New Delhi: India’s reliance on gas-based power to meet peak electricity demands is projected to decrease as more sustainable energy solutions like renewables and energy storage gain traction, according to a new briefing note by the Institute for Energy Economics and Financial Analysis (IEEFA). The report comes as India recently experienced unprecedented peak power demands, touching almost 240 gigawatts (GW) on 24 May 2024 due to a severe heatwave.
The briefing highlights the cost inefficiencies of gas-based power in the absence of sufficient domestic gas supplies and the high costs of imported liquefied natural gas (LNG). Purva Jain, IEEFA’s Energy Specialist, notes, “Gas-based power plants have a limited role in meeting peak demand, even in the short term. Their role is likely to diminish in the coming years as the government looks to innovative tendering to ensure round-the-clock availability of renewable energy.”
The government’s strategy includes significant advancements in grid-scale Energy Storage Systems (ESS) and firm and dispatchable renewable energy (FDRE) solutions, which are crucial for managing the variability of solar and wind energy. In the fiscal year 2023-24 alone, FDRE tenders comprised 17% of the 69GW of renewable energy tenders issued, indicating a strong push towards integrating renewable energy into the national grid.
Despite the current reliance on gas to meet immediate power demands, the trend is shifting towards daytime peak demand periods when solar power availability is higher. “To meet the immediate peak power demand, the government is ensuring that all available plants, including those that have been underutilized or non-operational due to fuel constraints, are made operational,” Jain added.
IEEFA’s analysis suggests that allocating more domestic gas to power plants could significantly reduce costs. Jain points out, “Even partial allocation of domestic gas can help lower tariffs to Rs 5.83 per unit, compared to Rs 13.70 per unit, which was the lowest bid for gas-based power supply using LNG in April 2023.”
However, emerging trends indicate that peak demand hours are shifting to the daytime, when solar energy can play a more prominent role. Peak demand is also shifting to the months when wind power is more widely available.
“Therefore, while imported coal and gas-based power can help the government mitigate a power crisis in the short-term, solar, wind and storage are more viable options in the coming years,” added Jain.
