Economics of Gas Based Power

Generation
May 2010
2.
Given the right price, Natural Gas can play a large role in Indias Power Supply
Basket
Fuel Diversification
Fuel Diversification
Indias Power Generation mix is considerably gravitated towards coal based power generation
The current capacity addition underway accentuates this dependence on coal as a generation source
Indias Power Generation mix is considerably gravitated towards coal based power generation
The current capacity addition underway accentuates this dependence on coal as a generation source
Expected Coal Shortages
Expected Coal Shortages
CIL predicts a substantial shortfall in the quantum of its coal production and committed linkages during this
decade
The Production from captive coal blocks is slow to take off
CIL predicts a substantial shortfall in the quantum of its coal production and committed linkages during this
decade
The Production from captive coal blocks is slow to take off
Smaller Gestation Period leading to Faster Capacity Additions
Smaller Gestation Period leading to Faster Capacity Additions
Greenfield LNG Based Power Plants can be set up in a period of 28-30 months
Whereas, other conventional sources of have gestation periods ranging from 48 months-84 months
Greenfield LNG Based Power Plants can be set up in a period of 28-30 months
Whereas, other conventional sources of have gestation periods ranging from 48 months-84 months
Peaking Ability
Peaking Ability
Dedicated Plants operating in Open Cycle in proximity to Load Centers can meet Peak Demand
Dedicated Plants operating in Open Cycle in proximity to Load Centers can meet Peak Demand
Comparatively Clean and Lean Source of Power
Comparatively Clean and Lean Source of Power
About 50% lesser emissions than a coal based station
Land and Water Requirement is also substantially lower
About 50% lesser emissions than a coal based station
Land and Water Requirement is also substantially lower
3.
Current Trends in Capital and Operating Costs
The Capital Cost for a Natural Gas based station in Combined Cycle are in the
range of INR 3.5 Crore/ MW
CERC has notified the Tariff Regulations for control period 2009-14:
The O&M expenses have been fixed as: INR 15.65 Lakh/ MW/ year escalated at 5.72% per
annum
Auxiliary Consumption for Combined Cycle stations has been stipulated as 3% of Energy
Generated and 1% for Open Cycle units
The Station Heat Rate for Advance class turbines range from 1700- 1800 Kcal/
KWh
LNG based Power Stations at Terminals can achieve better operational and
cost parameters due to Cold Energy Utilization
4.
Fixed Cost of Gas based stations are considerably lower than coal based
stations
The Fixed Cost per unit ranges from ~85 paise to 120 paise/ unit and compares
quite favourably to coal based supercritical stations
The levellized fixed cost is ~99 paise per unit vis--vis a levellized fixed cost of nearly 150
paise/ unit for a coal based supercritical station
Fixed Cost/ KWh
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
2
0
1
1
2
0
1
3
2
0
1
5
2
0
1
7
2
0
1
9
2
0
2
1
2
0
2
3
2
0
2
5
2
0
2
7
2
0
2
9
2
0
3
1
2
0
3
3
2
0
3
5
5.
Long Term Tariffs benchmarked with Case-I Winning Bids
2.72
2.88 2.89 2.9
3.27 3.29
0
1
2
3
4
Maharashtra Maharashtra Haryana Haryana Maharashtra Maharashtra
Lanco Emco Adani GMR Indiabulls Adani
R
s
.
/

k
W
h

(
L
e
v
e
l
i
z
e
d
)
For Natural Gas to be competitive in the Long Term Markets, a levellized Gas Price
of USD 7- USD 8 per MMBTU (Delivered) is sustainable for achieving a 16% RoE
The Developer shall also realize incremental revenues from CER benefits
Case-I bids won in
the last 3 years are
in the range of Rs.
2.72/ kWh to Rs.
3.29/ kWh
FY 08 FY 08 FY 08 FY 08 FY 09 FY 09
6.
Merchant Sale Economics
The Short Term tariffs have seen wide fluctuations in their yearly, seasonal and
intra-day patterns
Although a short term window exists for pure merchant operations, in the longer
term an appropriate mix shall have to be evolved by generators to hedge against
demand and price risks
The approx. delivered gas price at various merchant prices can be:
INR 4/ Unit: USD 9/ MMBTU
INR 4.5/ Unit: USD 11.5/ MMBTU
INR 5/ Unit: USD 12/ MMBTU
3.37
4.53
5.61
7.07
6.37
4.7
5.19
7.89
6.91
7.24
4.64
4.69
4.84
3
4
5
6
7
8
2
0
0
7
Q
3
2
0
0
7
Q
4
2
0
0
8
Q
1
2
0
0
8
Q
2
2
0
0
8
Q
3
2
0
0
8
Q
4
2
0
0
9
Q
1
2
0
0
9
Q
2
2
0
0
9
Q
3
2
0
0
9
Q
4
2
0
1
0
Q
1
2
0
1
0
Q
2
2
0
1
0
Q
3
R
s
.

