Power sector has received much attention in recent times due to India’s rapid economic growth, which in turn requires infrastructure to support the high growth rate. As power is a vital infrastructure for the growth of any economy, demand from across the sectors has grown exponentially resulting in demand-supply imbalance.
At present, India has a total of 1,46,750 MW of power generation installed capacity. During 2007-08, the total energy supply was 664.6 billion units (BU) against the demand of 737 BU, resulting in 10% deficit in total demand-supply of energy in the country. Peak hour energy shortages amounted as high as 14% during the year.
As a result of increasing power shortages, consumers are forced to generate their energy requirements on their own. Diesel based power generators have been the most preferred mode of electricity generation over the years. Currently, the total installed capacity of diesel-fired generators used by residential and commercial sector is estimated to be around 15,000 MW, which is nearly 10% of the total installed capacity of the country. Exhaustive use of diesel for power generation has pushed the demand for diesel in recent times. During the first quarter of FY2008-09, power sector has witnessed increase of 152% in the demand of diesel, to a total requirement of nearly 53,000 tonnes. However, limited domestic availability of oil coupled with growing environmental concerns and rising petroleum product prices have forced the consumers to look for alternative for diesel.
With the initiation of gas market and expansion of gas distribution infrastructure in the country, natural gas has the potential to change the way consumers generate electricity during peak hours. Consumers also have an alternative fuel for electricity generation, which is much cheaper as compared to diesel. According to CRISIL Research Power Annual Review, the cost of electricity generation for 1 MW or above capacity units, natural gas is almost 57% cheaper and it costs Rs 2.1 per unit as compared to Rs 4.9 per unit from diesel.
The total capacity of bigger diesel-fired units, (i.e. 1 MW or above) amounts to 12,000 MW in the country. Assuming that these units are operational at 50% plant-load factor, the total energy generation would be over 52 BU with aggregate cost of around 25,750 crore. If the same amount of electricity is being generated from natural, the total cost of generation would be around Rs 11,000 crore, resulting in savings of Rs 14,750 crore thus making natural gas an undisputed choice over diesel.
Even for less than 1 MW diesel-fired units, which are mainly used by households, offices and malls, the cost of power generation from natural gas would be 75 % cheaper (Rs 2.5-3 per unit) as compared to Rs 11-12 per unit from diesel presently. Assuming that this capacity operates at 10% plant load factor to supply the peak demand, the total energy generation would be around 2.6 BU with the total cost of Rs 2,890 crore, whereas, same amount of electricity generation would cost around 657 crore from natural gas at Rs 2.5-3 per unit. Thus, use of natural gas will save as much as Rs 2,233 crore. The total savings on account of substitution of diesel with natural gas for power generation would be around Rs 17,000 crore.
Moreover, replacement of diesel with natural gas for electricity generation also becomes imperative in the wake of burgeoning losses on sale of diesel every year. The total under-recovery on the sale of diesel during 2007-08 amounted to Rs 35,000 crores while during FY2008-09 diesel subsidies is estimated to be around 95,000 crore. Considering the fact that almost 15% of diesel is being used for power generation out of the total diesel consumed in the country, substitution of diesel with natural gas can save another Rs 14,250 crore approximately from the outgoing subsidy. Cumulatively, the total savings by utilizing natural gas instead of diesel can amount to Rs 31,250 crore, which can be utilized for adding another 9,000 MW gas based power generation capacity or two ultra-mega power projects with a total capacity of 8,000 MW.
Apart from cost benefits, natural gas can be easily transported to the point of consumption whether houses or small industries through pipes and does not need to be stored. Unlike liquid fuels, natural gas is environment friendly product and does not either affects the health or creates damage to house or equipments. Natural gas is already powering gas-fired turbines in the country for large scale generation and posses the potential to replace the diesel for peak hour energy demand in distributed power system through micro gas turbines.
Currently, the country produces 88 MMSCMD of gas domestically. Gas supply scenario is likely to change dramatically with the commencement of production of gas from RIL’s KG Basin. The gigantic field of RIL is likely to produce 40 million standard cubic metre of gas every day (MMSCMD) initially, which is expected to jump to 80 MMSCMD during the peak production. Additionally, major discoveries by GSPC and ONGC have also boosted the domestic supply prospects of natural gas. In addition to this, the LNG liquefication capacity in the country, which stands at 7.5 MMTPA right now, is likely to jump to 27.5 MMTPA (equivalent to 110 million standard cubic metres per day) during next five years. Supply from both the source can fuel the gas requirement for substituting diesel for power generation.
