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Cover Story | September 2016

Uncertain gas output hits entire energy sector

Gaurav Sharma | Senior Analyst, Independent Power Producers Association of India (IPPAI)

What is the present status of fuel supplies to you´re the gas-based power plants and what are the sources? How the present gas supply policy is affecting plant operations and what are the constraints that are influencing supplies?
The uncertain future of Indian domestic gas production has cascading effects on the overall role of gas in the country´s energy sector. The impacts have already been felt in the power sector where the PLF of gas-fired plants during the year averaged only 18.64% in May last year and more recently at 23.73% (May 2016) due to unavailability of gas.

In Phase III of the R-LNG (Re-gassified Liquefied Natural Gas) e-auctions held for stranded gas-based power plants in March this year, the highest allocation was for Ratnagiri Gas and Power Private Ltd (RGPPL). Nine power plants, including that of Dabhol, GMR and Lanco emerged as successful bidders in the e-auction of natural gas, securing 7.62 mmscmd gas for running a total 5,942 MW capacity.

What are the alternatives available for increasing the gas supply in the current scenario? How imports could help tide over the crisis as the government is planning to?
Recently, India and Australia decided to form a sub-group, to prepare a roadmap on streamlining issues that would help in providing cheap LNG for power plants in the country. The move will lead to committed LNG supply to gas-based power plants, which are running below their capacity due to lack of availability of gas. The grid connected gas-based power generation capacity in the country is around 24,508 MW. Of this, a capacity of 14,305 MW had no supply of domestic gas.

The power sector is the leading end user of natural gas in India along with the fertilizer sector and consumes nearly one third of the total natural gas produced in the country.

Moreover, the Central government is increasing its focus on gas based power projects due to their high efficiency, low gestation period, environmental factors, and requirement of less water and land compared to other fuel based power plants. Various other policies such as recent updates in ´Gas Allocation Policy´ have also been implemented to encourage use of gas in different end user segments. Other policies that are expected to have a positive impact on the country´s LNG market include E-bid for RLNG for smoothing the supply of imported spot RLNG to power plants and fertiliser industries.

Increasing focus on expansion of gas pipeline infrastructure in the country, rising demand for natural gas from power and industrial sectors and favourable government policies makes LNG a commercially viable and suitable fuel for various end users in India. As a result, LNG demand is forecast to witness robust growth over the next 5-10 years in India and project developers will have an abundant supply to run their plants not just at 25-30% Plant Load Factor (PLF) but at the required optimal levels of 80-85%.

What are the advantages of gas based power projects when compared other fuels?
Gas-based power projects are second only to renewables and hydro power in generating clean energy. So, ensuring fuel supplies for such projects will help the Independent Power Producers (IPPs) to avail CDM (clean development mechanism) benefits/ credits and will go a long way in meeting India´s obligations under the climate change commitments and reduce green-house emissions substantially. Also, dedicated plants operating in open cycle in proximity to load centres can meet peak demand.

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