Why GE Power wants Centre to introduce gas power as an option in ‘renewable+thermal’ tenders

GE Gas Power wants the Centre to introduce the option of mixing power from natural gas-based projects with renewable energy to ensure a balanced grid. According to GE’s analysis, under such an arrangement, the present gas price would be cheap enough to offer electricity at competitive rates.

“The Centre should introduce gas power as an option in ‘renewable energy plus thermal’ tenders to promote the growth of renewable energy. The gas price is very attractive and is expected to stay so,” said Deepesh Nanda, Chief Executive Officer, GE Gas Power, South Asia.

“We are in a long-cycle for inexpensive natural gas. The government should take advantage of this. If you look at the global markets, the indications are that there is a greater supply of natural gas than the demand. We are probably living in the golden age of natural gas,” Nanda told BusinessLine.

Price volatility

Currently, the landed price of imported natural gas in India is in the sub-$6 per million British thermal units (mBtu) range. But not long ago, it was hovering at $12 per mBtu. A large number of gas-based power projects that came up in the country hoping for abundant and cheap domestically produced natural gas are financially stranded today because of the volatility in prices.

That explains why the Centre is not comfortable with the idea of mixing power from natural gas-based projects with renewable energy — there is concern among buyers of electricity about gas prices going through the roof again. This concern is heightened by the expensive take-or-pay clauses built into gas procurement contracts.

“The gas community today is happy to relax the take-or-pay clauses, purely driven by a glut in the supply of natural gas. If you were to talk to a large gas supplier, they will give you better terms and conditions,” Nanda said.

Capex-intensive

Responding to a query on why gas-based power projects do not just sell in the spot market if the prices are so cheap and competitive, Nanda said: “All those who have built gas-based projects with the intention of selling in the spot market have burnt their fingers. It helps both buyer and seller if they enter into a long-term agreement, because these are high capital expenditure projects that require visibility to some extent.”

Highlighting how there has been a recovery of sorts for gas-based power generation in the country, Nanda said: “Because of the drop in LNG and domestic gas prices, we have seen gas-based power stations in India built 10 years ago being commissioned and operating right now.”

“These include the 350 MW Gujarat State Energy Generation Ltd Hazira project that had less than 2,000 hours of operations for 10 years. Today, it is running at 85 per cent plant load factor. In Pipavav, the 750 MW GSPC Pipavav gas-based power project was commissioned and built 10 years back. But it was not in operation because of the gas price. Today, it is running to capacity. Even NTPC gas-based projects are running today at 2 or 3 times the plant load factor than they were,” he added.