The government, which has offered subsidy to salvage stranded gas plants, has decided to allow developers without power purchase agreements (PPAs) to bid for the same.
The scheme is available to plants with a total capacity of 24,500 MW which includes 14,305 MW of stranded capacity and 9,845 MW capacity that is running on domestic gas. Out of the total capacity eligible for this scheme, nearly one-third (8,000 MW) does not have agreements (PPAs) with discoms.
There is an apprehension among industry watchers that while allowing plants sans PPAs to participate in auction could intensify competition, it could deprive those with PPAs of the much-needed fuel. The other concern is that even if a plant without any prior PPA wins the auction for government support on using imported gas, they may find it challenging to find buyers for electricity at the stipulated rate of Rs 5.50/unit.
The government has recently announced a transient mechanism where gas-based power plants can run at 30% plant load factor with assured supply of gas, but subject to a tariff cap of Rs 5.50 per unit. The operators of gas-based power units will get monetary support from the government for a period of one year so as to be able to service their debt while forgoing their return on equity. In a reverse bidding method, the plant willing to take the lowest amount of support from the government’s power system development fund (PSDF) to maintain tariff at Rs 5.50 will be given imported gas. “The bidding should be ideally limited to projects with long-term PPA with distribution utilities as public money is involved in the form of taxes foregone and subsidy, but short term contracts could be permitted to meet demand spurts and offer supply reliability to urban and industrial areas that could be levied the additional charge,” Kameswara Rao, Leader, mining & utility told FE.
Ashok Khurana, director general of association of power producers said that given the constraints of domestic gas supply, this was the best scheme to jump-start the process. He, however, added that a PPA regime that is congruent with the scheme will need to be developed over time to put all the plants on an even keel.
The stranded gas-based power developers located in Andhra Pradesh are likely to face a stern challenge in finding buyers for their produce. The state houses nearly one-fourth (6,000 MW) of stranded gas-based power plants but it doesn’t face any power deficit as per the national load despatch centre report for the beginning of April. This implies that if the entire capacity capacity is utilised at 30% plant load factor generating 1800 MW, it wouldn’t be consumed in the state itself.
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