Views of Shalini Prasad

“The potential of gas-based power plants remains vastly untapped”

The grid-connected gas-based power generation capacity currently stands at 25,329 MW, accounting for about 8 per cent of the total power capacity in the country. However, the potential of gas-based power plants remains vastly untapped. Limited gas supply has led to the plant load factors (PLFs) of existing plants remaining depressed at around 22-23 per cent in the past few years. The PLFs of private sector gas-based plants have been even lower, at only 14.7 per cent (2016-17). Another major factor for idling gas-based plants has been the unaffordability of imported gas-based power for discoms. At a recent conference, “Gas-based Power Generation”, organised by Power Line, Shalini Prasad, additional secretary, Ministry of Power (MoP), spoke about the biggest challenges for the segment, the role of gas-based plants in balancing renewables, the gas auction scheme, the feasibility of pooled pricing, and the outlook for the segment, among other things. Excerpts…

State of the sector

When we look at gas-based power, there are a few aspects that characterise the power sector at this point that must be looked at. The first is our generation capacity. For the first time, we have reached the point where generation is far more than demand. This is also true for peak loads. The second is the emphasis on renewables. We are looking at a very ambitious target of renewables going forward, largely in the solar segment. The third is prices. We have seen recently that the price bids for solar power have gone down beyond coal-based power prices and are now lower than any other source of power.

In the past few months, gas prices were very high and, therefore, the price of power produced by gas-based power plants was also high. It is clearly very difficult for these plants to come into the merit order despatch. This is a major challenge that all power plants, whether government or private, are grappling with right now. However, spot prices have started going down. There is a possibility of gas-based power becoming competitive. Also, given the fact that the price of coal-based power generation is going up a bit, we need to see where the market is headed.

Balancing renewables

I think the real challenge as well as the opportunity for the gas-based segment right now is the coming up of renewables and the need for balancing them. A lot of renewable capacity is in the pipeline, which would require some amount of balancing. We are actively looking at all possibilities including hydro, gas and flexible use of coal-based plants. We are currently undertaking studies to see how much balancing would be required, and what types of capacities and power are needed to meet the balancing requirements. We expect these studies to be completed in the next couple of months. Clearly, gas, being very flexible, has a very good opportunity. Whether the current gas-based capacity can handle the balancing requirements or whether fresh capacities will be needed will perhaps be known after the results of these studies are out.

Stranded gas-based capacity utilisation scheme

The Power System Development Fund scheme was introduced for a period of two years and at a time when we were grappling with power shortages. At this point, there is no such situation and we are looking at optimisation. We are trying to see whether, with the price correction, the scheme will be really required. For a private player, at the end of the day, it has to be an economic decision to invest and that too a market-based one. At Ratnagiri Gas Power Project Limited, we have managed to ensure that the plant is able to supply power (500 MW) without any subsidy support. This has been through the initiation of a well-formulated power purchase agreement with Indian Railways. Hence, at this point, there is a lot of uncertainty on spot prices. We are also in the middle of studies on the balancing requirements. Till we have these two things in place, we would not be taking a decision on whether to continue the scheme.

New emission norms

The new emission norms will come into effect from December 2017. There is a phasing programme being put into place because it goes without saying that all plants cannot be shut down at one go. With the new norms coming into play, there will be a cost impact. The prices of coal-based power generation will go up. This would have a bearing on the gas segment.

Reforms implementation

Almost all the states are now on board the Ujwal Discom Assurance Yojana (UDAY). The scheme is still in the very early years. The initial trends that we notice are encouraging. There has been a reduction in aggregate technical and commercial (AT&C) losses. These are long-haul reforms, wherein the actual results will not be seen overnight. We are moving in the right direction, which would have a good overall impact on demand. We are currently looking at a normal 6-7 per cent increase in demand, but our per capita consumption is very low. Hence, nobody is saying that it could not go much beyond that. There are many scenarios where this could be higher.

Pooled regasified liquefied natural gas and domestic gas prices

There have been many different scenarios that have been discussed, but a call has not been taken. One pooling scenario is to undertake it within the sector. Even then, sectors that get higher domestic gas will be very happy about it. Another possibility is to have pooled prices across sectors. However, in this case, sectors such as fertilisers, power and city gas distribution will not be very happy. So, it is a question of which sectors to do it for. Also, I think the quantities of allocations are pretty low; hence, it may not be of such substantial benefit.

Scenario of low PLFs

Given the series of assumptions based on demand, etc., these would be the new normal. Having said that, with active intervention, I think there is a lot of potential to increase the use of electricity. Our per capita consumption is very low as compared to global standards. So far, we are only talking based on trends, but that does not mean that the trends have to be followed.

Electric vehicles

The government plans to give a big push to electric vehicles. The Department of Industries is the nodal department for the programme. Charging is an area that would be looked at by the MoP. Hence, we are certainly looking at that. This is an area which can impact demand. We really need to look at other such solutions that can push up the use of power.

Last-mile connectivity

There are last-mile challenges in distribution. However, UDAY has been designed to look at the distribution segment and all its components. It will look at not just AT&C losses, but also at filing of tariff revisions, increasing metering, feeder metering, etc. Hence, once the discoms achieve a turnaround, the capacity to buy power will go up, and we should be seeing improved power supply as well as lower outages.

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