Can gas grow its role in Indian power markets?

Gas-fired power is well-positioned to take on a key role supporting increasingly variable renewable generation in Indian power markets, mainly providing flexibility during periods of peak demand. But for gas to power to live up to its full potential, a series of structural challenges must be overcome. 

Over the last 15 years, gas has been steadily displaced from India’s power mix, with its capacity share more than halving from 10% to just 4%. The country’s gas-fired power plants were built for baseload, but now survive mostly as flexible resources at times of peak demand, generating only around 1% of the country’s electricity needs.  

Drawing on data and insight from our Lens Power & Renewables Asia Pacific platform, our report India’s gas-to-power market: Economics over ambition highlights both the opportunity and the challenges for gas-fired generation. Fill in the form for your complimentary extract, and read on for a rundown of the four key challenges involved. 

1. Supply: Insufficient affordable domestic gas makes gas to power expensive 

Recent upstream additions have driven a recovery in Indian gas production after over a decade of falling supply from its large but mature KG-D6 field. However, supply remains well below demand. The shortfall is made up for with imported LNG, making international gas prices the marginal driver of gas-fired plant economics. 

How much demand is met through LNG imports and which country supplies around half of India’s imported LNG? Find out by downloading the report extract.

2. Policy: Market design and allocation rules marginalise gas-fired generation 

Under the country’s Domestic Gas Allocation Policy, use for transport, households and fertiliser is prioritised over power generation. At the same time, coal remains the preferred fuel in India to ensure energy security. The lack of effective policy support limits investment in new gas-fired generation. 

Despite its limited role as a balancing fuel, Indian gas-fired generation is destined to grow significantly in the 2040s. Read the extract to find out by how much.

3. Infrastructure: Uneven pipeline connectivity limits gas utilisation 

Gas pipeline connectivity has been expanded but remains uneven. Fuel availability has created a two-tier gas generating fleet, with significant regional variations. Plants in northeastern states enjoy reliable domestic gas supplies that support high utilisation, while western India benefits from proximity to LNG import terminals and well-developed infrastructure. However, elsewhere, limited access to fuel severely impacts plant utilisation. 

What percentage of India’s gas-fired capacity operates below a 20% utilisation rate? And what percentage achieves high utilisation? Get the answers in the report extract. 

4. Pricing: Imported LNG is increasingly expensive 

Gas-fired plants must compete with lower-cost coal and renewables. Declining renewable and battery costs are making renewable-plus-battery solutions increasing competitive, while persistently high and volatile LNG prices make gas generation expensive. As a result, most Indian gas-fired plants are brought online only during seasonal demand peaks when higher electricity prices mean dispatch is economically viable.  

How does the levelized cost of electricity from gas in India compare with other technologies? Find out in the report extract. 

Learn more about the role of gas-fired generation in Indian power markets

Fill out the form on this page to download your complimentary extract from the full report.