Sustainability Case-Study in the Energy Vertical at Nordic Asia Impact.
1. Introduction
Biochar is a porous carbonaceous material produced by the thermochemical conversion of organic materials in an oxygen-depleted atmosphere. It has physicochemical properties suitable for the safe and long-term storage of carbon in the environment and has a potential for soil improvement (Lehmann et al., 2009). Biochar differs from charcoal as the latter is produced specifically for its application to the soil as part of an agronomic or environmental management system. In recent times, the application of biochar has emerged as a promising approach to improvise clean cooking methods, enhance soil quality and crop production, and a novel approach to sequester carbon (Lehmann et al., 2003). Biochar has a very low density and it is highly porous. It acts like a sponge in soil and retains water and nutrient, preventing them from leaching away, thus making them more available to plants (Major, 2011). It is also resistant to decomposition by soil microbes and can hold carbon in the soil over long periods. The production and use of biochar in soils also have a very promising potential for the development of sustainable agricultural systems and global climate change mitigation.
Biochar is formed using a technique called pyrolysis, in which biomass is heated in the absence of oxygen to temperatures between 300‐800 degrees Celsius. The chamber in which the pyrolysis process occurs is referred to as a kiln. There are three major outputs produced from the pyrolysis process, a solid (biochar), a liquid (oil), and a gas (syngas). The quantity of each output is determined by four key variables of the pyrolysis process: input material, water content, operating temperature, and process time. Biomass, which is heated between temperatures of 300‐600 degrees Celsius typically is referred to as a “slow” pyrolysis product, as the processing time can take many hours. The benefit of the slow pyrolysis process is that up to 40% of the biomass input can be converted to biochar. The “fast” pyrolysis process occurs at temperatures above 600 degrees Celsius and can be completed in minutes; however, this process produces higher ratios of oil and syngas and less biochar. (Jirka, 2014)
Biochar can also be used as an alternative fuel source, as many developing countries are using the charring process as a method to cook. These countries use specifically‐designed stoves to char the biomass input, releasing enough heat to cook food. Additionally, the biomass input is charred throughout the cooking process, producing a biochar product equivalent to that produced within a kiln. Therefore, the advantages to this process variation are three‐fold: this method (1) provides a means for developing countries to cook, (2) utilizes a renewable resource as the fuel source, displacing the need for fossil fuels like natural gas, and (3) produces biochar as a byproduct.
Biochar can also be pelletized, in which the primary application is to be used for residential or commercial energy production. This pelletized biochar can be used as either a direct heat source or as an input to produce steam for electricity. Biochar pellets are advantageous in that the overall density is increased, thereby reducing transportation costs (Jirka, 2014). The pelleting process takes place after pyrolysis and requires a pellet mill or press, along with a series of steps depending upon the size and amount of substrate. Before a mill can be used, woody substrates should pass through a wood chipper and a “hammer mill” in order to create smaller pieces. Pellet mills are varied in their design and size, with larger engines necessary for commercial processes.
