Construction on the PMUG pipeline began in May 2019, and has been dragging on ever since. In addition, smaller gas pipeline projects such as the Cochin-Mangaluru-Bengaluru connector have suffered from severe delay due to extreme weather and engineering problems, which suggests the much larger PMUG project will not be completed on time.
India’s annual gas demand has been growing by an average of about 4 percent since 2015, driven by particularly strong growth in the power sector and by demand for feedstock by heavy and petrochemical industries. However, gas supply is much easier to come by on India’s west coast, notably four of the five Indian LNG terminals – Dahej, Hazira, Dabhol and Cochin. Meanwhile, the capacity of the fifth – Ennore LNG in Tamil Nadu state – is being underutilized.
Launch of new e-RLNG scheme
Eager to promote clean energies, the Indian government is about to give way to utilities’ demands and allow power plants running on RLNG to sell electricity into the higher-priced spot market, without having to adhere to their power purchase agreements.
The proposal, launched by Indian power producers, calls for a gas auction mechanism that will pool any domestically produced natural gas with imported LNG and then offer the fuel at a subsidized tariff. Analysts say the proposed e-RLNG scheme will require fewer subsidies than in past years due to the fall in global oil prices.
The aim is to revive some 25,000 MW, or 25 GW, of stranded gas-fired power generation capacity across the country, and help alleviate a looming energy crisis as the summer season approaches. Much of the 25 GW stranded capacity is lying idle given that total gas supply is hardly reaches 40 million standard cubic feet per day – a far cry from the plant’s combined gas requirements of 117 mmscm/d.
The new e-RLNG scheme has been proposed to initially run for 2 years, based on financial support from the India’s Power System Development Fund. The RLNG price is currently prices around $8/MMBtu, and in previous e-RLNG bidding rounds the government subsidized the electricity tariff at Rs 5.50 per unit. Observers expect, however, the government will this year keep the subsidies lower at Rs 4.24 per unit.
Utilities seek to stick to coal power
In contrast to the government’s pledge to gas generation and green energy, Adani Power and NTPC, two of India’s largest power producers, have pleaded to extend the deadlines of retrofitting coal power stations by two to three years. High costs for retrofits and India’s continued reliance on cheap thermal coal now needs to be weighed up against rampant air pollution.
Privately-held Adani Power, for once, calls for an extension of stricter emission limits at two of its large-scale power stations until March 2023. The two units were purchased from the GMR Group last year, and the Adani claims there would still be ownership issues to be resolved before looking into a plant retrofit. State-owned NTPC, India’s largest utility, has sought to push back the deadline by up to two years at its Bongaigaon eastern Indian plant.
Coal is by far India’s dominant energy source, and the power sector accounts for two-thirds of India's coal consumption. Now policy makers and regulators in the second largest economy in the Asia-Pacific region needs to decide on whether they want to stick to their green energy targets, or keep watering them down.