p
e
r

u
n
i
t
7.
0.11
Financing Cost (Rs per
unit of Consumption)
0.46
Operations Cost (Rs
per unit of
Consumption)
3%
Escalation in per unit
power purchase cost
2.96
Power Purchase Cost
(Rs/Unit)
Cost Details Projected ARR of Gujarat
0
10000
20000
30000
40000
50000
60000
70000
80000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year
R
s
.

C
r
o
r
e
s
Power Purchase Cost Operating Cost Financing Cost
3.58 3.55 3.54 3.57 3.60 3.62 3.65 3.68 3.71 3.75
Tariff Under Group Captive
Scheme (Rs/kWh)
3.58 3.51 3.45 3.42 3.39 3.36 3.33 3.29 3.26 3.24
Industrial Tariff (Under
Open access) (Rs/kWh)
2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Particular
Projected HT tariffs at 10% discount
Projected HT tariffs at 10% discount
Note: Cross Subsidy surcharge is not applicable in case of a Group Captive Power Plant.
Accordingly realizations under the Group Captive Scheme are better
Sale to Industrial Consumers Tariffs based on 10% discount to projected HT
Tariffs
8.
Sale to Industrial Consumers Netbacks
9.61
9.95
3.70
3.80
9.40
9.50
9.60
9.70
9.80
9.90
10.00
Sale to Industrial Consumer Captive Sale
3.64
3.66
3.68
3.70
3.72
3.74
3.76
3.78
3.80
3.82
Gas (USD per MMBtu) Power Tariff (Rs. Per kWh)
9.
Comparison with other fuels
1.00
1.47
1.90
1.47
1.98
1.47
0.00
3.70
2.03
0.99
2.37
0.99
2.71
0.99
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Rs/ KWh
Pithead
Coal
Station
Coal
Station-
1000 KM
from Mine
Imported
Coal-
Coast
Hydro Natural
Gas @ $6
Per
MMBTU
Natural
Gas @ $7
Per
MMBTU
Natural
Gas @ $8
Per
MMBTU
Variable Charge Fixed Charge
Natural Gas compares favourably with competing fuels till a price of USD 7- USD 8
per MMBTU delivered
However long term pricing certainty shall be an imperative as the Indian Power
Markets are coal dominated
10.
Given the right price, Natural Gas can play a large role in Indias Power Supply
Basket
Fuel Diversification
Fuel Diversification
Indias Power Generation mix is considerably gravitated towards coal based power generation
The current capacity addition underway accentuates this dependence on coal as a generation source
Indias Power Generation mix is considerably gravitated towards coal based power generation
The current capacity addition underway accentuates this dependence on coal as a generation source
Expected Coal Shortages
Expected Coal Shortages
CIL predicts a substantial shortfall in the quantum of its coal production and committed linkages during this
decade
The Production from captive coal blocks is slow to take off
CIL predicts a substantial shortfall in the quantum of its coal production and committed linkages during this
decade
The Production from captive coal blocks is slow to take off
Smaller Gestation Period leading to Faster Capacity Additions
Smaller Gestation Period leading to Faster Capacity Additions
Greenfield LNG Based Power Plants can be set up in a period of 28-30 months
Whereas, other conventional sources of have gestation periods ranging from 48 months-84 months
Greenfield LNG Based Power Plants can be set up in a period of 28-30 months
Whereas, other conventional sources of have gestation periods ranging from 48 months-84 months
Peaking Ability
Peaking Ability
Dedicated Plants operating in Open Cycle in proximity to Load Centers can meet Peak Demand
Dedicated Plants operating in Open Cycle in proximity to Load Centers can meet Peak Demand
Comparatively Clean and Lean Source of Power
Comparatively Clean and Lean Source of Power
About 50% lesser emissions than a coal based station
Land and Water Requirement is also substantially lower
About 50% lesser emissions than a coal based station
Land and Water Requirement is also substantially lower
11.
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