Gas has no guarantee of major Indian generation role
ExxonMobil study sees significant variation in penetration of gas-fired power in 2040
The share of gas in India’s generation mix in the April 2017-March 2018 fiscal year was just 4pc, according to the country’s Central Electricity Authority (CEA), down from a peak of 12pc in FY2009-10.
This leaves substantial potential for gas-for-power demand to grow, even if—as Dimitri Papageorgiou, research associate at ExxonMobil, told Petroleum Economist’s LNG to Power APAC virtual forum in late October—the CEA sees coal declining from its more than 70pc historical share (see Fig. 1) but still retaining a 50pc+ slice of generation requirements.
For one thing, Indian power demand is projected to increase two-and-a-half times from 2017 to 2040, according to the IEA’s New Policies scenario. What is the potential for gas?
Gas out of favour
Current government policy, says Papageorgiou, “appears to encourage renewables growth”. The power sector has been set a target to install 175GW of renewable capacity, including 100GW of solar and 60GW of wind, by 2022. And this goal may be extended to 450GW of non-fossil fuel-fired capacity by 2030. “But current solar and wind capacities are falling short of these targets,” the researcher says.
To get a more informed view of what India’s 2040 mix might look like, ExxonMobil, together with collaborators at the Massachusetts Institute of Technology and India-based thinktank the Council on Energy, Environment and Water, built a model based on three economic parameters: the future cost of gas, the capex cost of variable renewable electricity (VRE) and the cost of storage (see Fig. 2).
Then it ran the model under three policy alternatives: no limit on CO₂ emissions, a moderate limit and a much stricter limit. The results show the vital importance of Indian energy policy in determining the shape of the future energy mix:
- Under no limit, coal maintains its dominant role in the Indian electricity sector, contributing 61-80pc of all electricity generated in 2040. VRE—hydro/solar/wind—is projected to contribute 10-32pc, while gas-fired generation would play a minor role.
- With a moderate limit, coal generation is in a range of 26-35pc of total generation—still leaving the fuel near its 2019-20 absolute levels. VRE resources can still reach up to 55pc of total generation, while gas generation ranges from 2-27pc, depending on the gas price and the cost of VRE and energy storage. Coal plays a role in providing flexibility.
- Under a more stringent limit, gas generation plays a more prominent role (c.20-40pc), while the contribution of coal generation is less than 10pc. VRE contributes as much as 65pc of total generation. Gas and energy storage—but not coal—provide flexibility, ramping and reserve capacity.
In all cases, nuclear contributes c.6pc of total generation. Other key findings of the modelling include that VRE generation can increase on economic grounds alone, regardless of the stringency or not of emissions limits.
And it also shows that a carbon-constraint policy is more cost efficient than a renewable portfolio standard policy—which sets a minimum requirement for annual dispatch from renewable sources—when pursuing a carbon reduction goal.
For would-be suppliers of gas to India, the difference between 2pc of the 2040 mix and 40pc is a difference between fuelling c.65TWh, less than in the early 2010s, or fuelling c.1,300TWh, roughly India’s total 2017-18 output. As such, India’s policy decisions are worth watching.
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