India to step up gas imports to address summer power demand

India has asked state-run firms to increase imports of natural gas in anticipation of higher power demand next summer, three government sources said, aiming to avoid repeating a power crisis in April that was its worst in more than six years.

While the share of natural gas in India's power generation was just 1.5 per cent this year, down from 3.3 per cent in 2019 due to limited local availability and high global prices, the authorities see it as a crucial stop-gap power source for crunch times, especially when intense summer heat drives up air conditioning use.

An unrelenting heatwave this year sparked unprecedented electricity use in April, when power demand outstripped estimates by more than 7% and led to widespread power outages. Temperaratures typically start rising in most parts of India around mid-March and remain elevated until early June.

The Indian government has asked the country's largest gas distributor, state-run GAIL (India) Ltd, to increase supplies to power plants during the summer months, two of the sources said.

India's largest power producer NTPC Ltd has also been asked to have up to 2 gigawatts (GW) of gas-fired power plants - more than half of its capacity - ready to produce at full capacity if needed next year to address peak summer demand, two of the sources said.

GAIL and NTPC did not immediately reply to a request for comment.

"There has been a series of meetings on utilising gas-based capacity for meeting peak demand," one of the sources said, adding that officials from the government and from state-run companies were in attendance.

"The government is also likely to hold meetings with private gas-based power producers."

Coal and gas

Coal accounts for nearly three-quarters of India's power output, with renewables and hydro together accounting for about one-fifth.

India will continue importing coal to blend with domestic coal despite record growth in local production and supply, two of the sources said, due to surging power demand driven by a pickup in economic activity and higher summer temperatures.

But the government is also seeking greater availability of gas next summer, despite lower costs for imported coal, to have a more diverse set of fuel sources and to address logistical issues in some parts of the country, the sources said.

Gas-fired generation is also easier to ramp up or down based on demand, compared with coal or renewable energy.

The government has not yet estimated how much additional natural gas would need to be imported, but stepped-up purchases could push prices higher and hurt neighbouring Pakistan and Bangladesh, which are struggling with heavy debts and depend heavily on imported gas.

Global gas markets are expected to remain tight next year as Russian pipeline gas supplies dwindle.

Bangladesh and Pakistan have cut down on gas buying amid a surge in international gas prices after Russia's invasion of Ukraine, and turned to more polluting fuels such as fuel oil and diesel to address higher power demand this year, according to data from independent energy think-tank Ember.