India’s Torrent Power to supply gas for peak summer

Market: Electricity, Natural gas
04/03/24

India's private-sector Torrent Power is set to supply electricity from a gas-fired power plant to a unit of state-owned NTPC to meet peak power demand during summer, which will boost use of imported LNG.

Torrent won a competitive bid to supply a minimum of 388mn KWh from a contracted capacity of 770MW, as per the agreement with NTPC Vidyut Vyapar Nigam (NVVN) on 1 March. Torrent operates a 1200MW plant in Dahej on India's west coast.

The supply of power will start from 16 March and continue till 30 June, a period the government regards as a high-demand phase. Supply could be extended until 15 July, Torrent Power said.

The award will increase imports of LNG as India does not have enough domestic gas to supply power plants. The government has been prioritising domestic gas supplies for the city gas distribution network and the fertilizer sector over the past year.

India's LNG imports for the power sector more than doubled on the year to 2.23bn m³ during April 2023-January 2024, oil ministry data show. India's power demand is typically high during summer and the post-monsoon period.

India's peak electricity demand is likely to touch 256.5GW in 2024 from a record 243GW in 2023, according to government estimates.

The government has allowed NVVN to sell the procured gas-based power supplied by Torrent on the energy exchange to cover higher generation costs.

Delhi had first introduced the scheme of harnessing gas-based power generation to overcome the country's rising power demand in 2023. It had approved a mechanism to operate around 5000MW of NTPC's gas-based capacity during summer 2023 and also tendered to procure another 4,000MW of power from gas-based capacity (other than NTPC plants). Torrent Power won the bids for both 2023 and 2024.

Torrent Power will increase capacity utilisation at its plants to meet peak power demand this year.

Torrent Power has pegged the minimum revenue at 4.4bn rupees ($53mn) for the minimum quantity sold. NVVN will therefore have to sell the power for Rs11.3/KWh on the exchange to reach breakeven, according to Argus calculations.

India's power demand began surging since 2022 with day-ahead power tariffs in summer ranging from Rs10/Kwh to as high as Rs19/Kwh on the Indian Energy Exchange, as the Indian economy recovered rapidly following the pandemic.

But tariffs moderated last year when more electricity was available for sale. Tariffs rose to a peak of Rs9/Kwh in March, and averaged around Rs5/Kwh for the entire month.

Prices fell in May but a hotter-than-expected summer sent the average higher to Rs7/Kwh in August 2023.

The average tariff in February 2024 was close to Rs5/Kwh, compared with Rs6/Kwh in January. A hotter-than expected summer this year will also likely send tariffs higher.

By Rituparna Ghosh

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