Economics of Gas Based Power
Generation
May 2010
Given the right price, Natural Gas can play a large role in India’s Power Supply
Basket
Fuel
Fuel Diversification
Diversification
India’s
India’s Power
Power Generation
Generationmix
mix is
is considerably
considerably gravitated
gravitatedtowards
towards coal
coal based
basedpower
power generation
generation
The
The current
currentcapacity
capacityaddition
additionunderway
underway accentuates
accentuates this
this dependence
dependence on
oncoal
coalas
asaageneration
generationsource
source
Expected
ExpectedCoal
Coal Shortages
Shortages
CIL
CILpredicts
predictsaa substantial
substantial shortfall
shortfall in
inthe
the quantum
quantum of
of its
its coal
coal production
productionand
andcommitted
committedlinkages
linkages during
duringthis
this
decade
decade
The
The Production
Production from
from captive
captivecoal
coal blocks
blocks is
is slow
slow to
totake
take off
off
Smaller
Smaller Gestation
GestationPeriod
Periodleading
leadingto
toFaster
FasterCapacity
Capacity Additions
Additions
Greenfield
GreenfieldLNG
LNG Based
BasedPower
Power Plants
Plantscan
canbe
be set
setup
upin
inaa period
periodof
of28-30
28-30months
months
Whereas,
other
conventional
sources
of
have
gestation
periods
ranging
Whereas, other conventional sources of have gestation periods rangingfrom
from 48
48 months-84
months-84 months
months
Peaking
PeakingAbility
Ability
Dedicated
DedicatedPlants
Plants operating
operatingin
inOpen
OpenCycle
Cyclein
inproximity
proximity to
toLoad
LoadCenters
Centerscan
canmeet
meetPeak
Peak Demand
Demand
Comparatively
Comparatively Clean
Cleanand
andLean
LeanSource
Source of
ofPower
Power
About
About50%
50% lesser
lesser emissions
emissions than
thanaacoal
coal based
basedstation
station
Land
Landand
and Water
Water Requirement
Requirementis
is also
alsosubstantially
substantially lower
lower
2.
Current Trends in Capital and Operating Costs
3.
•
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
Fixed Cost of Gas based stations are considerably lower than coal based
stations
Fixed Cost/ KWh
1.40
1.20
1.00
0.80
0.60
0.40
0.20
•
20
35
20
33
20
31
20
29
20
27
20
25
20
23
20
21
20
19
20
17
20
15
The Fixed Cost per unit ranges from ~85 paise to 120 paise/ unit and compares
quite favourably to coal based supercritical stations
–
4.
20
13
20
11
0.00
The levellized fixed cost is ~99 paise per unit vis-à-vis a levellized fixed cost of nearly 150
paise/ unit for a coal based supercritical station
Long Term – Tariffs benchmarked with Case-I Winning Bids
4
Rs./ kW h (Leveliz ed )
3.27
3
2.72
2.88
2.89
3.29
2.9
Case-I bids won in
the last 3 years are
in the range of Rs.
2.72/ kWh to Rs.
3.29/ kWh
2
1
0
FY 08
FY 08
FY 08
FY 08
FY 09
FY 09
Maharashtra
Maharashtra
Haryana
Haryana
Maharashtra
Maharashtra
Lanco
Emco
Adani
GMR
Indiabulls
Adani
•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
5.
Merchant Sale Economics
7.89
8
7.24
7.07
7
Rs. per unit
6.91
6.37
6
5.61
4.84
5
5.19
4.64
4
4.7
4.53
4.69
3.37
20
10
Q
3
20
10
Q
2
20
10
Q
1
20
09
Q
4
20
09
Q
3
20
09
Q
2
20
09
Q
1
20
08
Q
4
20
08
Q
3
20
08
Q
2
20
08
Q
1
20
07
Q
4
20
07
Q
3
3
•
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:
6.
