Ten stranded gas-based power plants to be revived

The Dollar Business Bureau Ten stranded gas-based power generation plants have put themselves back on the line by bidding in an reverse e-auction process for generating 5.05 billion units of electricity. The power generated will be bought by Discom between June 1, 2015 and September 30, 2015 with support from the government to the tune of Rs 723.00 crore from the Power System Development Fund, said a PIB release. The grid connected gas based power generation capacity in the country is 24,150 MW. Of this, a capacity of 14,305 MW had no supply of domestic gas and is competely stranded. These comprise 29 plants of which 9 plants are yet to be commissioned. All these plants were eligible to participate in the auction process held today. In the auction process, 14 plants with a cumulative installed capacity of 8,109 MW participated in the Technical Bid round and all were declared as Technically Qualified. The auction was meant to determine the plants which were seeking lowest per unit support for sale of power to Discoms, while utilizing fully 10 MMSCMD of imported Regasified Liquified Natural Gas (RLNG). In March 2015, the Government of India approved a major policy intervention to revive and improve the utilization of gas-based power generation units in the country. A decision to this effect was taken in a Cabinet Committee meeting on Economic Affairs, chaired by the Prime Minister, Narendra Modi, on March 24th. To revive the stranded gas-based plants in the country, the government has announced a mechanism where the (RLNG) will be imported and supplied to these plants, boosting the overall power generation in the country. Through this move, 31 gas-based power units in the country with a capacity of 14,000 MW, those have been lying idle due to shortfall in domestic natural gas production, will be allowed to import LNG through e-auctions. The new policy expects all the stakeholders including the Central and State Governments, to sacrifice by way of exemptions from certain applicable taxes and levies on the incremental RLNG being imported. The gas transporters and re-gasification terminals have also agreed to reduce their transportation tariff, marketing margin and re-gasification charges and the power developers were also expected to forego returns on their equity, says the official release. The government’s intervention has arisen in view of the issue where, the supply of domestic gas from KG basin to power plants (set up in large numbers expecting allocations from the KG basin) started declining since 2012 and finally resulting in complete stoppage since March 2013. Of the total 24,150 MW gas grid connected power generation capacity in the country, 14,305 MW has currently no supply of domestic gas and may be considered as stranded and the balance 9,845 MW involving an investment of over Rs 40,000 crore is also working at a sub optimal level with the limited domestic gas availability. However, with the new policy, the electricity generation in the country is expected to grow significantly by around 79 billion units valued at about Rs 42,000 crore. This move will also help in improving the grid stability and safety, besides supporting the renewable balancing power requirements and enabling grid integration of renewable energy. This would also give boost to the country’s gas infrastructure by creating a need for optimal usage of gas pipelines and re-gasification capacities. The intervention resulting in gas-based power generation, also gives boost to the Indian government’s aspiration to scale up renewable generation, as the gas-based power generation is an environment-friendly option compared to that of coal-based power generation. On a whole, the revival of stranded gas-based capacity is expected to fuel the country’s economy by reducing burden on banking sector and restoring the investors’ confidence in power sector.    

May 13, 2015 | 4:57 pm IST.