To bring respite to 26,000-MW gas and hydro power plants that are stranded, the government is planning to introduce what is called “peaking power policy”, which would allow electricity distribution companies (discoms) to step up purchases from these plants. Time-of-day metering is a billing method where, depending on the expected load on the grid, a billing day is divided into several time zones, encouraging consumers to shift usage to periods when the power is cheaper. This, in turn, helps discoms in better management of peak demand. Experts believe customers would adapt to time-of-day tariffs if costs are justified appropriately and they have a chance to reduce their monthly bills with judicious and efficient usage. In the current scenario of surplus power, the costly gas and hydel plants, many of them lacking long-term power purchase agreements with buyers, find it very difficult to find consumers. Many plants are not even getting the capacity charges, a component of the tariff, which is to be received even when supplies are not made.
Gas-based and hydro power are much costlier (ranging from Rs5/unit to even Rs12/unit for LNG-based ones) compared with Rs3.20/unit, the average rate of coal-based power charged by state-run behemoth NTPC. The lowest costs of solar and wind power are Rs2.44/unit and Rs3.46/unit, respectively. However, “if time-of-day tariffs can be bundled along with compensation for deficient quality, it would be palatable to consumers”, Sambitosh Mohapatra, advisory partner, power and utilities at PwC, told FE. “One of the major factors hurting gas-based plants is the high price of fuel, which is pushing their tariffs to as high as Rs11-12 per unit of electricity in case of LNG-based plants,” noted Care Ratings in a recent report.
Owing to their ability to start and stop power generation faster than other conventional modes, gas and hydro power plants are more suitable for balancing and ramping requirement of the grid. The move, if implemented, would be in line with the 2016 revised tariff policy objective of promoting hydroelectric power generation to provide adequate peaking reserves, reliable grid operation and integration of unreliable renewable energy sources. Though not encouraging further capacity addition due to the shortage of gas supply, the national electricity plan of 2016 acknowledged the role of gas-based plants during evening to meet balancing power and ramping requirement. Given that renewable power supplies are irregular by nature, gas-based capacity of about 2,000 MW is proposed to be kept as reserve during off-peak hours.
More than half of the total gas based capacity of about 25,139 MW remains stranded due to unavailability of natural gas. This represents an investment of over `60,000 crore, which is on the threshold of becoming non-performing assets. Private gas plants with a capacity of 10,556 MW operated at an average plant load factor of 13.52% in the quarter ended June. Currently, 21 hydro electric projects of 6,429 MW are stranded. Work has not even started for 45 projects with a capacity of 25,000 MW.