According to industry sources, about Rs 50,000 crore of investments in gas-based power projects are in the doldrums due to the policy lacuna.
Gas-based power plants seek to be included in an ongoing scheme which proposes to sell renewable energy and thermal power together in a bundle. In the existing format, the scheme does not allow gas-based plants to supply power even though sector experts feel that these power stations are better suited than their coal counterparts for balancing renewable energy.
In a letter written to Union power minister RK Singh, the association of power producers (APP) said that about 25,000 megawatt (MW) of gas-based power plants are currently lying idle, adding that this fuel form causes less harm to the environment compared to thermal power generation. “Therefore, out of the ongoing 5,000 MW round-the-clock (RTC) renewable energy plus thermal tenders, a portion may be carved out for gas-based power to test the market,” APP wrote in the letter, reviewed by FE.
State-run Solar Energy Corporation of India (SECI) has already invited bids from wind and solar plants to supply 5,000 MW power under the round-the-clock scheme, where 49% of the power supplied can come from coal-based power plants so that buyers are not put off by the intermittency of renewable-based generation can get the assurance of receiving uninterrupted electricity supply.
The scheme aims to provide a leg-up to the renewable energy sector by addressing the issues of intermittency, limited hours of supply and low capacity utilisation of solar and wind power plants, and make them more attractive for state-owned power distribution companies (discoms). It is also seen to provide some relief to lenders by enabling stressed coal power plants to find buyers for their electricity, thereby reducing the quantum of non-performing assets.
Though the government wants to increase the share of gas in the energy basket, industry watchers feel gas-based power plants need to be promoted more to achieve this target. Due to the current low gas price regime, the cost of power generated from a gas plant is equivalent to that from imported coal.
According to industry sources, about Rs 50,000 crore of investments in gas-based power projects are in the doldrums due to the policy lacuna. The draft MNRE RTC Scheme document considered the life of gas-based plants at 15 years and has therefore not considered them suitable for blending with RE sources. However, according to the CERC Tariff regulations, the useful life of gas-based power plants is 25 years, similar to coal-based plants. Hence, gas-based plants should be considered at par with coal-based plants for blending with renewable sources, industry sources feel.
“Apart from being environment friendly, the land and water requirement of gas based power plants is only 25% of the coal-based power plant. Because of flexibility in gas generation and faster ramp up and winding up abilities, generators will also be able to have a large mix of RE in bundled power,” APP director general Ashok Khurana said. The cost of gas based power is now equivalent to that of coal-based power, as the current gas prices — at around $2.3/mmBtu — are much lower due to a drop in crude prices globally.
“With the increasing share of renewables across the globe, gas prices are expected to remain low for long. Even compared to other balancing alternatives like batteries being considered by SECI to increase reliability of RE, gas is a cheaper alternative,” Khurana said.