Nine gas-fired power plants in southern India – currently stranded for lack of fuel – have been allocated approximately 10 million cubic meters a day of natural gas at auction. With a combined capacity of 5 GW, these plants are now contracted to supply electricity at a price below Rs 4.7 per unit and will be restarted between October 1, 2016 and late March 2017.
The latest gas allocation of imported LNG was handled through a reverse e-auction, concluded on 3 September. The process of the reverse auction ensures that those operators, who require the least assistance to bring their power plant asset back to the market, will get access to necessary fuel. Financial support of Rs.187 crore will go to the selected plants, according to the Indian power ministry.
Prevailing low global gas prices and weak hydropower availability have stimulated LNG demand in India. For 2017, the consultancy Energy Aspects forecasts another 2.1 million ton (11%) increase y/y of gas imports, although that is dependent on either the completion of the Kochi pipeline or the addition of new regasification capacity.
Over half of India’s 14 GW of gas power capacity that lack fuel supplies have participated in the latest auction. In total, India has nearly 24 GW of gas-fired power generation capacity that is connected to the grid, however, a large share of this has been idled for months due to fuel shortages – exacerbating the risk of power cuts.
Continued focus on coal, renewables
Though the e-auctions of RLNG help restart some of India’s gas power plant fleet, the fast-growing economy continues to heavily rely on coal. In fact, over a third of the 65 GW of planned new coal-fired capacity has already been added to the grid.
In its 12th Five Year Plan (2012-17), India plans to add 120 GW of power capacity to the grid – over half of this will be new super-critical coal power plants. To offset some carbon dioxide emissions from fossil fuel sources, the government is also promoting renewable energy use, with a 32-GW planned capacity expansion from wind, solar, biomass, and waste during the current Five Year Plan.
Most installed fossil plants are clustered in the highly populated western region of India, particularly in Maharashtra and Gujarat. For example, Maharashtra, the largest Indian state by GDP, hosts 14% of the nation’s generating capacity. Decentralised, captive power plants for on-site industrial consumption account for just 40 GW.
India has over 249 GW of utility-based centrally installed capacity – mostly from coal power plants, according to India’s Central Electricity Authority (CEA). Renewables are also expanding fast, while the government sees flexible gas plants mainly as a supply source for peak-load power requirements.