MoPNG suggests gas-based power purchase obligation to revive plants

The Ministry of Petroleum and Natural Gas (MoPNG) has suggested an obligatory purchase mechanism, along the lines of the Renewable Purchase Obligation, for reviving gas-based power plants.

The installed capacity of gas-based power plants is around 25 GW, of which almost 12 GW is idle.

In its reply to the Parliamentary Standing Committee on Petroleum & Natural Gas, the Ministry pointed out that with increasing share of renewable energy, gas-based power plants provide the best option for grid balancing due to faster generation ramping up rates, low technical minimum level of operation and high part-load efficiency

The report is on the action taken by the government on recommendations in the 11^th report of the panel. The action taken response was received on July 14, 2022.

Around 500 GW of RE energy is proposed to be installed in the country in coming years. RE is highly dependent on weather and has inherent challenges like seasonality, reliability, diurnal variations resulting in the need of grid balancing, MoPNG said.

Power purchase obligation

The Ministry said that findings of study by CEA, CERC, MoP and POSOCO highlight the importance/benefits of gas based power in integration of RE capacity.

Besides, natural gas-based plants are much cleaner in respect of environmental norms including particulate matter, SOx, Nox and CO₂ emissions compared to coal-based power plants and RE-Gas Power bundle is likely to be cleaner than RE-Coal power bundle.

“Suitable peaking power policy for using RE-gas bundled model is required for nudging utilities to purchase RE-gas power to serve customers 24x7. For example, cost of externalities of coal-based power plants may be considered in merit order dispatch and gas-based power purchase obligation can also support reviving gas-based power plants,” the Ministry suggested.

Further, there may be a possibility to operationalise gas-based power plants using domestic MDP gas from diverse areas, including gas from CBM fields, which is accessible at a competitive price or by envisaging any scheme similar to power pooling”.

The Committee recommended that gas marketing PSUs like GAIL and Petronet LNG can explore the supply of gas to encourage the possibility of gas-based hybrid power plants to aid and accelerate India’s RE transition.

RE + Gas Power Hybrid

The Parliamentary Standing Committee on Energy in a report placed in Parliament on January 4, 2019, observed that gas based capacity can be utilised for peak energy demand. Such plants can help balance the grid by maintaining uninterrupted electricity supply, especially when solar plants shut down in the evenings and coal based plants take time to ramp up.

Natural gas is among the cleanest burning hydrocarbons. As per the US EIA, coal emits about 211.06 pounds of CO₂ per million British thermal units (mBtu) of energy, while natural gas emits 116.65 pounds of CO₂.

Feasibility

A senior government official said that while gas is a better option compared to coal, there are issues related with availability of cheap gas.

“At present, international prices are around $41-43 per mBtu, which is among the highest. It will make generation costlier. Already half the gas-based capacity is idle due to high prices. Also with the current geopolitical scenario, LNG prices are not expected to weaken in the near future and with winters approaching, Europeans are scouting for gas. At present, it is not a cheap alternative,” he explained.

India imports about half of its natural gas requirement as liquefied natural gas (LNG), of which around two-thirds is through long-term contracts and the rest is spot, another official said. “Gas-power can compete with coal for around $10 per mBtu rate, beyond this it is not economically viable. Although coal prices are higher in global markets, it is still preferred over gas,” he explained.

According to CareEdge, Coal prices of South African thermal coal, a global benchmark, crossed its all-time high price of around $200 per tonne (in October 2021) and peaked at around $300 in April 2022. In May 2022, the global benchmark prices fell to $280.

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