Over the past decade, India has shown a marked improvement in the power sector, with the installed electricity generation capacity reaching about 370 GW, per capita energy consumption touching 1,208 kWh in 2020, and large-scale adoption of renewable energy pushing cumulative wind and solar capacities to about 87 GW. With the goal of achieving 450 GW of renewable capacity by 2030, the Government of India is working aggressively to transform the country into a manufacturing hub in the renewable energy sector and creating significant investment opportunities of the level of $20 billion per year. These ambitious targets are achievable, considering India’s solid inherent growth drivers. The country is pegged to become the world’s third-largest economy by 2030, according to a recently released study by the Centre for Economics and Business Research, a UK-based think tank.
Owing to its population growth, infrastructure development potential and future power demand, India will be vital for the global energy markets. Notably, the Government of India is bringing progressive reforms to upgrade the power sector, such as establishing one national grid, making efforts to implement performance-based metrics while bailing out the already stressed discoms on a need basis under the Ujwal Discom Assurance Yojana, floating innovative round-the-clock (RTC) tenders via the Solar Energy Corporation of India to further streamline solar power tariffs and encourage the adoption of hybrid generation models, broadening the gas pipeline network, improving the gas infrastructure across the nation, and improving the functionality of the real-time energy markets. Recently, India launched the Green Term Ahead Market, which will reduce the burden on renewable energy-rich states and incentivise them to develop their renewable energy capacity beyond their renewable purchase obligations. The country also launched the India Gas Exchange to facilitate transparent price discovery in natural gas and augment the share of natural gas in India’s energy basket. The country is also moving ahead with the adoption of digital technologies such as smart metering and artificial intelligence-enabled predictive analytics, thus helping both utilities and discoms to work in tandem to meet the fluctuating power demand.
The above attributes and mechanisms constitute the must-haves in the power sector, forming a robust baseline to support future growth. Against this backdrop, it is also important to evaluate the implications of the power sector’s increasing dependence on variable renewable energy sources, and think of technology options that can improve the flexibility and reliability of the system.
Moving towards resilience
The International Energy Agency (IEA) anticipates that India’s installed power capacity will rise to 1,500 GW by 2040. Holistically speaking, if we think about future investments in the power sector and India’s commitment to curbing climate change, it is a no-brainer that a significant proportion of this power capacity might come from renewables. To achieve and manage such an enormous scale of intermittent energy at the grid level requires super-resilient infrastructure and a framework that can secure the investments and efforts required.
According to the IEA, wind and solar expansion are expected to add 74 per cent of net new generation capacity globally by 2040. Such a scenario will certainly have its own nuances. Let us consider a couple of global examples. In December 2020, Britain saw the first ever coal-free Christmas day, with zero-carbon sources delivering over half of the country’s power. However, the National Grid had to issue an Electricity Margin Notice (EMN) to send a signal to the market about the tightness in supply. EMNs are issued whenever the margins are low and the market needs to react quickly to provide baseload power capacity in order to avoid any unplanned outage. The UK is becoming increasingly reliant on wind power and is building the world’s largest wind farm.
In California, USA, the reduced electricity demand during 2020, the year of the Covid-19 pandemic, led to a record curtailment of the available wind and solar power connected to the state’s primary transmission grid. There was 66 per cent more curtailment than in 2019 and 246 per cent more than in 2018, according to estimates. Such trends prove to be highly inefficient and costly for grid operators and create a tremendous amount of risk and uncertainty for developers, as they have to plan while being cognisant of the fact that a significant part of their output will be curtailed.
As per the Government of India’s projections, renewable energy curtailment would be about 27 per cent at the point when renewable energy installed capacity reaches 175 GW (by 2022) and about 50 per cent when it reaches 450 GW, adding to power generators’ losses. Hence, the future grid will need more despatchable synchronous generation as spinning reserve to provide load following and frequency response services. What is required is independent generation capacity that can quickly deliver electricity to the grid in order to keep it in balance and maintain stable frequency and voltage within the limits. Grid-firming using baseload capacity is a necessity at higher levels of renewable integration.
Natural gas-fired power generation has inherent flexibility and despatchability, as gas-based power plants can come online quickly due to their higher ramp rates. Gas-based power plants have higher availability, providing dependable capacity 365 days in a year. Gas-based power can provide an efficient and cost-effective avenue to provide the necessary baseload generation capacity.
As per GE estimates, a renewable energy-gas power hybrid, modelled for a 400 MW RTC solution, can provide a highly competitive first-year composite tariff of
Rs 2.89 per kWh, as well as the additional benefits of higher annual availability, maximised renewable energy share in annual energy production at over 75 per cent, improved plant load factors, a reduction in renewable energy curtailment to less than 10 per cent, and a lowering of capex and land requirement by about 40 per cent and about 30 per cent respectively.
By 2040, the IEA expects gas to emerge as the leading fossil fuel generation player in the global energy mix due to its relatively low emissions and flexibility to be paired with the growing renewable base. GE believes that a combination of gas-based power and renewables is critical to addressing climate change, and will enable the fastest practical and affordable path to decarbonisation.
Gas-based power is playing a critical role in the transition to a lower-carbon future. While the sun sets and the wind stops blowing, gas is a proven alternative that is assuming a bigger role every day. Natural gas-fired combined cycle power plants have the lowest emissions among fossil fuel power plants, whether measured based on carbon dioxide, sulphur oxides, nitrous oxides, particulate matter or mercury.
Global economies require both affordable and sustainable electricity provided by a mix of technologies, and gas will play a foundational role in providing this balance due to its low capex, flexibility, reliability and efficiency.