2. Bio-char making process
The reactor consists of a feedstock chamber with a fuel grate at the base for placing
and charring the feedstock to be converted to biochar, a fuel chamber where the fuel for heating the reactor to temperatures necessary for pyrolysis to begin, and a pipe to collect bio-oil during the pyro-lytic process (Fig. 1). The reactor also has doors to access the feedstock and fuel. The feedstock is spread on a tarpaulin in the sun to get dry and be packed in sacks before weighing with a weighing scale. The reactor is preheated before the feedstock was introduced. The firewood for heating the reactor is weighed and fed into the fuel chamber and then ignited. The doors of the reactor are opened to facilitate the burning of the firewood to ashes to release energy for heating the reactor. A thermocouple is used periodically to determine when the desired temperature for pyrolysis is reached. The fuelwood door is then closed and the feedstock is fed onto the fuel grate in the feedstock chamber for the charring process once the firewood has burnt out and the desired temperature is attained. The charring is monitored periodically and once completed; it is removed from the reactor and quenched with water to prevent it from combusting. It is then spread on the tarpaulin and allowed to dry in the sun. The biochar is then packed in sacks, weighed, and ready to be used for cooking and other purposes. (Blackwell et al., 2009)
On average in one month, a total of 1,460 kg of wood shaving feedstock and 988 kg of firewood is used to produce a biochar yield of 540 kg with an average charring ratio of 37.5%. The yield of biochar obtained is consistent with a report on woody biomass under slow pyrolysis (Honsbein, 2005). Biochar yield is dependent among other things on the nature of the feedstock used (woody or herbaceous), operating conditions, and the environment of the pyrolysis units (low vs. high temperature, residence time; slow vs. fast pyrolysis, heating rate, and feedstock preparation) (Laird et al., 2011). Woody biomass with high lignin contents typically produces greater char yields. Similarly, a slow pyrolysis rate with low temperatures leads to a higher char yield (Bridgewater, 2007). Drying the feedstock before charring also improves the pyrolysis process efficiency (Cummer and Brown, 2002) as a fairly large energy input would be required for drying during the pyrolysis process. High moisture content also leads to a reduction in biochar yield (Minkova, 2001). Teak is found to be most effective in generating heat for the combustion process (Minkova, 2001). Whenever it rains, the reactor cools down and the fire chamber has to be heated to continue the combustion process. The total cost for producing the 540 kg of biochar is around 50,000 INR where approximately 2500 INR, 9600 INR, and 12,500 INR is spent on feedstock, firewood, and transportation respectively. The labor cost is around 400 INR per day. Also, it is recommended that the locally manufactured reactor needs to address heat loss issues as well as improve the heat capture system. The reactor should also be sited near the source of feedstock to reduce transportation costs and additionally government can subsidize the price of biochar just like fertilizers once farmers patronize its application.
3. Market Value
3.1. Social Value
One of the major considerations for starting a biochar production operation would be the opportunity to support the local community by creating highly valued employment positions. The social goal of this biochar operation is four‐fold: (1) Provide livable wages to its workers; (2) Provide year‐round employment; (3) Create partnerships with composters, nurseries, and farms to expand the business. There is also a chance of producing a biochar production operation within the farmers’ community and the ability to produce a highly‐valued product that can either be used by the local community or exported out to other places.
3.2. Product life cycle considerations
The biochar industry is currently in the first phase of a product life‐cycle – the market introduction stage. During this phase, costs are very high and sale volumes slow to start. While competition is generally low, so is demand. In essence, demand must be created, which will require educating the potential consumer base to try the product and then working to retain them as a customer. Scaling a smaller production model to a larger one is required if a biochar business is to be profitable, although, at that point, it would risk attracting competition. This would be considered the growth stage in a product life‐cycle. Production costs will decrease, but due to increased competition, so would prices. As biochar has many benefits (carbon sequestration, soil amendment, and clean energy), it can have many revenue sources (GHG credits, agricultural fertilizer, and alternative energy). While it is part of an emerging industry, it is also very diverse, with active companies, universities, and governmental organizations located around the world. There is a great potential for the biochar industry to continue to grow and expand beyond the market introduction stage. (DeLuca, 2009)
3.3. Industry Competition
Despite using a technology that has been around for more than 2000 years, the nascent biochar sector is faced with some challenges, including 1) High start‐up costs associated with biochar production, particularly compared to the composting sector. 2) Lack of consensus among the scientific community on how biochar achieves its range of benefits, especially over the long run. This is critical to convincing the possible market sectors of biochar’s benefits. 3) With so few operations up and running, it is hard to test the benefits on a commercialized scale. For now, industry pioneers rely on the research community to prove the benefits. This makes it hard for potential investors – especially risk-averse investors – without which a large‐scale biochar business is unlikely. 4) In the long run, if biochar becomes a profitable industry it runs the risk of over-competition for feedstock sources, which could lead to land misuse, thus reversing the benefits of the process. (Garcia-Perez, 2009).
