air and pass it through industrial HEPA filters before releasing filtered air, as depicted in the image below. This project was a pilot initiative by the Delhi state government (under the Arvind Kejriwal-led AAP government) to test the efficacy of smog towers in purifying air.
It has been well argued that this method is unrealistic and effective only in indoor environments, not outdoors, due to a complex mix of factors such as variable mixing heights of particulate matter and wind speed, reducing its effectiveness. The filtering efficiency (0.00002%) and the projected cost (Rs 40 lakh crore for full-scale implementation in Delhi) make such towers infeasible for citywide deployment. It is far more effective to curb air pollution at the source — through stricter emission regulations and alternatives to stubble burning — rather than attempting to clean outdoor air downstream. This pilot project seems more of a political gimmick than a serious technical project trial.
Conclusion
The EROI metric should be a key consideration for policymakers when developing public energy policies. Citizens, too, should ask about it whenever a new policy is introduced, to ensure that the government is doing its due diligence.
The substitution of existing energy sources with higher-EROI alternatives is the only way any government can provide genuine long-term energy security to its citizens. However, current policies such as ethanol blending in petrol and green hydrogen adoption involve only partial substitution of fossil fuels with lower-EROI alternatives.
As a result, these policies do not strengthen energy security in the long run. They merely diversify energy sources and thereby enhance energy resilience. Ultimately, biofuels and green hydrogen can only serve as supplements to oil and gas, which we cannot fully wean off unless we are willing to accept a reduced standard of living.
It is equally important to reflect on energy resilience through the lens of wealth inequality. The rise of the urban elite in India is putting enormous pressure on energy demand through increasingly consumerist lifestyles. This undermines the energy resilience of those in lower economic strata, as they face higher prices due to the declining EROI of natural gas and the adoption of lower-EROI alternatives. Energy equity, therefore, needs to be addressed in policy through measures such as some form of energy capping for the urban elite, a step that remains deeply unpopular in the pursuit of higher GDP growth for the Indian economy.
PS: This article has been edited by Anjaly Raj.
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