Sweltering heat and policy measures are boosting the use of gas energy in India, with imports of liquefied natural gas (LNG) expected to rise sharply over the next two years, according to industry representatives and experts.
According to data from Grid India, gas-fired electricity production doubled in April and May to reach 8.9 billion kilowatt-hours (kWh) compared to the same period last year, reducing the share of electricity generated by gas. coal for the first time since the COVID-19 pandemic.
By 2023, more than 75% of the electricity generated in India came from coal, while gas plants have only accounted for around 2% in recent years, largely due to the high cost of gas relative to coal. .
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In May, the share of coal fell to 74%, compared to 75.2% in the same month last year, while that of gas almost doubled, going from 1.6% to 3.1%.
The emergency clause invoked to force the operation of inactive gas plants in order to avoid electricity cuts during the 43 days of federal elections that concluded last week also boosted the use of gas, according to sector authorities, since the Electricity outages have historically been a key electoral issue.
“The current growth in Indian electricity demand suggests that the growing need for greater (natural gas) availability and flexibility will remain a fixture in the coming years,” said Joachim Moxon, LNG analyst at ICIS.
INCREASE IN LNG IMPORTS
Gas-generated electricity production in India is expected to grow 10.5% in the fiscal year ending March 2025, following 35% growth the previous year.
To meet that demand, LNG imports by the price-sensitive buyer rose in May to the highest levels since October 2020, data from analytics firms LSEG and Kpler showed, even though global prices they quintupled from the lows of 2020, affected by the pandemic.
LNG demand in India, the world’s fourth-largest importer of the fuel, will rise 19% in 2024, with imports forecast to reach more than 28 million metric tons in 2025, up from 22.1 million tons in 2023. , according to ICIS.
“Indian LNG imports will continue to be driven by the energy sector for at least the next two years,” said Victor Vanya, director of Indian energy analysis firm EMA Solutions.
Industry representatives and analysts have argued that allocating more domestically produced gas would allow gas generation to better compete with coal, but most local gas has gone to other sectors in recent years.
“Insufficient local gas production is increasingly being used to supply the city gas grid and fertilizer companies, and electricity generators will have to import,” said a senior executive at a major Indian gas exchange. He declined to give his name because he was not authorized to speak to the media.
Despite being cheaper, solar and wind are harder to control and forecast than gas, while coal and nuclear cannot be ramped up or down as quickly in response to sudden spikes or dips in demand.
The flexibility of gas and a 2022 federal regulation that establishes a policy framework for the operation of more expensive gas power plants have helped boost the use of this fuel, according to experts and industry officials.
“Until we have optimal, large-scale battery storage solutions in India, we will have to rely on thermal sources, including natural gas, to meet rapidly fluctuating energy demands,” explained Sadek Wahba, managing partner at I Square Capital.
This Miami-based firm has invested billions of dollars in natural gas and renewable energy in India.
With information from Reuters
