Exclusive: Govt plans to increase uptake of gas-based power to meet peak summer demand

On March 22, Union Minister for Power RK Singh summoned gas-based power developers and chaired a high-level meeting to discuss ways to increase the share of gas-based power in the total energy mix to help meet the country's peak power demand this summer.

The Union government is pushing power generation companies (gencos) to buy gas and scale up electricity generation from stranded or underutilised gas-based power units, according to officials in the know.

On March 22, Union Minister for Power RK Singh summoned gas-based power developers and chaired a high-level meeting to discuss ways to increase the share of gas-based power in the total energy mix to help meet the country's peak power demand this summer.

He directed them to buy more gas, citing softening of prices. Natural gas prices have witnessed around 30 percent decline in the last six months.

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The government is looking to tap nearly 10,000 MW of gas-based power during the ongoing "crunch period", officials said. The Central Electricity Authority (CEA) has predicted that the period between March 16 to June 30 this year may see power demand rising significantly.

To be sure, the 10,000 MW gas-based capacity will be in addition to NTPC's gas-based capacities (5,000 MW). Until now, only about 3,200 MW-4,200 MW of gas-based power is being utilised, of which 2,000-3,000 MW is being run by NTPC and 1,200 MW has been bought by the government.

Senior officials present in the meeting told Moneycontrol that the minister has directed all gencos to run their gas-based power plants and sell it on the power exchanges in case discoms are not buying power from them. Singh directed such gencos to ensure full tie-up of gas with GAIL India Ltd, Indian Oil Corporation Limited (IOCL) or buy it from the spot market.

The Union minister reminded gas-based power developers that the Ministry of Power on March 1, amended the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, under which gencos are bound to offer surplus power to the power exchanges, a senior official requesting anonymity said.

While the industry raised concerns over offtake of gas-based power, the minister argued that the government is anticipating high demand and hence, finding buyers would not be a problem.

"Now in March itself, thermal capacity is already running at maximum load and in the coming three months, no substantial thermal capacity addition is expected. Hydropower is already down by about 17 percent due to weather conditions. Hence, the focus has now come on using gas-based power since gas prices have also moderated quite a bit. It is necessary to meet the night time peak demand when renewable energy is not available," said a senior power ministry official present in the meeting.

The Ministry has also urged the government of Gujarat to reduce the value added tax (VAT) imposed on gas temporarily as it would help lower the cost of gas-based power. Majority of India's gas used in power plants comes from Gujarat.

"With the current gas prices, it makes sense for gas-based power gencos to operate their plants and contribute in meeting the country's growing power demand. We have asked them (gencos) to ramp up their generation. The good thing about gas-based power is that it can be run even on short notice and it can be quickly ramped up and ramped down," Pankaj Agarwal, Secretary, Ministry of Power told Moneycontrol on March 15.

Spot gas prices are currently trading at low levels of around $8 per mmbtu to $9 per mmbtu amid muted demand due to milder winters in Europe and ample supply in the market. Gas prices had climbed to highs of $23 per mmbtu in early 2023.

India has 25,000 MW of installed gas-based power capacity, of which around 5,000 MW are that of state-run NTPC Ltd, 10,000 MW is now unusable, leaving a workable capacity of about 10,000 MW that is owned by private entities and state governments.

The government is anticipating a peak power demand of 256.53 GW (256,530 MW) in the coming months. However, on March 4, Central Electricity Authority (CEA) chairperson Ghanshyam Prasad said the peak power demand this year could even hit the 260-GW mark.

For 2023, the CEA had projected a peak power demand of 230 GW, but the demand crossed an unprecedented 240-GW mark. The unusual surge in demand also resulted in an alarming spike in the country's power shortage, recorded at 10.745 GW (10,745 MW) on the same day (September 1).