Generation Costs to Increase: India Ratings & Research (Ind-Ra) says that the fuel cost per unit for natural gas based power generation could increase by 56% to INR3.41/kwh if domestic gas prices were to increase to USD6.775/mmbtu from the current USD4.2/mmbtu. This would manifest itself as an increase of 9paisa/kwh on the total Indian power generation of 912 billion kwh, which would lead to an additional burden of INR78bn towards gas costs on the gas-based power generation of 65 billion kwh. The additional cost, which is also contributed by the fall in INR, would ultimately have to be either recovered from consumers or borne by state power utilities.
Gas Prices Could Increase: The government is evaluating a proposal to increase domestically available natural gas prices. Various options suggested by experts and stakeholders propose a revised price in the range of USD4.4/mmbtu to USD10.8/mmbtu. The Rangarajan Panel has suggested a simple average of producers’ net back price for Indian imports and world average producers’ net back price, thus arriving at a price of USD8.8/mmbtu. The Planning Commission has suggested a price of USD10.8/mmbtu. On the basis of feelers from the Petroleum Ministry, some industry reports suggest a revised gas price of USD6.775/mmbtu.
Rupee Fall Additional Worry: Gas prices are denominated in USD and the recent volatility in the USD/INR exchange rate could further accentuate domestic gas price in INR terms. This analysis captures the twin impact of a possible gas price increase and the current INR depreciation on the power generation cost of gas-based power plants. The Indian power industry, a major consumer of natural gas, mostly operates on the principle of pass-through of fuel costs to consumers.
Fuel Costs Highly Sensitive: Ind-Ra estimates the fuel cost per unit of domestic gas-based power plants to increase by INR1.22/kwh to INR3.57/kwh (56% to 163%) depending upon the increase in domestic gas prices (USD6.775/mmbtu-USD10.8/mmbtu) and rupee depreciation (refer Table 1 and Table 2). This could mean an additional annual cost of INR78bn-INR228bn for power distribution companies (Table 3). The additional burden could increase further to INR166bn-INR485bn annually if gas availability were to improve, which would result in higher plant load factors (PLFs) for gas-based plants (Table 4).
Given that 7.1% (65 billion units) of the total electricity generation (912 billion units) during FY13 was gas based, the overall impact on all India fuel costs on account of higher gas prices and rupee depreciation is likely to range from 9 paisa to 25 paisa per unit (Table 5).
Off-take Risk Increase: Gas-based power plants would move further down in the merit order despatch schedule if gas prices were to increase from the current levels. This may increase off-take risks. The cost of generation from a domestic gas-based power plant could be 53% higher at INR5.41/kwh, compared with a coal-fired domestic plant operating at benchmark parameters (Table 6).
Consumers Being Impacted From Multiple Directions: Besides the gas price hike, the recent moves to allow pass-through for price hikes in imported coal and higher fixed cost per unit of newly commissioned plants due to higher capex costs are likely to increase power purchase costs for distribution companies (discoms). As many state discoms implemented tariff hikes in 2012 and 2013, the capability of the discoms to pass on price increases to consumers would remain limited.
��
-->
Gas Prices Could Increase: The government is evaluating a proposal to increase domestically available natural gas prices. Various options suggested by experts and stakeholders propose a revised price in the range of USD4.4/mmbtu to USD10.8/mmbtu. The Rangarajan Panel has suggested a simple average of producers’ net back price for Indian imports and world average producers’ net back price, thus arriving at a price of USD8.8/mmbtu. The Planning Commission has suggested a price of USD10.8/mmbtu. On the basis of feelers from the Petroleum Ministry, some industry reports suggest a revised gas price of USD6.775/mmbtu.
Rupee Fall Additional Worry: Gas prices are denominated in USD and the recent volatility in the USD/INR exchange rate could further accentuate domestic gas price in INR terms. This analysis captures the twin impact of a possible gas price increase and the current INR depreciation on the power generation cost of gas-based power plants. The Indian power industry, a major consumer of natural gas, mostly operates on the principle of pass-through of fuel costs to consumers.
Fuel Costs Highly Sensitive: Ind-Ra estimates the fuel cost per unit of domestic gas-based power plants to increase by INR1.22/kwh to INR3.57/kwh (56% to 163%) depending upon the increase in domestic gas prices (USD6.775/mmbtu-USD10.8/mmbtu) and rupee depreciation (refer Table 1 and Table 2). This could mean an additional annual cost of INR78bn-INR228bn for power distribution companies (Table 3). The additional burden could increase further to INR166bn-INR485bn annually if gas availability were to improve, which would result in higher plant load factors (PLFs) for gas-based plants (Table 4).
Given that 7.1% (65 billion units) of the total electricity generation (912 billion units) during FY13 was gas based, the overall impact on all India fuel costs on account of higher gas prices and rupee depreciation is likely to range from 9 paisa to 25 paisa per unit (Table 5).
Off-take Risk Increase: Gas-based power plants would move further down in the merit order despatch schedule if gas prices were to increase from the current levels. This may increase off-take risks. The cost of generation from a domestic gas-based power plant could be 53% higher at INR5.41/kwh, compared with a coal-fired domestic plant operating at benchmark parameters (Table 6).
Consumers Being Impacted From Multiple Directions: Besides the gas price hike, the recent moves to allow pass-through for price hikes in imported coal and higher fixed cost per unit of newly commissioned plants due to higher capex costs are likely to increase power purchase costs for distribution companies (discoms). As many state discoms implemented tariff hikes in 2012 and 2013, the capability of the discoms to pass on price increases to consumers would remain limited.
No comments:
Post a Comment