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High fuel prices to keep gas-based power projects in a bind

Unavailability of natural gas, steep prices of imported LNG hurting operations of projects

Jayajit Dash  |  Bhubaneswar 

High fuel prices to keep gas based power projects in a bind

The unavailability of natural gas and steep prices of imported are hurting the operations of gas-based in the country.

Gas-based power generation capacity in the country at present is 25,300 Mw — the figure is 7.5% of the total installed power capacity. Data by the Central Electricity Authority (CEA) shows over 70% of privately operated gas plant potential is underutilised due to unavailability of natural gas required to fuel them. For the ones operated by Centre or state, the under-utilisation is lower at 38-40%. In 2016-17, the gas fired projects operated at a mere 22.51% plant load factor (PLF), producing 49 billion units of electricity.

"One of the major factors hurting gas based plants is the high price of fuel which is pushing their tariffs to as high as Rs 11-12 per unit of electricity in case of based plants", says an industry report on 'Power-Thermal and Nuclear Energy" released by

Out of 25,329 Mw of gas-based power plants in the country, 14,305 Mw capacity is technically stranded-such projects are either fully or partly inoperative due to deficient gas supplies. Investments of the order of over Rs 1 lakh crore have been pumped into such plants.

During 2016, world natural gas consumption grew by 63 billion cubic meters (bcm) or 1.5%, slower than the 10-year average of 2.3%. Global natural gas production increased by only 21 bcm, or 0.3%. Gas trade grew by 4.8%, helped by 6.2% growth in imports/exports.

"Gas powered plants are far less polluting compared to coal powered plants. But due to the unavailability of natural gas, the same capacity has been left technically stranded. They mainly rely on Liquefied Natural Gas (LNG) as fuel. Two main benefits of based power plants is a far lesser gestation period of 2-3 years compared with four or more years for other conventional power plants and far lesser requirement of land for setting up plants and lower requirement of water for cooling towers. When it comes to cost of generation and power tariff, gas based power is competitive compared to coal", the report states.

Though natural gas prices have been low since 2016, lack of capacity for regasification, especially on the eastern coast of the country, is causing scarcity of fuel for gas fired power plants. According to the report by CARE Ratings, the same scenario is likely to prevail in the current year which means that the natural gas power plants would remain underutilised.

Moreover, the government has rolled back subsidies under the gas priced pooling mechanism to the gas powered power companies post-March 31, 2017. Additionally, gas prices auctioned by the government are much higher, as much as double the prevailing global prices for natural gas.

First Published: Tue, July 11 2017. 20:35 IST
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