–
INR 4/ Unit: USD 9/ MMBTU
–
INR 4.5/ Unit: USD 11.5/ MMBTU
–
INR 5/ Unit: USD 12/ MMBTU
Sale to Industrial Consumers – Tariffs based on 10% discount to projected HT
Tariffs
Cost Details
Projected ARR of Gujarat
80000
Power Purchase Cost
(Rs/Unit)
70000
2.96
Rs. Crores
Escalation in per unit
power purchase cost
60000
3%
Operations Cost (Rs
per unit of
Consumption)
50000
40000
30000
20000
10000
0.46
Financing Cost (Rs per
unit of Consumption)
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Year
0.11
Pow er Purchase Cost
Operating Cost
Financing Cost
Projected
Projected HT
HT tariffs
tariffs at
at 10%
10% discount
discount
Particular
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Industrial Tariff (Under
Open access) (Rs/kWh)
3.24
3.26
3.29
3.33
3.36
3.39
3.42
3.45
3.51
3.58
Tariff Under Group Captive
Scheme (Rs/kWh)
3.75
3.71
3.68
3.65
3.62
3.60
3.57
3.54
3.55
3.58
Note: Cross Subsidy surcharge is not applicable in case of a Group Captive Power Plant.
Accordingly realizations under the Group Captive Scheme are better
7.
Sale to Industrial Consumers – Netbacks
Gas (USD per MMBtu)
Power Tariff (Rs. Per kWh)
3.80
10.00
3.82
3.80
9.90
3.78
9.80
3.76
3.74
9.70
3.70
9.95
9.60
3.72
3.70
3.68
9.50
9.61
3.66
9.40
3.64
Sale to Industrial Consumer
8.
Captive Sale
Comparison with other fuels
4.00
3.50
3.00
2.50
Rs/ KWh 2.00
1.50
1.00
0.50
0.00
1.47
1.47
0.99
0.99
0.99
3.70
1.47
1.90
2.03
1.98
2.37
2.71
1.00
0.00
Pithead
Coal
Imported
Coal
StationCoalStation 1000 KM Coast
from Mine
Variable Charge
Hydro
Natural Natural Natural
Gas @ $6Gas @ $7Gas @ $8
Per
Per
Per
MMBTU MMBTU MMBTU
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
9.
Given the right price, Natural Gas can play a large role in India’s Power Supply
Basket
Fuel
Fuel Diversification
Diversification
India’s
India’s Power
Power Generation
Generationmix
mix is
is considerably
considerably gravitated
gravitatedtowards
towards coal
coal based
basedpower
power generation
generation
The
The current
currentcapacity
capacityaddition
additionunderway
underway accentuates
accentuates this
this dependence
dependence on
oncoal
coalas
asaageneration
generationsource
source
Expected
ExpectedCoal
Coal Shortages
Shortages
CIL
CILpredicts
predictsaa substantial
substantial shortfall
shortfall in
inthe
the quantum
quantum of
of its
its coal
coal production
productionand
andcommitted
committedlinkages
linkages during
duringthis
this
decade
decade
The
The Production
Production from
from captive
captivecoal
coal blocks
blocks is
is slow
slow to
totake
take off
off
Smaller
Smaller Gestation
GestationPeriod
Periodleading
leadingto
toFaster
FasterCapacity
Capacity Additions
Additions
Greenfield
GreenfieldLNG
LNG Based
BasedPower
Power Plants
Plantscan
canbe
be set
setup
upin
inaa period
periodof
of28-30
28-30months
months
Whereas,
other
conventional
sources
of
have
gestation
periods
ranging
Whereas, other conventional sources of have gestation periods rangingfrom
from 48
48 months-84
months-84 months
months
Peaking
PeakingAbility
Ability
Dedicated
DedicatedPlants
Plants operating
operatingin
inOpen
OpenCycle
Cyclein
inproximity
proximity to
toLoad
LoadCenters
Centerscan
canmeet
meetPeak
Peak Demand
Demand
Comparatively
Comparatively Clean
Cleanand
andLean
LeanSource
Source of
ofPower
Power
About
About50%
50% lesser
lesser emissions
emissions than
thanaacoal
coal based
basedstation
station
Land
Landand
and Water
Water Requirement
Requirementis
is also
alsosubstantially
substantially lower
lower
10.
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A Subsidiary of CRISIL Limited, a Standard & Poor’s company
11.
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