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Dilligentia 2nd Annual Gas conference - (ICF) India Gas Market Assessment_27th April 2016

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Dilligentia 2nd Annual Gas conference - (ICF) India Gas Market Assessment_27th April 2016

  1. 1. 1icfi.com | Indian Gas Perspective – Present & Future: Role of natural gas in fulfilling COP21 targets 2nd Annual Gas Summit
  2. 2. 2icfi.com | ©2016 ICF Consulting India Pvt.. Ltd. All Rights Reserved IMPORTANT NOTICE: REVIEW OR USE OF THIS REPORT BY ANY PARTY OTHER THAN THE CLIENT CONSTITUTES ACCEPTANCE OF THE FOLLOWING TERMS. Read these terms carefully. They constitute a binding agreement between you and ICF Consulting India Pvt. Ltd. ("ICF"). By your review or use of the report, you hereby agree to the following terms. Any use of this report other than as a whole and in conjunction with this disclaimer is forbidden. This report may not be copied in whole or in part or distributed to anyone. This report and information and statements herein are based in whole or in part on information obtained from various sources. ICF makes no assurances as to the accuracy of any such information or any conclusions based thereon. ICF is not responsible for typographical, pictorial or other editorial errors. The report is provided AS IS. You use this report at your own risk. ICF is not liable for any damages of any kind attributable to your use of this report. NO WARRANTY, WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE IS GIVEN OR MADE BY ICF IN CONNECTION WITH THIS REPORT.
  3. 3. 3icfi.com | Good times ahead……
  4. 4. 4icfi.com | 1. Background and Changing environment 2. India’s NDC - Overview 3. Changing times ahead 4. What future holds 5. Key Takeaways 6. How gas industry needs to adapt 7. Big Game changers for future Table of Contents
  5. 5. 5icfi.com | Power sector being highly price sensitive, has been unable to absorb LNG Total LNG Imports (Long Term, Spot) MMSCMD 2003-04 1 2004-05 9 2005-06 19 2006-07 25 2007-08 31 2008-09 30 2009-10 33 2010-11 36 2011-12 43 2012-13 41 2013-14 41 2014-15(P) 50 Source: Metis Industry-wise Domestic Gas Supply Gas for 2013-14 (Total- 94.13 MMSCMD) Industry-wise LNG Supply for 2013-14 (Total- 41.11 MMSCMD) LNG demand in power sector supported by fall in global energy prices and PSDF support
  6. 6. 6icfi.com | Sustainable Energy Transition for India to be marked by various factors 1. Increased electricity demand 2. Increase in per capita consumption 3. Change in load shape 4. Reducing load factor 5. Addition of industrial demand
  7. 7. 7icfi.com | Sustainable Energy Transition for India to be marked by various factors • Boost for non-fossil based generation and cleaner fuel generation options • Improving efficiency of coal based generation • Use of Clean coal technologies • Boost to wind and solar generation • Limiting GHG emissions • Need for flexible generation for integrating RE capacity
  8. 8. 8icfi.com | COP21 commitments – a brief
  9. 9. 9icfi.com | Commitment under NDC to shape the future • Reduce emission intensity of GDP by 33% to 35% by 2030 (wrt 2005 levels). • Govt. plans to achieve about 40 percent Generating capacity from non-fossil fuel based energy resources by 2030 • With a current installed capacity of 5.78 GW (and additional six reactors of 4.3 GW at different stages of commissioning and construction), efforts are being made to achieve 63 GW installed capacity by the year 2032, if supply of fuel is ensured Targets for 2030 • 175 GW of RE capacity – 100 GW of solar, – 60 GW wind and – 15 GW of Biomass + Small Hydro Targets for 2022 • Target for whole economy • Unclear how will this be distributed between – Different sectors – Centre v/s States
  10. 10. 10icfi.com | • In absence of sector wise targets, we have assumed that same emission cuts are imposed on each sector. – For Power Sector: From 2005 levels of 14.47 (Emission intensity of ‘GDP at factor cost’ in gm/INR, 2004-05 series), India has set a target of reaching ~9.41 gm/INR by 2030 (ie a reduction of ~35%) • Power system will not be allowed to emit more than specified GHG to comply with target To meet its commitment for INDC, a cap on total system emissions will be needed Historical Assumed
  11. 11. 11icfi.com | Changing time ahead Big game changers for Indian power sector: COP21 and RE capacity addition
  12. 12. 12icfi.com |  How to integrate 175 GW of RE capacity into system?  Will such huge RE capacity addition result in peak shortages?  Is system equipped to handle variability in demand?  Will it be sufficient to meet emission reduction targets, if not then what else can be done?  How will system meet emission reduction targets if RE capacity addition falters?  How will the change in load factor of system impact generation mix requirement?  Can mix of coal and RE alone be sufficient to balance the overall objectives?  What would be RE capacity requirement in that case?  How will system integrate that amount of RE?  Will there be significant amount of peak and energy shortages in the system?  What is the incremental cost on health for not reducing emission as promised? Big game changers for Indian power sector: COP21 and RE capacity addition Pertinent questions in front of planners right now
