The Hindu Business Line : Power shortage makes cos rely on liquid fuel captive plants

New Delhi/Chennai, May 16 Companies running their captive liquid-fuel based power plants are shelling out as much as Rs 7 a unit of electricity generated, nearly one and a half times more than what it cost them to generate electricity from the same plants a year ago or double of what it was three years ago.

In the case of power plants fired on naphtha, the cost is even more. A unit of electricity from a naphtha-based plant costs about Rs 7.75 against Rs 4.50-5.00 a year ago.

With the power shortage, industries that require uninterrupted and good quality power have no option but to continuously run their liquid-fuel based captive plants.

According to industry sources, the cost of electricity from an efficiently run furnace oil based captive plant of 6-8 MW capacity is Rs 6.50 to Rs 7 a kWh. A year ago, this was about Rs 5. Three years ago the electricity generated by the same captive power plant would have worked out to just Rs 3.50 a unit. A lot of these companies also pay up to Rs 4.50 a unit for grid power.

In the last two years, according to an industry representative, furnace oil prices have gone up by two-and-a-half times. Almost 80 per cent of the cost of generation is accounted for by furnace oil.

Despite global oil prices at an all-time high, petroleum fuel oils, mainly diesel and naphtha, continue to be used for power generation. A widespread ramping-up of standby captive power generation by industrial units in recent months, increasing use of diesel generating sets at infrastructure project sites across the country, and a global shortage of gas are the key factors pushing up use of petroleum fuels by the power sector.

Captive generation

With the nationwide peak power shortage climbing to 17.1 per cent, industry has resorted to increased use of captive power generation. Nearly 40 per cent of the captive power capacity of about 22,500 MW is estimated to be based on diesel or furnace oil. A big growth in diesel consumption in small factories with captive power units below 1 MW in capacity, besides those used by the commercial and domestic users, is adding to the increasing demand for diesel.

“We are in the process of ramping up our furnace oil-based captive capacity from 24 MW to 36 MW, with our consumption of fuel slated to double from current levels of 15 kilo litres a day,” Mr A.K. Mittal, GM - Electrical and Automation at Gujarat Ambuja’s Darlaghat plant in Himachal Pradesh, told Business Line. He said that diesel and furnace oil use across Gujarat Ambuja’s other units has been increasing.

According to Mr D.K. Nair, Secretary-General, Confederation of Indian Textile Industry, the textile industry is bound to increase fuel usage at captive power units as production load is on the rise and power availability is worsening across States.

“There is a direct correlation between peaking shortages and use of captive sets. Standby captive power units have been ramping up power generation across the board to plug shortfall from the grid... Captive capacity has been proliferating as manufacturing activity in the economy has been increasing while power generation has failed to keep pace,” said Mr Ravinder Arora, Chief (Engineering), Central Electricity Regulatory Commission.