Goyal, Pradhan step on gas to switch on idle power plants

NEW DELHI: Power minister Piyush Goyal and oil minister Dharmendra Pradhan on Wednesday moved to speed up an action plan to prevent stranded gas-fired generation stations from turning into bad investments by using them as “spinning reserve” for preserving grid health.
“We discussed the problems facing the power sector in its entirety… we are working on a concrete plan to provide adequate power in deficit areas and keep energy costs affordable with sustained policy measures,” Goyal said after the meeting.
The plan is expected to increase generation by 15%, Goyal said without going into the specifics of his discussions with Pradhan. The ministers were assisted by officials of both ministries and executives from state-run transmission utilities.
By all accounts, the basic thrust of the meeting was to pool prices of imported and domestic gas to make fuel affordable for these plants. These plants would then be used as “spinning reserve” to meet peak demand.
Gas-fired plants, unlike coal-based units, can be switched on and off quickly. Operating as spinning reserve would help maintain grid stability at times of demand spike and allow the plants to recover their fixed costs.
According to Association of Power Producers, an umbrella body of private generation companies, viability of 24,149 mw gas-fired generation capacity connected to the grid involving an investment of Rs 1.2 lakh crore is under a cloud due to fuel shortage. About 16,000 mw of such capacity involving Rs 64,000 crore investments is idling.
The problem lies in the shortfall in domestic gas supplies and price of imported gas, which can cost as much as three times the domestic price. Thus electricity generated by using imported fuel becomes unaffordable for state utilities, leaving the power stations idle. Price pooling is expected to bring fuel cost down to a manageable level.
A relief package jointly drafted by the power and oil ministries had suggested — besides gas price pooling — measures such as capping tariff from these plants at Rs 5.50 per unit by using National Clean Energy Fund, accumulated from cess on coal, to subsidize generation from pooled gas.
The measures also suggested pipeline operators such as state-run GAIL and RGTIL reducing transportation tariff by 20% and the former halving marketing margin on supplies made for power generation.
Other measures include giving power sector priority till 2018-19 in allocation of additional gas produced from auctioned fields beyond the current output level.