  13. 13. 13icfi.com | These questions can be answered using IPM®: ICF’s proprietary power sector modeling tool
  14. 14. 14icfi.com | I-IPM® is an Excellent and Versatile Long Range Planning Model • IPM® uses a Linear-programming based optimization approach • It simulates least-cost plant dispatching and least-cost investments in generation capacity and interconnections to meet projected load in the region. • IPM® is a long-term capacity expansion and production costing model for electric power systems including generation, transmission, and hourly demand • It is a multi-regional, deterministic, dynamic, linear programming model • Utilizes Dynamic Optimization Framework with an Objective Function of Minimizing the Present Value of Total System Cost subject to: – Electricity Demand Constraints – Reserve Margin Constraints – Environmental Constraints – Transmission Constraints – Fuel Constraints – Other Operational Constraints • Simulates rational expectations for perfect foresight providing the framework for inter-temporal decision making
  15. 15. 15icfi.com | ICF has a Global Scope in Power and Fuels Markets
  16. 16. 16icfi.com | What Future holds….. Integrated Planning Model – IPM®
  17. 17. 17icfi.com | Each technology type has their own technical, commercial and operational limitations Limitations Solar and Wind Biomass Small- Hydro Hydro (RoR) Hydro (Storage) Nuclear Gas Coal (Super Critical) Pace of Land acquisition P Equipment supply P Integration issues P Capital cost P P P P P P Fuel availability P P Fuel Cost P P Ability in providing flexible generation NA Highly limited Highly limited Highly limited Highly limited Highly limited Overall Potential P P Fuel uncertainty P P P P Delays in getting clearance P P P P P P Local resistance P P P Geological considerations P P Emissions P P If not for fuel prices, Gas is one of the best generation source. More importantly, (i) it can provide integration support to RE, and (ii) much less pollution than coal
  18. 18. 18icfi.com | ‘Coal continues to be the mainstay of power in India’ Hon'ble minister of State with Independent Charge for Power, Coal, New and Renewable Energy Year 2030Year 2016 Mix much more healthier in 2030
  19. 19. 19icfi.com | NDC commitments to drive long-term gas demand from power sector, however near term might remain slow Near term gas demand is primarily driven by RE integration requirements Long-term gas demand is primarily driven by emission reduction requirements All India Gas Consumption
  20. 20. 20icfi.com | However, if RE capacity addition falters, gas requirement in near term may also rise significantly All India Gas Consumption Gas insurance: If RE capacity addition lags, Gas requirement will also be felt in near term for meeting emission reduction targets
  21. 21. 21icfi.com |  Although system will burn expensive gas based generation, but it will indirectly benefit common man by reducing its hospital bill Committing to emission reduction targets will result in significant reduction in total health costs Reduction in health expense of common man
  22. 22. 22icfi.com | Role of gas in future…… Merit order stack based on average availability of different plant types Gas as flexible generation for RE Integration Gas as flexible generation And cleaner fuel
  23. 23. 23icfi.com |  Short-term: Gas demand of 15 BCM to 50 BCM (by 2022) dependent on pace of RE capacity addition  Long-term: Gas demand of 70 BCM to 80 BCM (by 2035), primarily driven by emission reduction targets  As gas continues to be the most expensive source of generation, gas is used as provider of last resort  Gas generation is required as mid merit to peaking generation capacity which ramps up and ramps down during day Key takeaways
  24. 24. 24icfi.com |  Need for strong and independent pipeline network operator  Quick response gas storage facility needed on National Gas Grid  Ancillary service markets: Incentive to run at partial load  Gas exchange for spot purchase and sale of gas  Change in contracting structure between  Power plant and DISCOMs  Power plants and Gas suppliers Business opportunity for pipeline storage systems How gas industry needs to adapt….
  25. 25. 25icfi.com |  Depleted Field:  Advantage: large size and natural gas storage environment, least cost to develop  Drawback: slow response (seasonal storage)  Auifers:  Advantage: larger size compared to salt caverns and quicker response compared to depleted fields.  Drawbacks: large cushion gas requirement  Salt Caverns:  Advantages: very quick response times (cycled 10-12 in a year)  Disadvantage: relatively smaller sizes  LNG storage: Smallest sized storage but quickest response rate Indian gas grid will require LNG storage solution Storage systems across world
  26. 26. 26icfi.com | Game changers for the future…. Things to watch out for Clean coal technology Battery storage systems Pump storage and hydro storage systems Their impact needs thorough evaluation
  27. 27. Headquarters: 9300 Lee Highway Fairfax, VA 22031 USA +1.703.934 3000 New Delhi 302-307 Ashoka Estate 24 Barakhamba Road New Delhi 110 001 India +91.4354 3000 Gurpreet Chugh gurpreet.chugh@icfi.com Ashish Singla Ashish.singla@icfi.com For More Information
  28. 28. 28icfi.com |

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