These obstacles create a high barrier to entry for biochar companies. However, there are many biochar organizations working around the world to move the industry forward. For this reason, it is important to understand the competition within the biochar industry, which includes both commercialized biochar businesses and not-for-profit or university‐related organizations. Universities all over the world are doing research into the benefits of biochar. Non‐profit organizations and international government agencies are also working on biochar solutions. In the commercial sector, clean energy businesses have started to incorporate the powerful benefits of carbon into their business model. Furthermore, an established investor base is critical to biochar’s success.
3.4. Marketing Portfolio
There are two models of products that can be explored:
1) 100 percent pure Biochar
Less costly to produce but sold at a lower price point. Geared towards the educated consumer and can be sold in large bulk amounts. Great for B2B, delivery outside the region can be costly.
2) Bio-char Compost/ Fertilizer Mixes
More expensive to produce, but can be sold at a higher price point. More convenient for the “less educated” (home gardeners) but delivery outside of the region is costly. This product offers more options for expansion of product lines but varies according to size and mixture.
In Meghalaya, there can be 3 customer segments that can be targeted: 1) Local Households, 2) Farmers, 3) Local Restaurants. These can be approached by distributing pyrolysis stoves. The unique feature of this stove is that it can use biochar and provide clean energy access. The price of this stove can be kept around 150 INR or can be adjusted by being reasonable for the locals. The key partners can be biochar facility suppliers and installers, Maintenance companies, and pyrolysis stove suppliers. The key activities would be initial construction set up, regular maintenance and troubleshooting, and procedure in the selling of pyrolysis stoves and bio-char and pyrolysis stoves. Key resources needed would be logistic supply for material transport, facility technicians, and rural farmers’ and workers’ data. The installation cost would be around 50,000 INR where subsidies of 15000 INR can be provided by the government through different schemes and around 5-kilogram bags of biochar can be sold at the retail and wholesale price starting with 75 INR. The profits would come from the sale of end products to various consumers and by providing the set-up to produce biochar in the backyard of farmers and workers.
The distribution of biochar is a large expense for any biochar business. Both models face similar concerns when it comes to the packaging and shipping of biochar. For long‐distance shipping, the mark‐up is approximately 100% due to the weight of the product. Special arrangements with shipping firms would need to be arranged to reduce this effect. Long‐distance shipping requires more intensive packaging that will protect the product from moisture and damage. Most biochar mixtures can be sold in wax‐coated, heavy boxes or plastic bags. The designs mimic those of any other compost mixture or fertilizer on the shelf where the inclusion of soil benefits and other marketing design elements can be included. (Jirka, 2014).
For Promotion, there are mixed opinions on who is driving the market for biochar: home gardeners and managers of city parks, golf courses, and university campuses or large‐scale farmers and wineries. The research indicates that lack of awareness by the consumer is the number one hurdle for a successful biochar business. For the government, in addition to a strong web presence, getting involved in biochar organizations is an important part of a promotion in this emerging industry. The International Biochar Initiative, a non‐profit organization dedicated to “supporting researchers, commercial entities, policymakers, farmers & gardeners, development agents and others committed to sustainable biochar production and use,” is not only an excellent resource, but they are also working on a buy/sell biochar portal to better connect buyers and sellers.
