The NDA government expects the share of natural gas in the energy mix of India to be 20% by 2025 compared with 11% in 2010, as stated by the Petroleum and Natural Gas Regulatory Board (PNGRB) in its Vision 2030 document. But the high tariff of gas-based power generation — around R5 per unit — may prove to be the Achilles’ heel in achieving this ambitious target.
Comparatively, in the recently concluded wind power auction (a first for India) a record low tariff of R3.46 per unit was quoted. This was a tad above R3.29 per unit quoted for solar power tariff at the Rewa auction. It definitely is good news for the country which is looking to move towards cleaner sources of power and plans to have an installed capacity of 175 gigawatt of renewable energy by the end of 2022.
The PNGRB document notes that in future, the natural gas demand is set to grow significantly at a compounded annual growth rate of 6.8% from 242.6 MMSCMD in 2012-13 to 746 MMSCMD in 2029-30, and gas-based power generation is expected to contribute the highest — in the range of 36% in 2012-13 to 47% in 2029-30.
But the current state of gas-based power projects in India paints a discouraging picture. In the end of February, installed capacity of gas-based power plants was 25,329 MW, which is 8% of the overall installed generation capacity of the country. Out of this, 10,556.10 MW belonged to the private sector.
HomeEconomy Narendra Modi govt’s target of 20% gas energy mix by 2025 set to hit high-cost hurdle
Narendra Modi govt’s target of 20% gas energy mix by 2025 set to hit high-cost hurdle
The NDA government expects the share of natural gas in the energy mix of India to be 20% by 2025 compared with 11% in 2010, as stated by the Petroleum and Natural Gas Regulatory Board (PNGRB) in its Vision 2030 document.
Comparatively, in the recently concluded wind power auction (a first for India) a record low tariff of R3.46 per unit was quoted.
The NDA government expects the share of natural gas in the energy mix of India to be 20% by 2025 compared with 11% in 2010, as stated by the Petroleum and Natural Gas Regulatory Board (PNGRB) in its Vision 2030 document. But the high tariff of gas-based power generation — around R5 per unit — may prove to be the Achilles’ heel in achieving this ambitious target.
Comparatively, in the recently concluded wind power auction (a first for India) a record low tariff of R3.46 per unit was quoted. This was a tad above R3.29 per unit quoted for solar power tariff at the Rewa auction. It definitely is good news for the country which is looking to move towards cleaner sources of power and plans to have an installed capacity of 175 gigawatt of renewable energy by the end of 2022.
The PNGRB document notes that in future, the natural gas demand is set to grow significantly at a compounded annual growth rate of 6.8% from 242.6 MMSCMD in 2012-13 to 746 MMSCMD in 2029-30, and gas-based power generation is expected to contribute the highest — in the range of 36% in 2012-13 to 47% in 2029-30.
But the current state of gas-based power projects in India paints a discouraging picture. In the end of February, installed capacity of gas-based power plants was 25,329 MW, which is 8% of the overall installed generation capacity of the country. Out of this, 10,556.10 MW belonged to the private sector.
On an average, gas-based power plants were operating at a meagre PLF of 22.5% in the April 2016-February 2017 period. Average private sector PLF in the period was even lower at 14.77%. Overall, these plants generated 44.9 BU of electricity during the period. Private sector generation was 13.1 BU. Gas-based electricity generation has plummeted from 103 BU in FY 2011 to 48 BU in FY 2016, with PLFs falling from 66.2% to 22.5% during that duration.
In January, generation loss due to supply shortage of gas was 5.6 BU. Around 102 MMSCMD of gas was allotted to these plants, whereas gas supplied was 26.54 MMSCMD. The private sector received only 2.21 MMSCMD out of the allotted 27.64 MMSCMD in January.
In financial year 2017-18, the country aims to generate 47.3 BU of electricity from natural gas-based thermal power plants.
In 2015, the government had announced a transient mechanism where gas-based power plants could run at 30% plant load factor with assured supply of gas, but subject to a tariff cap of R5.50 per unit. Under the mechanism, the operators of gas-based power units get monetary support from the government so as to be able to service their debt while forgoing their return on equity. These included exemptions from certain taxes on the incremental regasified liquefied natural gas (RLNG) being imported for the gas plants. Gas transporters and re-gasification terminals had also agreed to reduce their transportation tariff, marketing margin and re-gasification charges on the incremental RLNG. However, this scheme is supposed to discontinue from April 1.
Four reverse e-auction for the stranded gas-based plants has been conducted under the scheme so far. In the auctions, the successful bidding plants agreed to supply electricity at or below R4.70 per unit to the purchaser electricity distribution company.
To ease the situation, power minister Piyush Goyal had said in December last year the government is hoping to tie up long-term gas contracts for gas-based power plants.
In a recent interview with the Center on Global Energy Policy at the Columbia University, petroleum minister Dharmendra Pradhan said, “I have to accept this fact that we are not using too high percentage of gas in our basket. Gas is one of the cleanest form of energy and India is very keen to create a gas-based economy. We need to heavily invest in infrastructure and give remunerative price for gas production. We need to create new verticals for gas consumption.” Pradhan has also at various occasions emphasised that gas usage in India’s energy basket should be 15% in the next three years.
In a recent interaction with FE, BC Tripathi, chairman and managing director of GAIL (India), said India needs to do a lot of reforms in the power sector. “We need to create space for gas in the power sector. The power based on gas cannot be compared to coal. We need to pay higher price for efficient and clean power because of the consequential impact of polluted power is much higher.” He cited a report by International Monetary Fund which shows that per unit cost of power-based coal is causing R2.40 per unit as medical cost.
Tripathi added that focus on renewables is good but gas can act as the supplementary for off-wind days, off-Sun days, at nights, or during monsoon,. He however admitted that coal will remain predominant as the natural resource is available in abundance and a balance is required.
The other gas consuming areas which have considerable low consumption compared with power include fertiliser, city gas distribution (CGD), industry, petrochemicals and refineries, and sponge iron and steel which would all also require proportionate increase in consumption to achieve the envisaged goal.
In the recent World Energy Policy Summit held in New Delhi, a session was dedicated to the role of gas in the emerging scenario and panel included captains from across the oil and gas value chain, both private and public sectors. The panel unanimously concluded that gas and power projects go hand in hand across the world, but somehow that has not happened in India, and much of it is to be blamed to gas pricing.
The government in the last Union Budget cut customs duty on import of liquefied natural gas to 2.5% from 5% earlier. The price of high temperature-high pressure, deep sea gas is at present capped at $5.3 per MMBTU. Though the customs duty may be slashed further, the price is expected to move up, as per analysts.
PNGRB expects the share of domestic production in total natural gas supply to fall to 48% by 2029-30 from 70 in 2012-13 and imports to increase to 51% from 30% during the same period.
Source:financialexpress
