1. Odd-Even & more: Gas has unmistakable benefits for India

Odd-Even & more: Gas has unmistakable benefits for India

Gas has unmistakable benefits for India, particularly in reducing the pains of transition to renewable sources

Updated: April 19, 2016 9:16 AM
Odd-even The odd-even rule returns to Delhi yet again. The nationwide debate on vehicular traffic vis-a-vis its impact on pollution is far from conclusion. (PTI)

The odd-even rule returns to Delhi yet again. The nationwide debate on vehicular traffic vis-a-vis its impact on pollution is far from conclusion. Clearly there is a trade-off between increasing the ease of commuting for the growing city population and ensuring healthy lives of residents. Neither benefit can be sidelined for the need of the other.  If we draw the analogy to power generation, it’s no different. Citizens today expect 24X7 power that is not just affordable and reliable, but also has the least environmental impact. The reality is that India’s peak demand deficit for the financial year 2015 stood at 4.7%. Challenging as the scenario may sound, the solution, like in every facet of life, lies in finding the right balance.

India’s current energy mix remains heavily skewed towards coal-based power, which contributes 61% to the total generation. Renewable sources are more environment friendly, but bring with them the challenges of natural fluctuations. The uncertainty and variability associated with renewable power generation is creating operational and grid stability challenges. This will get further accentuated as we add more of the targeted 175 GW of renewable energy. In order to fully utilise their power, renewable sources need to be complemented with commensurate load balancing power.

Now that we have the stark reality in front of us, there must be something that will enable us to find the right balance. There must be a solution that will lead more firm power generation, with lesser resources and even lesser environmental impact. The answer is to look towards gas-based power generation.

But, why not gas?

At the outset, we need to leave behind a cleaner planet. The use of gas for power generation helps in reducing the carbon footprint with significantly lower CO2 emission levels vis-a-vis coal. Also, the water consumption for a gas-based power plant is 70– 80% lesser. With India facing severe water shortage, this can help relieve some pressure on the demand for the scare resource. Gas-based power with its low level of emissions (CO2, NOx, SO2) is key to meet the COP21 commitment for India.

Flexible gas-based generation with quick start up, deeper turn down and faster ramp rates are key enablers to integrate higher renewables into the system. India is the fourth largest importer of LNG, sourcing 13 million tonne per annum (MTPA). With upcoming terminals, the LNG re-gasification capacity is set to increase three folds by 2020. At the same time, while in the past few years gas has been scarce in India and imported LNG prices have been significantly high, global supply developments along with demand faltering, has resulted in prices falling steeply.

When one assesses the financial implications, gas may help improve the financial health of the discoms and renewable power producers in states where there is a high share of renewables, but is currently under-utilised due to curtailment issues arising from the state’s inability to integrate such supply with the grid.  Burdened with huge debts, many state discoms do not have sufficient cash to buy electricity even at the lower rates of R2-3 per unit. With the UDAY scheme, discoms will be in a better financial position to absorb the reducing price differential between gas and coal. Gas also has the lowest capex requirements of R4.5 crore per MW when compared to all other fuels.

It helps in grid management for increasing share of renewables with quick ramp-up power plants, ability to balance infirm renewable load and best in class efficiency of greater than 60%. India would need 100–150 GW of gas-based power to integrate targeted renewable power into the system.

What it takes to scale up gas production

In 2012, the Central Electricity Authority (CEA) said that no new gas-based power plants should be set up till 2015-16, considering the high natural gas prices and low output prevalent at that time. Obviously the capacity for gas-based power has remained low.

The advisory should now be de-notified. State governments should be incentivised to add energy-efficient, environmentally friendly and cost effective gas-based power plants particularly to meet the peaking power requirements. For most of India’s large cities which are grappling with worsening air quality, gas-based power is the optimal option.  Singapore is a proven example of how a city can make gas its primary source of energy to balance reliable power generation with environmental concerns.

The global model works on a Power Purchase Agreement (PPA) structure where fuel cost is a pass through thereby reducing the uncertainties for power producers. PPAs are backed by financial guarantees which, in India’s case would mostly be state governments.

As India rises in the world order, its contribution to curbing global emissions is being watched closely. It is incumbent upon the country to demonstrate its leadership in moving to cleaner and sustainable sources of power.

Gas has unmistakable benefits for India, particularly in reducing the pains of transition to renewable sources of power. With gas prices at record lows and expected to stay low for some time, there couldn’t be a better time to diversify the energy mix of the country. Moreover, as we try to bring clean air to our choking cities, the solution would have to go beyond just an odd-even formula for traffic management.

By Deepesh Nanda

The author is CEO, gas power systems, GE South Asia

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