Gas-based power generation to be used as a last resort and for grid stability: NTPC CMD

Gas-based power stations are important as they are capable of fast ramping up operations and are best suited for flexing.

India’s gas-based power plants will be used only as the last resort to meet peaking demands and for grid control, unless gas prices reduce substantially in the coming years, the country’s largest state-owned power generator NTPC Ltd said.

“Gas (based power plants) is going to be the last resort. It is very costly and we should utilise it only for grid security purpose, which it is currently being used for. Let us hope that gas prices come down. It is still in double digits now. If it comes down to single digit, that will be really good,” said NTPC chairperson and managing director (CMD) Gurdeep Singh during a recent interaction with investors and the media.

He added that gas will have some say in meeting India’s energy demand. “But I am afraid that it will be only for a few hours in a day and a few months in a year,” Singh said.

The capacity

India has at least 62 gas-based power stations with a total capacity of 23,845 megawatt (MW). Of this, as many as 28 plants with a capacity of 9,308 MW had no generation at all in FY23 due to high prices and an overall shortage of gas. Due to higher input costs, the overall cost of power from gas-based power stations also becomes expensive, compared to electricity cost from coal-based, hydro or renewable energy plants.

NTPC has the highest state-owned gas-based capacity of 6,511 MW in India spread across 11 power stations.

Gas-based power plants are now being used only during peak demand phases to reduce power shortages. The Union Ministry of Power had asked NTPC to run its gas-based power plants and generate 5,000 MW during the “crunch period” starting March this year. The ministry further asked NTPC Vidyut Vyapar Nigam Ltd to procure 4,000 MW gas power from plants run by state governments.

India met an all-time high peak demand of 23,405 MW on August 17, even as the shortage remained as high as 7,255 MW.

Grid security

Ramesh Babu V, director (operations) NTPC, said gas-based power plants remain essential in India to ensure grid security. “The company’s gas stations are still being run primarily for grid control. They are being run by Grid India. No discounts are actually scheduled in that power. But from the grid security point of view, it is very much essential that we have the gas plants available,” he said.

Babu said the government has taken a lot of initiatives toward this and has instructed NTPC to ensure fuel supply to produce electricity during the crunch period. “So compared to last year, we already consumed a lot of gas. To ensure further availability of gas in the long run, we are going to sign an agreement for another four-and-a-half years with GAIL. Therefore, gas is going to stay here for some time to maintain grid stability,” he said.

NTPC's long-term agreement with GAIL for the supply of 1.1 Million Metric Standard Cubic Meter per Day (MMSCMD) of Regasified Liquefied Natural Gas (RLNG) on a firm basis is valid until December 2023.

As per NTPC's 2022-23 annual report, the company has long-term Gas Supply Agreements (GSAs) with GAIL for both Administered Price Mechanism (APM) gas and non-APM gas which is valid till July 6, 2026. "However, due to allocation of gas to the City Gas Distribution (CGD) sector by the government, the supply of domestic gas (both APM and non-APM) to power plants, including NTPC stations within the gas grid, has been discontinued since June 16, 2021," it stated.

Gas stations are important as they are capable of fast ramping up operations and are best suited for flexing. CPSU gas stations are frequently utilised for providing ancillary services for reliable grid operations.