New and cleaner options may soon replace the role of gas power in meeting peak electricity demand

India’s dependence on gas-based power to meet soaring peak power demand during the hot summer months may decline in the long term, which new information note from the findings of the Institute for Energy Economic and Financial Analysis (IEEFA).

The note pointed out that gas-based power is already an expensive option in the short term without a larger allocation of domestic gas or the option of combining imported liquefied natural gas (LNG) with locally produced fuel for electricity generation units. In the medium term, energy storage options are likely to achieve commercial viability and the capacity to produce 24/7 renewable energy is likely to increase, further reducing the cost competitiveness of gas-generated electricity.

“Gas-fired power plants play a limited role in meeting peak demand, even in the short term. Their role is likely to wane in the coming years as the government begins to consider innovative tenders that will ensure 24/7 availability of renewable energy to facilitate grid integration and enable greater use of renewable energy,” says the author of the note, Purva Jain, Energy Specialist – Consulting gas and international, IEEFA.

“In addition, in the medium and long term, the increase in the commercial viability of batteries and the availability of pumped storage will help eliminate the use of gas,” he adds.

Tenders for grid energy storage systems (ESSs), including pumped hydro and solid and dispatchable renewable energy (FDRE), that provide 24/7 supply are already helping to overcome the variable nature of solar and wind power. Their capacity is likely to increase in the coming years.

Previous report by IEEFA and JMK Research states that FDRE tenders have driven recent growth in the ‘renewables + ESS’ tender segment, with FDRE accounting for 17% of the 69 gigawatts (GW) of renewable energy tenders issued in fiscal year (FY) 2023-24.

The heatwave that has swept across India has reached unprecedented levels, and government data shows immediate respite is unlikely. On May 24, 2024, peak demand exceeded government estimates of 235 GW and reached almost 240 GW.

“To meet the immediate peak power demand, the government is ensuring that all available power plants, including gas-fired power plants that were either underutilized or not operational due to fuel constraints, are brought back into operation,” says Jain.

IEEFA cost analysis shows that even in the short term, the use of gas-based energy to meet peak demand requires the allocation of more domestic gas, while maintaining flexibility in terms of minimum warranty obligation (MGO) for gas consumption to make it profitable.

“If we compare the prices of short-term energy, energy from domestic gas and energy from LNG imports as of April 2023, it is clear that there is a strong case for allocating a limited amount of domestic gas to partially operational gas-fired power plants. enough power to meet peak demand and ancillary services,” says Jain.

“Even a partial allocation of domestic gas can help reduce rates. Tariffs may come down to Rs 5.83 per unit by increasing domestic gas allocation to enable 50% blending with LNG as compared to Rs 13.70 per unit which emerged as the lowest bid for gas power supply using LNG in April 2023.” – he adds.

However, Emerging trends indicate that peak demand hours are shifting to times of day when solar energy can play a more significant role. Peak demand also shifts to months when wind energy is more widely available.

“Therefore, while imported coal and gas-based power may help the government alleviate the energy crisis in the short term, solar, wind and storage will be more viable options in the coming years,” says Jain.

Read the information note: Assessing the role of gas-based energy in meeting India’s peak electricity demand

Contact with the media: Prionka Jha ((email protected)) Tel: +91 9818884854

Author’s contact: Purva Jain ((email protected))

About IEEFA: The Institute for Energy Economics and Financial Analysis (IEEFA) researches issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diversified, sustainable and profitable energy economy. (ieefa.org)