IEEFA South Asia: Gauging the Role of Gas-based Power in Meeting India’s Peak Electricity Demand; Achieving India’s Renewables Target & Other Updates

Welcome to the 15th edition of IEEFA Asia Pacific Insights LinkedIn #newsletter featuring some quick insights on the issues related to energy markets, trends and policies focused on a sustainable and profitable #energy economy.

In this edition, we bring light to our new releases in South Asia:

• Purva Jain in her briefing note "Gauging the Role of Gas-based Power in Meeting India’s Peak Electricity Demand " explored how rising urbanisation, increasing industrial activity and erratic weather patterns are driving a surge in peak power demand. While gas-based power currently helps meet this demand, but there is an interesting shift. Renewables are stepping up to the challenge as gas has a diminishing role in the medium- to long-term.
• IEEFA South Asia and JMK Research & Analytics jointly released the note "Achieving India’s Renewable Energy Target by 2030 ". It is a set of recommendations for India to reach its target of 500 gigawatts (GW) of renewable energy capacity by 2030. The note had recommendations for implementations in the immediate and medium term, offering viable solutions to navigate the sector's challenges and foster its growth.
• IEEFA South Asia, Ember and JMK Research & Analytics in a combined press release "Surge in India’s renewables tendering set to keep coal’s share below 50% in total installed capacity " highlighted that the share of coal in India's total power generation capacity dipped below 50% in the first quarter of 2024, the first time since the 1960s.
• Shafiqul Alam in his report "Industrial energy efficiency to curb Bangladesh's short-term LNG demand growth " mentioned that greater efficiency in gas-fired captive power generation and productive use of waste heat can reduce LNG imports by 50.18Bcf and save Bangladesh US$460 million a year.
• A new joint report by IEEFA South Asia and JMK Research & Analytics "Utility-scale renewable energy tendering trends in India " discusses that large-scale renewable energy projects in India have been the focus of intense interest from both domestic and international players, as evidenced by tender issuances crossing a record 69 gigawatts (GW) on the back of a strong push by the central government.

Finally, we are also pleased to share that IEEFA will host its annual Energy Finance conference in Asia for the very first time this year. From 2-4 September in Kuala Lumpur, Malaysia, IEEFA will be bringing together the best minds in the region to discuss effective solutions in Asian energy markets for a sustainable future. I hope you will be able to join us at the event. Click below for more details.?

Gauging the Role of Gas-based Power in Meeting India’s Peak Electricity Demand

KEY FINDINGS

• Rapidly rising peak power demand has resulted in the Indian government taking proactive measures, including relying on gas-based power, to ensure there is no supply shortfall.
• Allocating more domestic gas to gas-based power plants or allowing the blending of liquefied natural gas (LNG) with domestic fuel could improve the affordability of the gas-fired electricity needed to meet peak demand.
• Ongoing trends, such as increased deployment of renewable energy assets, improving economies of scale for battery storage and the rise of round-the-clock tenders with more competitive bidding rates for firm and dispatchable renewable energy (FDRE) point to the diminishing role of gas-based power plants for meeting peak power needs in the medium-term.

“Gas-based power plants have a limited role in meeting peak demand, even in the short term. Their role is likely to diminish in the coming years with the government looking at innovative tendering to ensure round-the-clock availability of renewable energy to facilitate grid integration and enable higher capacity utilisation of renewable energy" Purva Jain , author of the briefing note.

Read the briefing note: Gauging the Role of Gas-based Power in Meeting India’s Peak Electricity Demand

Achieving India’s Renewable Energy Target by 2030

Introduction

• India has ambitiously aimed for 500 gigawatts (GW) of renewable energy capacity by 2030, a crucial step towards sustainable energy independence. As of March 2024, the country has successfully installed approximately 190GW* of renewable energy, indicating significant progress.
• To meet the 2030 target, an annual installation rate of around 50GW is imperative. To put this into perspective, in the fiscal year (FY) 2023-24, India added only a little over 18GW of renewable energy capacity. Investments into the renewable energy sector also marginally declined from US$11.7 billion in FY2022-23 to US$11.4 billion in FY2023-24. Consequently, the country must accelerate its efforts, requiring more than 2.5 times the installation compared to the previous fiscal year.
• These challenges underscore the complexities inherent in the renewable energy sector, hindering the seamless translation of issued tenders into tangible on-ground projects and impeding investment inflow. This note outlines recommendations for implementation in the immediate and medium term, offering viable solutions to navigate the sector's challenges and foster its growth.

Read the recommendations: Achieving India’s Renewable Energy Target by 2030

Surge in India’s renewables tendering set to keep coal’s share below 50% in total installed capacity

KEY FINDINGS

• Coal’s share in total power generation capacity in India dropped below 50% for the first time in several decades in the first quarter of 2024.
• A record 69+ gigawatts (GW) of renewable energy tenders were issued across India in fiscal year (FY)2024, exceeding the central government’s target of 50GW.
• India surged to third in the world in terms of solar power generation in 2023.

“After a slump from 2019 to 2022 due to supply-chain issues and global price spikes brought on by the COVID-19 pandemic and Russia’s invasion of Ukraine, the market has rebounded and gone from strength to strength.” Vibhuti Garg , co-author of the note.

Read the note: Surge in India’s renewables tendering set to keep coal’s share below 50% in total installed capacity

Industrial energy efficiency to curb Bangladesh's short-term LNG demand growth

KEY FINDINGS

• Bangladesh’s plan to power its economic development with LNG imports was not designed to cope with extreme global fuel market volatility, depreciation of the local currency and weak fiscal conditions.
• Greater efficiency in gas-fired captive power generation and productive use of waste heat can reduce LNG imports by 50.18Bcf and save Bangladesh US$460 million a year.
• This study finds that the average efficiency of industrial gas-fired captive generators is 35.38%, which can be improved to 45.2% with high-efficiency generators.
• The high dependence on gas is raising import bills and with it, the tariffs paid by consumers. Bangladesh must urgently re-evaluate its energy strategy, and take steps to improve energy efficiency to contain the growing demand for gas.

“Full energy independence may be a utopian dream, but the country must find ways to rein in its import dependence. Weaning Bangladesh off LNG imports will take time, but decision-makers must plan and act now lest the country is left badly exposed to the next global shockwave.” Shafiqul Alam , author of the report.

Read the report: Industrial energy efficiency to curb Bangladesh's short-term LNG demand growth

Utility-scale renewable energy tendering trends in India

KEY FINDINGS

• A record 69+ GW of renewable energy tenders were issued in fiscal year (FY) 2024, surpassing the government-mandated target of 50GW.
• Of all awarded tenders in FY2024, about 25% were from the Solar Energy Corporation of India (SECI). However, the rising prominence of other tendering agencies underlines the strength of India's renewable energy tendering ecosystem.
• In two years, solar tariffs have increased marginally by ~8.5%, from an average of Rs2.3-2.4 per kilowatt-hour (kWh) to Rs2.5-2.6 per kWh, despite a ~57% fall in module prices in the same period.
• From FY2020-24, the share of hybrid renewable energy tenders increased from 16% to 43%.

“There is strong investor interest in the Indian utility-scale renewable energy market. The primary reasons are the large-scale potential for market growth, central government support in terms of targets and regulatory frameworks, and higher operating margins.” Vibhuti Garg , co-author of the report.

Read the report: Utility-scale renewable energy tendering trends in India

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