IEW 2026: Liquid biofuels to drive India's renewable energy transition by 2030 -- IEA

India's liquid biofuels sector is poised for substantial growth over the next five years, with domestic production expected to surge up to 85% by 2030 if policy support accelerates, according to an International Energy Agency report released Jan. 29 at the India Energy Week.

In the main case scenario, which assumes current policies remain in place, liquid biofuels are forecast to grow from just over 11 billion liters/year in 2025 to more than 16 billion liters/year by 2030, with ethanol consumption alone projected to reach over 15 billion liters/year. If all announced targets are met and capacity rapidly scales, liquid biofuels could more than double to over 21 billion liters/year, with biodiesel potentially growing by sixfold.

The IEA's Outlook for Liquid and Gaseous Biofuels to 2030 maps the supply and demand landscape across ethanol, biodiesel and sustainable aviation fuel, identifying both opportunities and critical policy gaps that must be addressed to unlock India's potential as one of the world's fastest-growing bioenergy markets.

Paolo Frankl, head of the IEA's Renewable Energy Division, presented the findings at the IEW alongside key policymakers, including Neeraj Mittal, secretary at India's Ministry of Petroleum and Natural Gas.

Ethanol momentum accelerates

Ethanol's dominance in India's liquid biofuel mix reflects the success of the country's National Policy on Biofuels, implemented in 2018 and amended in 2022. Since the NPB's launch, domestic ethanol consumption has surged nearly fourfold from less than 2 billion liters/year to more than 6 billion liters/year by 2024, making India the world's fourth-largest consumer of liquid biofuels.

The government's blending mandates -- targeting 20% ethanol in gasoline by 2025-26 -- combined with guaranteed pricing mechanisms and state-level incentives, have created the policy certainty investors need. Multiple states like Maharashtra, Uttar Pradesh and Bihar have introduced bioenergy policies offering duty exemptions, capital subsidies and interest subsidies for new ethanol plants, the IEA report showed.

In 2024 alone, India deployed more than 25 million metric tons of feedstock for liquid biofuels production, with sugars, primarily sugarcane and molasses, accounting for over 60% of total feedstock demand.

Biodiesel bottleneck threatens blending targets

Biodiesel presents a starkly different picture. Despite a mandated 5% blending target by 2030, the sector remains constrained by feedstock scarcity. Current biodiesel production capacity stands at just over 2 billion liters/year, a fraction of what's needed to meet the government's 2030 targets.

The IEA identifies a critical bottleneck: insufficient supplies of fats, oils and greases to support scaling. In the main case forecast, biodiesel production is expected to stagnate at about 200 million liters/year, falling far short of the 5% blending requirement. However, the accelerated scenario, which assumes feedstock challenges are resolved and production capacity rapidly scales, projects biodiesel could surge to over 4 billion liters/year by 2030.

"The key issue is collection and distribution of used cooking oil (UCO)," said one analyst following the IEA's presentation. "Feedstock aggregation remains disaggregated and costly. Without a structured supply chain similar to what exists for ethanol, biodiesel will remain a structural constraint."

The report recommends India consider guaranteeing prices for biodiesel produced from UCO -- mirroring the ethanol pricing mechanism -- to drive demand and incentivize development of third-party aggregator networks. Additionally, state-level production-linked incentives, such as Uttar Pradesh's $3.30/liter support, could accelerate capacity additions.

SAF pathways narrow amid cost challenges

Sustainable aviation fuel remains India's most ambitious yet most uncertain liquid biofuels target. The government has mandated 1% SAF blending for international flights by 2027, scaling to 5% by 2030. Yet SAF costs remain two to five times higher than conventional jet fuel, creating a profitability gap that even policy support struggles to bridge.

The IEA forecasts biojet production could reach 500-700 million liters/year by 2030 in the main and accelerated cases, respectively. Key developments include Indian Oil Corp.'s announcement to produce 38 million liters/year of biojet from UCO at its Panipat refinery, which secured CORSIA certification in 2025, and a partnership with LanzaJet to develop alcohol-to-jet production capacity of 109 million liters/year, with startup expected by early 2028.

However, the report warns that sustained support across the value chain, including innovation grants, concessional financing for demonstration projects and public-private partnerships, will be essential to bring SAF costs down to competitive levels.

Policy gaps and priority actions

The IEA outlined four critical policy priorities for accelerated deployment:

1. Long-term road maps and targets: While India has strong near-term mandates for ethanol and compressed biogas, the report emphasizes the need for a comprehensive "sustainable fuels roadmap" covering all liquid and gaseous biofuels with clear post-2030 targets. This would provide the long-term investment certainty required for infrastructure and supply chain development.

2. Integrated supply chains and infrastructure: The report calls for a national biomass inventory to guide feedstock allocation and prevent intersectoral competition. This includes investments in feedstock aggregation, transport networks and storage, particularly critical for biodiesel and SAF scaling.

3. Innovation support: Targeted grants, concessional finance and innovation challenges should be deployed to reduce SAF costs and accelerate the commercialization of emerging pathways. The IEA cites Canada's The Sky's the Limit Challenge and India's own Pradhan Mantri JI-VAN Yojana as models for success.

4. Carbon accounting and sustainability frameworks: Without a transparent carbon accounting framework, India faces barriers to international investment, export opportunities and CORSIA compliance. The report recommends developing frameworks aligned with international best practices, building on work already underway in India's voluntary carbon market.

Feedstock surge

Meeting the announced blending targets would require feedstock demand to jump 70% -- from levels of just over 25 Mmt annually to more than 60 Mmt by 2030. For ethanol alone, approximately 30 Mmt of sugars and 20 Mmt of starches would be required to sustain the 20% blending mandate. For biodiesel and SAF, nearly 5 Mmt of vegetable oils and FOGs would be needed.

The IEA notes India's abundant agricultural residues and organic waste provide the resource base, but logistical and policy coordination challenges remain critical. State-level feedstock support programs, such as Haryana's subsidy for collection equipment and Maharashtra's feedstock eligibility expansion, offer partial solutions, but greater integration is needed.