Page 5 - AsianOil Week 33

AsianOil SOUTH ASIA AsianOil
While the company’s efforts are certainly laudable, and will help reduce a reliance on LPG for cooking and heating, the investment roadmap highlights a lack of focus on replacing coal with gas in power generation. e problem for the cleaner burning fuel lies in how much cheaper coal is.
India set the price of domestic gas production at $3.69 per per million British thermal units ($102.07 per 1,000 cubic metres) from April 1, while S&P Global Platts has calculated that the average price of coal for the rst seven months was $2.75 per mmBtu ($76.07 per 1,000 cubic metres).
King coal
India has an abundance of coal, with extensive deposits situated in the north-east of the coun- try. e fuel provides half of India’s commercial primary energy and is the dominant feedstock for power generators.
US think-tank the Brookings Institution released a report on the country’s power sector earlier this year and predicted that coal would remain the dominant fuel up to and beyond 2030 owing to its cost advantages.
The Indian power system’s built-in ineffi- ciency and rigidity make any changes to the feedstock mix a challenge. e report noted that state-level power distributors buy electricity from generators, predominantly through power purchase agreements (PPAs), which treat all power the same regardless of source. at power is then sold to end-users at regulated prices, forc- ing distributors to sell below break-even prices and reducing their ability to reinvest in more sophisticated transmission technologies.
More expensive feedstocks such as gas clearly leave the entire supply chain at a disad- vantage. To highlight the issues of the power system, even newer, more e cient coal- red TPPs are likely to be less competitive, the Brookings Institution said. is is either owing to a lack of PPAs or because they are located further from coal mines and are squeezed by the country’s logistical bottlenecks. For exam- ple, TPPs in the south and west of the coun- try have opted to import coal from Indonesia rather than transport supplies from the north- west via the country’s ageing rail network.
ese issues have seen critics call for greater support for ultra-supercritical coal- red TPPs, which have a thermal e ciency levels of 45% or higher, to replace the 30%-e cient conventional sub-critical TPPs.
With such a fractured approach to read- ily available coal, it is hard to anticipate more
expensive and less accessible gas playing a core role in any government plan for the power sector.
Out of gas
National gas production is in decline, driving up a reliance on imports. Output peaked at 47.4bn cubic metres in 2010, before falling to 27.5 bcm in 2018, according to BP’s Statistical Review of World Energy 2019. Consumption, in turn, peaked at 60.3 bcm in 2011 before falling to 47.8 bcm in 2015.
While gas use rebounded to 58.1 bcm in 2018, it came on the back of rising LNG imports. Foreign supplies now meet more than half of the country’s demand. ese supplies are far more expensive than coal, however, with Platts calcu- lating that the average price for LNG imports this year has been around $7.77 per mmBtu ($214.92 per 1,000 cubic metres).
India’s gas- red TPPs have been hit by declin- ing local production. At the end of 2018, more than half of the country’s 24.87 GW of installed gas- red power generation capacity reportedly lay idle owing to a lack of a ordable feedstock.
At the start of this year, the Parliamentary Standing Committee on Energy released a report blaming the government’s short-sighted approach to the upstream as the root cause of these shutdowns. It said gas-fired generation capacity had been built with the assumption that supplies would increase from the o shore Krishna-Godavari D6 (KG-D6) eld. e eld’s operator, Reliance Industries Ltd (RIL), encoun- tered technical di culties at the eld and pro- duction has declined steeply.
e panel also criticised the government’s decisions in 2013 and 2014 to prioritise the sup- ply of gas to the transport industry over power plants and warned that the plants, in which more than $7bn had been invested, were on the verge of becoming non-performing assets (NPAs).
Gas is widely touted as the “transition fuel” of choice, able to help economies move beyond coal and crude oil to a cleaner energy mix led by renewables and nuclear. Preventing India in participating in that vision is the government’s slow pace of power sector reforms and coal’s clear economic advantages.
Renewable energy will eventual replace older coal- red TPPs, but the country needs reliable baseload and intermittent power supplies in the near to mid-term. With few e orts being made to encourage a switch from less-e cient coal plants to ultra-supercritical TPPs, let alone to gas, it is hard to see how India will be able to reduce its reliance on coal.v
Week 33 21•August•2019 w w w . N E W S B A S E . c o m P5