Shifting power plants to gas as a source of fire may not be an easy option for the government as the availability and cost of the blue fuel can pose a challenge for both power producers and consumers.
Domestic natural gas producers, transporters and marketers feel that the rhetoric of switching to gas when there is a coal shortage may sound like a good proposition in theory, but it is difficult to put into practice given the volatility in natural gas prices. It is possible.
In fact, the Association of Power Producers (APP) has requested the Ministry of Power that the domestic gas which is being auctioned, should be auctioned limited among the power sector companies. According to him, this will yield dual benefits – help revive 24 GW of stranded gas-based projects and reduce our dependence on imported coal and save precious foreign exchange.
About 70 percent of the electricity produced in the country is generated using coal as the main feedstock, while hydro, gas and nuclear account for about 16-17 percent of the production. The government had increased the price of domestically produced natural gas by 62 per cent. From October 1, 2021 to March 31, 2022, the price of domestic natural gas was $2.9 per million British thermal units (mmBtu). Plus, the price of gas produced from hard-to-reach areas such as the deep sea, which is based on a different formula. , was increased from $3.62 per mmBtu to $6.13 per mmBtu.
According to a report by Crisil Research, while coal-based power generation grew by about 19 per cent year-on-year, generation from other conventional sources saw a decline of around 16 per cent year-on-year. Gas production, which on average is around 3-4 per cent of monthly production, saw a 26 per cent decline annually as gas prices increased by about 1.5-2.5 times (contracted and spot, respectively) for LNG.
In the recently concluded India Energy Forum by CERAWeek, Manoj Jain, CMD, GAIL (India) Limited said that such volatility (in gas prices) may not be a good sign for a country like India.
long term deals
“Indian gas market traditionally relies heavily on long-term contracts (around 70 per cent) while around 30 per cent is on spot basis. So, around 70 per cent of the market is largely unaffected,” he said. “However, severe volatility and changes in crude oil prices could impact long-term contracts as well. Industries such as fertilizers, refineries and glass ceramics rely on long-term contracts.
“It is usually the power sector which is getting affected in a big way because of the high volatility. They do not precipitate over long periods, so they are not able to combine for long periods of gas. When there is great volatility, the new industry that wants to move to gas hesitates a bit and it gives a bit of a jolt,” said Jain. Electricity generation through conventional sources has declined due to rise in prices.
Meanwhile, shortage of supplies during monsoon in April-June 2021 and unprecedented increase in coal-based power coupled with creation of low stocks in April-June 2021 has led to depletion of coal reserves in power plants. Higher international prices of coal by import-based power plants affected imports and power supply, even under PPAs, reduced by about 30 per cent. However, in the first half of the current financial year, domestic power supply has grown by about 24 per cent.
The shortage of imported coal has been compensated for power generation from domestic coal, which has further increased the demand for domestic coal. As on October 21, around 104 coal-fired thermal power plants have either critical or supercritical level of stock, while a year ago only 16 plants were in critical/supercritical stock status (stock holding less than six days). Were. Period.
The average stock of coal in power plants is currently around four days and the average daily stock is close to 7.69 million tonnes (mt).
However, the situation has improved marginally in the last one week as compared to 115 plants having critical/supercritical stock level with a total stock of around 7.29 million tonnes as on October 10 this year.
According to a senior industry official, the average position of coal in power plants is expected to improve for six to seven days and the average daily stock is expected to rise to 10 million tonnes by the end of this month.
.