There are also various challenges associated with these business models. Though many people around the world are actively researching, producing, selling, and buying biochar, there has yet to be any individual or organization to prove a clear market demand for the product. The first challenge is to do more research to convince farmers of the benefits of biochar. While home gardeners may be more easily persuaded to purchase their first bag of biochar, farmers and other large‐scale agricultural companies have a greater risk involved in trying new soil amendments geared toward increasing crop yields and selling as a source of clean cooking fuel. Regardless of how “natural” a fertilizer is, farmers may be slow to displace traditional chemical fertilizers where the added yields are uncertain. Until then, the market price is hard to pin down. A second challenge that cannot be overlooked is the lack of regulation for biochar. This stems from the lack of consensus among scientists of biochar, as well as a clear understanding of the optimum composition of biochar for maximum carbon sequestration. Market regulation is also critical for biochar to be considered as a high-quality offset in carbon credit programs. As a result of these issues, entering the biochar industry requires government or a firm to not only develop their own pilot testing models but also get involved in advocacy efforts to increase funding for research and build alliances with other groups in the industry. (Major, 2011)
3.5. Business Model Options
Two operational models can be framed in order to better understand biochar’s sales potential. The models represent a wide range of sales, in that each model forecasts the extremely high‐ and low‐ends of product’s sales potential. The first model that can be explored is considered the “demand scenario,” in which a market research analysis is performed to better understand the sales volume of the existing or new competitors based on current industry demand. This model forecasts sales at the lower end of the range. The second model, the “supply scenario,” is based on the available supply of local feedstock and assumes that all of the biochar produced can be sold. This model forecasts sales at the higher end of the range. Additionally, consumer awareness of biochar’s benefits must be increased to bring these sales volumes to fruition.
For Industrial purposes, the operating equipment required for this scenario would be portable kilns as well as other machineries like bulldozers, chippers, utility loaders, baggers/labelers, and flatbed trucks. The number of kilns required is based on the unit’s input capacity and the number of operational hours per year. Additionally, a large warehouse would be required to bag and label this massive quantity of material and can provide impressive social impacts by employing a lot of workers. (Jirka, 2014)
4. Recommendations and Conclusion
1) Justification of demand: A successful business model must truly understand the market and be able to discern long‐term interest. The conflicting opinions surrounding who makes up the potential biochar market – large‐scale farms or home gardeners – is a challenge that must be overcome. Additional research in this area is required to explore.
2) Demonstrable markets and growth opportunities through a Pilot Testing Model: As there is also disagreement on the benefits of biochar on all the stoves, it is important to create a pilot testing model. Marketing “pull” strategies are vital tools for a successful business in an emerging industry, so involving consumers in the testing and application process will be critical.
3) Realizable and sustainable biomass supply and yield: By far the most important building block is an established long‐term feedstock supply that can be timed to meet business demand. While slash may appear readily available, the challenge thus far has been creating an application that is worthy of the investment. Understanding this and planning for long‐term feedstock supplies is critical.
4) Partnerships: Partnerships are an important component of a biochar start‐up business in Meghalaya. The programs through the government can include biochar research, educational outreach, and technology development geared toward promoting biochar as a solution to global environmental challenges and thus should help farmers and workers to develop market demand.
Understanding these four building blocks will help define the risk‐reward profile of biochar set up in the Meghalaya state. While neither business model explored is necessarily feasible, there is a belief that there is room for a successful biochar business model of some type to exist in the state of Meghalaya. Like all sustainable business models, it will take time, persistence, and a creative way of approaching the traditional business model. Yet if done properly, the reward will be a profitable business that is truly integrating itself as a source of clean cooking fuel for decades ahead.
5. References
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DeLuca, T. H., MacKenzie, M. D., & Gundale M. J. (2009). Biochar Effects on Soil Nutrient Transformations. In J. Lehmann & S. Joseph, Biochar for Environmental Management: Science and Technology (pp.251‐271). London, UK: Earthscan
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Laird, D. A., Rogovska, N. P., Garcia-Perez, M., Collins, H. P., Streubel, J. D., Smith, M. R. (2011). Pyrolysis and Biochar – Opportunities for Distributed Production and Soil Quality Enhancement. In: Ross Braun, Douglas L. Karlen, and Dewayne Johnson (editors) Sustainable Alternative Fuel Feedstock Opportunities, Challenges and Roadmaps for Six U.S. Regions. Proceedings of the Sustainable Feedstocks for Advanced Biofuel Workshop. SWCS publisher. www.swcs.org/roadmap
Lehmann, J., Czimczik, C., Laird, C. and Sohi, S.(2009). Stability of biochar in soil. In Lehmann, J. and Joseph, S. (eds) Biochar for Environmental Management: Science and Technology. London: Earthscan.
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