The capacity utilisation, or plant load factor (PLF), of gas-based power plants rose to 14.8 per cent in FY24 from 11.5 per cent in FY23 aided by India’s rising electricity consumption due to growing industrial and commercial activity as well as increasing demand from households.

India’s power demand, which grew at more than 7 per cent y-o-y in FY24, forcing the government to direct gas-based power plants with around 25 gigawatts GW) of installed capacity to run at full capacity, which coupled with declining liquefied natural gas (LNG) prices pulled up demand for natural gas.

The world’s fourth largest LNG importer consumed 66.63 billion cubic meters (BCM) natural gas in FY24, compared to 59.97 BCM and 64.16 BCM in FY23 and FY22, respectively.

Gas-based power

In FY24, gas-based power plants produced 31.30 billion units (BU) against a target of 32 BU cumulatively consuming 235.78 million standard cubic meters per day (MSCMD) natural gas. India’s peak power demand in 2023 rose to a record 240 gigawatts (GW) in September 2023.

India’s total generation capacity grew 10 per cent y-o-y to 442 GW as of March 2024 (March 2022: 399 GW).

Softening LNG prices and higher requirement of gas by the industrial and power sectors also pushed up the trade on gas exchanges.

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For instance, Indian Gas Exchange (IGX) witnessed Free Market Gas trade volumes hit a record 17.5 Million mBtu (million British thermal units), an increase of 20 per cent y-o-y in FY24. There were 998 trades executed throughout the year. Dahej dominated Free Market Gas trades.

However, total trading volume stood at 41 million mBtu, which was lower by 20 per cent y-o-y mainly due to decline in sale by domestic gas producers and its resale by marketers. Domestic Ceiling Price Gas accounted for 23.3 Million mBtu.

GIXI (Gas Index of India) for March 2024 was Rs 799 or $9.6 per mBtu, lower by 10 per cent from February. GIXI- South was ₹677 or $8.1 per mBtu and GIXI-West Rs 814 or $9.8 per mBtu. Total Domestic ceiling price category gas traded during the month was 3,31,100 mBtu at below ceiling price (average ₹730 per mBtu) at KG Basin delivery point.

Different spot gas benchmark prices recorded during March 2024 with Henry Hub (HH) at around $1.5 per mBtu and Dutch TTF at around $8.5, whereas LNG benchmark indice West India Marker (WIM) stood at around $10 per mBtu.

Rising power demand

Rising demand from the industrial and power sector is expected to further accelerate India’s consumption of natural gas. The Power Ministry expects India’s peak demand to hit 260 GW during April to June 2024.

The International Energy Agency (IEA) projects India’s gas demand to grow by 7 per cent y-o-y in 2024 calendar year, while the Gas Exporting Countries Forum (GCEF) predicts usage to grow at 6 per cent on an annual basis.

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Fitch Ratings expects India’s power demand to rise by 7-8 per cent y-o-y in April-June 2024 due to robust industrial activity, strong GDP growth and Indian Meteorological Department’s (IMD) forecast of above-normal temperatures during the summer months.

“Utilisation of gas-based plants has been low in the past due to higher fuel prices or lack of availability of fuel. However, both spot- and term-market liquefied natural gas prices have fallen by around 30 per cent y-o-y. The relatively lower price should improve the viability and utilisation of gas-based plants, especially during peak summer months when spot power prices also increase. The price of electricity on short-term exchanges has already increased to above ₹5 per kWh from average levels of ₹3-4 per kWh,” it added.