Special tariff likely to attract $20-25 billion additional investments over the next five years in natural gas-based power generation

IN what may open the doors for $20-25-billion additional investments over the next five years in natural gas-based power generation, the electricity watchdogiscomingoutwith a special tariff dispensation for peaking power plants, reports Noor Mohammad inNewDelhi. "We are finalising the tariff norms for peaking power plants and may notify these in a week or so," Central Electricity Regulatory Commission (CERC) chairman Pramod Deo said. The projects will be allocated through tariffbased bidding, he added.

IndianOil, ONGC, BPCL, GAIL, NTPC and RIL are amongcompanieshavingaccess to domestic or imported natural gas. They are likely to scramble to tap the opportunity that the new regulatory regime would open. The move is line with the advice of a McKinsey study commissionedbytheCentre.

Higher rates for peaking power to give open cycle gas-based plants a leg up

IN what may open the doors for $20-25 billion additional investments over the next five years in natural gas-based power generation, the electricity watchdog is coming out with a special tariff dispensation for peaking power plants.

"We are finalising the tariff norms for peaking power plantsandmaynotifytheseina week or so," the Central Electricity Regulatory Commission(CERC)chairmanPramod Deo told FE. The projects will be allocated through tariffbased bidding, he added.

Peakingpoweristheelectricity supplied to the Grid when thereismaximumloadonitand the risk of collapse is higher.

Open cycle natural gas-based power plant is the most reliable source to meet peaking power requirements as it is easier to switch it on and ramp up generation quickly . The existing gasfired power plants operate in closedcyclemode.Thisfuel-efficient technology is not suitable for peaking power due to the lack of operational flexibility which open cycle plants offer.

IndianOil, ONGC, BPCL, GAIL, NTPC and Reliance Industries are among companies whichhaveaccesstodomesticor imported natural gas. They are likelytoscrambletotapthebusiness opportunity that the new regulatoryregimewouldopen. At present, coal-based or other baseline power plants are required to reduce generation when electricity demand drops.

When electricity demand increases,suchplantslacktheflexibilitytoquicklystepupgeneration to meet the extra demand.

Thatposesabigconstrainttooptimising returns on investmentsmadeinsuchplants.

Peaking power plants will have higher tariffs compared to generatingstationsusedtomeet baseline power requirement as theyaremeanttooperateduring peak hours only . They will supply power under long-term powerpurchaseagreement.

The CERC move is in line withtherecommendationmade inarecentMcKinseystudycom missionedbythegovernment.

India's peaking power shortage is estimated at 18,000 -20,000 mw, or 10-12% of the total installed capacity . This gap could widen to 25% by March 2017, as per McKinsey's projection. The global researchfirmsuggestedthatIndia increase share of natural gasfiredpowergenerationcapacity to overcome the growing shortageof peakingpower.

" In the coming years, India will need 25,000-30,000 mw capacity dedicated to meeting peaking power requirement," Wartsila India managing director Rakesh Sarin said."The industryiskeen toinvestindeveloping peaking power generation capacity ," he said.