Gas stations in full throttle as India's power demand touches new record

India's gas refiners bet on rise in LNG demand from power generation sector

Thermal power stations running on gas, which were in a beleaguered state, are generating close to 10 gigawatt (Gw), the highest in several years.

Pushed by the directive of the Ministry of Power, such thermal power stations are running at an optimal rate of at least 50 per cent.

This has pushed up the power sector’s demand for gas, which was muted for the past several years.

Earlier this year, the ministry gave directives to gas-based power stations to “mandatorily” run during summer.

Of the 24,150 Mw of gas grid-connected power generation capacity in the country, 14 Gw has no domestic gas supply and the balance is working at a sub-optimal level due to the limited quantity of domestic gas.

But with the directive, gas units are now running at a plant load factor of 40-50 per cent by sourcing both domestic and imported liquefied natural gas (LNG). India’s largest power generator, NTPC, is leading with close to 3 Gw. Others are Torrent Power, GMR Infra, and state-owned units in Tamil Nadu and Andhra Pradesh. Tamil Nadu is running gas units of 230 Mw and officials say they are dependent on only domestic gas.

An email query sent on Monday to GMR Power, Torrent Power, and Urban Infra remained unanswered till press time.

Unlike coal, a gas-based thermal power station can be switched on and off instantly, thereby helping the grid operators to step up supply when power demand goes up.

“Gas generation with 101 million units (almost 15 Gw in seven hours) is supporting peak-hour shortages where rates on exchanges are hovering between Rs 10 and Rs 13 per unit for high-cost power. Since gas power generation requires minimal rampup or rampdown, and rates are almost at parity with coal-based power, it is the best strategy of the Ministry of Power to keep peak shortages minimum at 0.065 per cent, which used to be 3-4 per cent some six-eight years back,” said Rajiv Goyal, chief executive officer and wholetime director, EKI Power Trading.

Gas demand shoots up

In India’s supply chain of natural gas, gas-based power is now one of the sectors contributing to the rise in demand. For domestic gas producers like Reliance Industries Ltd (RIL), demand from gas-based power plants is providing an added push. In an investor call in April, top executives of RIL noted demand in the Indian market had made a big comeback. 

The executives listed gas-based power demand as one of the sectors that contributed to the revival, others being city gas distribution, fertilisers, and refineries.

For gas suppliers such as GAIL India, demand from India’s gas-based power plants is also changing the market mix. Executives of the company in a recent call with investors noted a change in the sector-wise supply for natural gas.

India’s natural gas demand is expected to grow by 7 per cent in 2024 due to increased industrial and power-sector demand, International Energy Agency (IEA) officials said on Wednesday. Most of the rise in consumption has been attributed to rising demand from fertiliser and power generation. India imported 25 per cent more LNG in the first three months of 2024, as compared to the same period of 2023, the IEA has said.

India relies on imports for up to 50 per cent of its gas demand.

(With inputs from Shine Jacob)