By Siddhartha Bhatnagar
The MBA curriculum includes an industrial trip and I recently visited one of the-gas based power plants in Gujarat. Predictions unfortunately have become reality, as gas power plants are running on one third of their capacity and some have been declared NPA i.e. Non-Performing Asset. Gas based plants require gas, and India is facing severe shortages of domestic gas. The international price of gas is sky high which has made it difficult for the players in this sector to use RLNG for power production.
The price of power generated from coal based plants is 2-3 Rs per unit (varies according to ppa i.e. per purchase agreement); meanwhile the rate of gas based power is 9-11 Rs per unit (the revised list of international LNG price). It is easy to assess the downfall of the generation of power from gas based power plant if we compare the rates.
It was feasible to produce power with minutely high rates in the previous decade, when the country noticed the bumper domestic production of gas. There was more sanctioning of gas based power plants, keeping in mind the KGD6 basin good production as well as the added advantage of environmental friendliness. A sudden dip in the domestic production has had a direct effect on all the plants. India heavily depends on black gold i.e. coal for its power consumption. As per the BP statistical review 2012, close to 53 % power generation is dominated by coal and gas contributes about 10 % in power generation. This figure depicts the plight of a number of players, both public and private entities involved in gas power plants, which are thinking about the credibility of their investment. The investment involved is huge and we already have news that Essar has converted two of its gas based plants to coal based plants.
Well, things do seem grim, but the glass is always half full.
Some encouraging indicators that can help in the grim situation are:
- In the scenario of UI i.e. Unscheduled interchange, when the frequency is down, all power producing companies whether using coal or gas want to tap into the benefits of additional revenue. Gas power plants, known as peaking power plants are at an advantageous position as they have the capacity to generate power in short intervals of 5-10 seconds. Coal based power plants lack this quick turn up, stakeholders are likely to favour and use gas-based plant.
- The Southern Grid is more likely to be connected to the rest of the grid by April 2014. This upcoming development provides an ideal platform for the sinking business to recreate revenue. The Southern region has only 2 gas based power plants presently. Energy -deficit southern states will, for a short span of time be likely to consume the extra power through this mode.
- As gas prices have been revised to 8.4$ mmscmd (Million Metric Standard Cubic Meter per Day) by Rangarajan committee with effect from 1 April 2014, the price has come close to international prices ranging around 13-15$ mmscmd. The country eagerly hopes that with the increase in the price allotment, there will be increase in the domestic production as per the claim by committee.
- The Empowered Group of Ministers (EGom) has kept the fertilizer sector on priority followed by the power sector. The prospect of subsidized cost of 6.4$ mmscmd will help players to breath as the situation may demand more time.
- The bottleneck of coal supply by CIL to all its major customers has radically burdened coal power generation. The recent controversies of low grade coal supply to NTPC and organization restructuring assignment given to Deloitte etc are few instances that depict problems involved in the coal business. With the passage of the Land Acquisition Bill, it is certain that companies have to fight harder for coal in the country. Adding to these is challenges, is the fact that gas as a clean fuel has lesser complications and adverse effects.
- From an environmental standpoint, the Government should push to purchase RPOs (Renewable Purchase Obligation), so that gas plants keep running and not transform into NPA. When the Southern grid is connected to the national grid in the future, the benefits of RPO will be boosted further as there are only 2 gas based power plants in the southern region now.
As national assets, shutting down gas plants is not a viable option .The energy requirement is bound to increase and with Government scrutiny on gas allotment, there seems to be hope alive as many sectors are dependent on good domestic gas production. India has unique problems requiring unique solutions. With 80% oil requirements already being met by imports and the pressure of a flagging rupee, the situation is desolate, and and all hope for the quick discovery of substantial amount of new gas reserves is hanging in the balance. The situation may become worse with the rupee not doing well, but maybe we can come out of it with a good gas reserves and production. The scenario is ensconced in Eric Bentleys thoughts- If one truly has lost hope, one would not be on hand to say so .
He is currently pursuing MBA in Energy and Infrastructure from School Of Petroleum Management, Pandit Deendayal Petroleum University Gandhinagar, Gujarat. He has completed B.Tech (I.T.) from Jaypee University of Information Technology, H.P. and was engaged with Infosys as Senior Systems Engineer. He believes India is energy scarce country and it needs personnel who can understand the complexity in this secto. A deep research mindset, voracious reading, and ability to simplify things will prove handy and that is where his contributions incline.