Peaking gas and power units to run under special scheme next summer

Move aimed at handling peak demand, NTPC-GAIL to ink pact, PowerMin to fund the scheme

In a move aimed at avoiding a deficit in the supply of electricity during the high summer demand months, the Union power ministry is looking to designate 2.5 gigawatts of state-owned thermal power behemoth NTPC as peaking power stations. Under the scheme, gas would be sourced by GAIL Ltd in advance and would be completely paid for, even if left unutilised.

The ministry plans to set up a fund for this scheme, from which it will pay for the unused gas. “Whatever NTPC procures from GAIL would be paid by the company, at the market rates at which GAIL procures. If any of the gas supplied is left unutilised, it will be paid for by the power ministry. This would ensure seamless supply, as and when the gas stations need to jump-start to meet a sudden rise in power demand,” said a senior official.

NTPC has a gas-based power generation capacity of 4 Gw that it runs on its own, and another 2.5 Gw through joint ventures. Confirming the development, senior NTPC executives said this would take care of peak power, especially when coal-based capacity is unable to scale up to meet the surge in demand.

“As is being mulled upon, there wouldn't be any price barriers. The ministry is actively looking at ways to meet peaking power demand and hence gas would be procured at whatever best price GAIL can offer. Both parties have approved this mechanism in principle, and we will comb over the details,” said a senior executive.

The fund would be akin to the last such fund for gas-based units – Power System Development Fund (PSDF) – but the quantum would be restricted to select 2.5 Gw, and would not involve any bidding.

Unlike a coal-based power generation unit, a gas unit can be started and stopped instantly and hence is used to meet sudden peaks in power demand. While coal is a base energy source, hydro, gas and battery storage act as flexible energy sources for balancing demand and supply on the power grid.

During the 2021 summer, several states and generating stations had complained about the shortage of domestic coal supply. Following  a directive of the power ministry, NTPC imported coal to meet the shortfall. According to company officials, it imported 10 million tonnes during the first half of the current financial year.

In an investor concall, the company’s management said the average tariff at NTPC units jumped by around Rs 0.91 per unit. This was passed on to consumers.

Of the 24,150 Mw of gas grid-connected power generation capacity in the country, 14,305 Mw has no domestic gas supply. On this front, an investment of over Rs 65,000 crore is on the verge of becoming a non-performing asset.  The remaining capacity (9,845 Mw), involving an investment of about Rs 40,000 crore, is working at a sub-optimal level, due to the limited quantity of domestic gas in India.

The Centre in 2016 floated a reverse e-auction process for power plants to avail subsidy on the purchase of costly imported Regasified LNG (RLNG). This involved a reverse bid for the subsidy amount to come from PSDF to buy the RLNG.

The scheme was stopped in 2017 only to be restarted in 2019, with twice the fund amount of Rs 1,000 crore under the PSDF. It has not been revised after that, leaving gas based units languishing for want of gas and funding.

Gas-based power generation accounts for six per cent of India’s total installed capacity of 408 Gw.

Power Plan

• Under the new scheme, NTPC will procure gas up to 2.5 Gw from GAIL 
• Ministry plans to set up fund for the scheme, from which it will pay for the unused gas 
• The move will help to cope with the sudden rise in power demand during summer months 
• During the summer of 2021, states complained about domestic coal supply shortage 
• NTPC imported 10 million tonnes of coal in the first half of FY23