Scorching heat drives India's gas-fired power use to multi-year highs in May - Hindustan Times
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Scorching heat drives India's gas-fired power use to multi-year highs in May

Reuters |
Jun 06, 2024 10:47 AM IST

INDIA-POWER/LNG (PIX):Scorching heat drives India's gas-fired power use to multi-year highs in May

By Sudarshan Varadhan and Sarita Chaganti Singh

Scorching heat drives India's gas-fired power use to multi-year highs in May
Scorching heat drives India's gas-fired power use to multi-year highs in May

NEW DELHI, - Sweltering heat and policy measures are fuelling a surge in the use of gas-fired power in India, with imports of liquefied natural gas forecast to rise sharply over the next two years, industry officials and experts say.

The country's gas-fired power generation doubled in April and May to 8.9 billion kilowatt-hours compared with the same period last year, data from Grid India showed, eating into the share of coal-fuelled electricity for the first time since the COVID-19 pandemic.

More than 75% of India's power generation was from coal in 2023, while gas-fired plants have accounted for only about 2% in recent years, largely because of the high cost of gas relative to coal.

In May, coal's share dipped to 74%, compared with 75.2% during the same month last year, while gas's share nearly doubled to 3.1% from 1.6%.

An emergency clause invoked to force operation of idle gas-fired power plants to avoid power cuts during the 43-day federal elections that ended last week also drove gas usage, industry officials said, as power outages have historically been a key electoral issue.

"The current growth of Indian power demand suggests the rising need for greater availability and flexibility will remain a fixture in coming years," said Joachim Moxon, LNG analyst at ICIS.

LNG IMPORTS TO RISE

India's gas-fired power output is expected to grow by 10.5% in the fiscal year ending in March 2025, following 35% growth the prior year.

To meet that demand, LNG imports by the price-sensitive buyer swelled in May to the highest levels since October 2020, data from analytics firms LSEG and Kpler showed, despite global prices up five-fold from the pandemic-hit lows of 2020.

Demand for LNG in India, the world's fourth-largest importer of the fuel, is set to increase by 19% in 2024, with imports forecast to reach more than 28 million metric tons in 2025, up from 22.1 million tons in 2023, according to ICIS.

"India's LNG imports will continue to be driven higher by the power sector in at least the next two years," said Victor Vanya, director at Indian power analytics firm EMA Solutions.

Industry officials and analysts have argued allocating more domestically produced gas could allow gas-fired generation to better compete with coal, but most local gas has gone to other sectors in recent years.

"The insufficient local gas output is increasingly being used to supply the city gas network and fertiliser companies, and power generators will have to import," said a senior executive at a large Indian gas exchange who declined to be named because he was not authorised to speak to media.

Despite being cheaper, solar and wind are harder to control and forecast than gas, while coal and nuclear power cannot be ramped up or down as quickly in response to sudden demand spurts or dips.

Gas's flexibility and a 2022 federal regulation that provided a policy framework for operating more expensive gas-fired power plants have helped boost the fuel's use, industry officials and experts said.

"Until we have optimal, large-scale battery storage solutions in India, peaking requirements such as ramping up and ramping down quickly will be met by thermal sources including natural gas," said Sadek Wahba, managing partner at Miami-based private equity firm I Squared Capital, which has invested billions of dollars in natural gas and renewables in India.

This article was generated from an automated news agency feed without modifications to text.

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