The use of natural gas, in place of diesel can positive environmental effects. Apart from that, it can have large monetary advantages. The money this saved could be further used for adding extra base load capacities, which can help the country bridge the demand-supply mismatch to some extent.
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At present, India has a total of 1,46,750 MW of power generation installed capacity. During 2007-08, the total energy supply was 664.6 billion units (BU) against the demand of 737 BU, resulting in 10% deficit in total demand-supply of energy in the country. Peak hour energy shortages amounted as high as 14% during the year.
As a result of increasing power shortages, consumers are forced to generate their energy requirements on their own. Diesel based power generators have been the most preferred mode of electricity generation over the years. Currently, the total installed capacity of diesel-fired generators used by residential and commercial sector is estimated to be around 15,000 MW, which is nearly 10% of the total installed capacity of the country. Exhaustive use of diesel for power generation has pushed the demand for diesel in recent times. During the first quarter of FY2008-09, power sector has witnessed increase of 152% in the demand of diesel, to a total requirement of nearly 53,000 tonnes. However, limited domestic availability of oil coupled with growing environmental concerns and rising petroleum product prices have forced the consumers to look for alternative for diesel.
With the initiation of gas market and expansion of gas distribution infrastructure in the country, natural gas has the potential to change the way consumers generate electricity during peak hours. Consumers also have an alternative fuel for electricity generation, which is much cheaper as compared to diesel. According to CRISIL Research Power Annual Review, the cost of electricity generation for 1 MW or above capacity units, natural gas is almost 57% cheaper and it costs Rs 2.1 per unit as compared to Rs 4.9 per unit from diesel.
The total capacity of bigger diesel-fired units, (i.e. 1 MW or above) amounts to 12,000 MW in the country. Assuming that these units are operational at 50% plant-load factor, the total energy generation would be over 52 BU with aggregate cost of around 25,750 crore. If the same amount of electricity is being generated from natural, the total cost of generation would be around Rs 11,000 crore, resulting in savings of Rs 14,750 crore thus making natural gas an undisputed choice over diesel.
Even for less than 1 MW diesel-fired units, which are mainly used by households, offices and malls, the cost of power generation from natural gas would be 75 % cheaper (Rs 2.5-3 per unit) as compared to Rs 11-12 per unit from diesel presently. Assuming that this capacity operates at 10% plant load factor to supply the peak demand, the total energy generation would be around 2.6 BU with the total cost of Rs 2,890 crore, whereas, same amount of electricity generation would cost around 657 crore from natural gas at Rs 2.5-3 per unit. Thus, use of natural gas will save as much as Rs 2,233 crore. The total savings on account of substitution of diesel with natural gas for power generation would be around Rs 17,000 crore.
Moreover, replacement of diesel with natural gas for electricity generation also becomes imperative in the wake of burgeoning losses on sale of diesel every year. The total under-recovery on the sale of diesel during 2007-08 amounted to Rs 35,000 crores while during FY2008-09 diesel subsidies is estimated to be around 95,000 crore. Considering the fact that almost 15% of diesel is being used for power generation out of the total diesel consumed in the country, substitution of diesel with natural gas can save another Rs 14,250 crore approximately from the outgoing subsidy. Cumulatively, the total savings by utilizing natural gas instead of diesel can amount to Rs 31,250 crore, which can be utilized for adding another 9,000 MW gas based power generation capacity or two ultra-mega power projects with a total capacity of 8,000 MW.
Apart from cost benefits, natural gas can be easily transported to the point of consumption whether houses or small industries through pipes and does not need to be stored. Unlike liquid fuels, natural gas is environment friendly product and does not either affects the health or creates damage to house or equipments. Natural gas is already powering gas-fired turbines in the country for large scale generation and posses the potential to replace the diesel for peak hour energy demand in distributed power system through micro gas turbines.
Currently, the country produces 88 MMSCMD of gas domestically. Gas supply scenario is likely to change dramatically with the commencement of production of gas from RIL’s KG Basin. The gigantic field of RIL is likely to produce 40 million standard cubic metre of gas every day (MMSCMD) initially, which is expected to jump to 80 MMSCMD during the peak production. Additionally, major discoveries by GSPC and ONGC have also boosted the domestic supply prospects of natural gas. In addition to this, the LNG liquefication capacity in the country, which stands at 7.5 MMTPA right now, is likely to jump to 27.5 MMTPA (equivalent to 110 million standard cubic metres per day) during next five years. Supply from both the source can fuel the gas requirement for substituting diesel for power generation.
The use of natural gas, in place of diesel can positive environmental effects. Apart from that, it can have large monetary advantages. The money this saved could be further used for adding extra base load capacities, which can help the country bridge the demand-supply mismatch to some extent.
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