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Gas-based power plants want fuel allocation from upcoming fields.

Date: 22-12-2020
Subject: Gas-based power plants want fuel allocation from upcoming fields
On the other hand, most of the units at Lanco Kondapalli (1,476 MW), GMR Rajahmundry (768 MW), GVK Gautami (465 MW) — all in Andhra Pradesh — continue to lie idle.

Severely stressed gas-based power plants have sought a “separate bucket for allocation/auction of gas” from the offshore fields on the eastern coast of the country where production is to commence soon.

As much as 24,900 megawatt of gas-based power stations operated at only 26% utilisation levels in the April-October period for lack of fuel supply. Around 12,000 MW of gas plants are stressed assets, 5,600 GW have had no gas supplied to them in FY20, while the rest had limited supplies.

In letters to the Prime Minister’s Office and the petroleum and power ministries, the Association of Power Producers (APP) has said, “The additional 30 million standard cubic meters per day (mscmd) of domestic natural gas to be available by FY23 from KG basin should have some quantity earmarked for the power sector plants, which have no gas presently, on priority basis to revive and operationalise them in long term.”

The ultra-deep-water gas fields in in the KG D6 Block of the Krishna Godavari basin, developed by Reliance Industries (RIL) and BP, are expected to cumulatively produce 30 mscmd by 2023, accounting for a quarter of the country’s domestic gas output.

RIL and BP announced the commencement of gas production from the block on December 18 and the fuel will be sold according to standard bidding norms approved by the Cabinet in October. Though these fields have been given considerable pricing and marketing freedom, the gas prices are to be capped under the government determined tariff limits. The current price cap is set at $4.06/million British thermal units (mBtu), and is expected to rise after March 31, 2021. To make gas-based power commercially viable, the cost of the fuel at burner tip — including transportation costs and taxes — should not be more than $6/mbtu.

“The domestic gas that would be produced can be allocated through bidding route, but of the total gas being bid, there should be a special bucket or a specific quantity solely for the power sector as power sector cannot compete with other non-regulated industries,” the APP said.

Though it is touted as one of the cleanest reliable source, the share of electricity from gas-based power plants — even amid the current efforts to achieve emission reduction targets — remains less than 4%.

Average plant load factor (PLF) of India’s gas-based power plants increased only three percentage points annually in April-October 2020 even though spot liquefied natural gas (LNG) prices fell about 22% year-on-year. The marginal rise in PLF can be attributed to power generation increasing multi-fold in only a handful of generating stations located near the gas import terminals on the western coast. “Transportation costs of gas remained high, and coupled with landed cost of LNG imports and regasification, the final power price is still high and uncompetitive in relation to coal-based plants,” a source said.

Reaping the benefit of lower fuel rates, around 2,600 MW of state-owned gas-based plants of Gujarat (Pipapav, Uran, Dhuvaran, Utran and Hazira units) increased their PLF levels two to three times from last year. Electricity production from Torrent Power’s 1,200 MW Dgen unit and NTPC’s 657 MW Gandhar gas plant, also in Gujarat, have more than doubled from last year.

On the other hand, most of the units at Lanco Kondapalli (1,476 MW), GMR Rajahmundry (768 MW), GVK Gautami (465 MW) — all in Andhra Pradesh — continue to lie idle.

The government’s recent decision to rationalise gas pipeline tariff structure is expected to provide some relief, but power plants are yet to find out how much the unified tariff regime would help. “We expect some reduction in costs, but the unified tariff is too complex, and we will have to wait to find out real implications,” a senior gas power plant executive told FE.


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