Power projects refuse to bleed, cos snap supply

AHMEDABAD: Faced with spiralling prices of coal, Adani Power Limited and Essar Power

Gujarat

Limited have discontinued the contracted power supply of 2,000MW and 1,000MW respectively, to staterun

Gujarat Urja Vikas Nigam Ltd

(GUVNL).


This has forced Gujarat, a power surplus state, to purchase more power from open market apart from raising its own generation to meet the electricity demand.


As per the data available with Western Regional Dispatch Load Centre, Gujarat bought a record 32 million units, roughly 1,333 MW, of electricity from power exchanges on Friday.

“The average daily purchase of power from exchanges remained between 800MW to 1,333MW this week,” said sources in a leading power exchange in the country. GUVNL accounts for majority of electricity purchased from power exchanges.

Adani and Essar did not respond to emailed queries seeking reasons for discontinuation of power supply.

Gujarat bought a record 32 million units, roughly 1,333MW, of electricity from power exchanges on Friday. Touted to be a power-surplus state, Gujarat is forced to procure more electricity from the open market as several power plants are struggling to cope with the cost of coal and gas.

Adani Power Ltd and

Essar Power Gujarat Ltd

have discontinued the contracted power supply of 2,000MW and 1,000MW, respectively, to state-run Gujarat Urja Vikas Nigam Ltd (GUVNL) under power purchase agreements (PPAs).

“The stoppage of power supply from Adani and Essar has created a shortage of power that has forced GUVNL to purchase power from the open market to meet the requirement of the state,” said a senior officer of the state energy and petrochemicals department. Queries sent by email to Adani and Essar did not elicit any response.

The power demand has been steadily increasing with the rise in temperatures and it is poised to increase further during the summer. To meet the growing demand, Gujarat’s power purchase from the open market ranged from 800MW to 1,333MW every day this week. The demand for electricity in the state surged to 14,405MW on February 23 from 13,380MW on February 13.

Industry players say that the steep increase in coal imported from Indonesia has made power generation unviable at tariffs quoted by the power producers under PPAs. However, Tata Power’s subsidiary,

Coastal Gujarat Power Ltd

, continues to supply 1,805MW of power under

PPA

to GUVNL.

Sardar Sarovar Narmada Nigam Ltd has also stopped power generation at its 1,450MW hydro power plant due to declining water levels in the Narmada dam. GUVNL, which accounts for over 80% of power purchased by Gujarat from the open market, gets 232MW from this plant.

K K Bajaj, an energy expert, said: “GUVNL has been forced to purchase costly power from other sources, including central and state government plants.” This will increase GUVNL’s power purchase cost this quarter, he said. “This is likely to result in higher fuel surcharge in the next quarter. Ultimately consumers will have to cough up more money,” he said.

Power industry experts say that the costlier coal and gas have changed the dynamics of the power industry over the past few years. The Indonesian coal prices have shot up to $101 per tonne, making power generation unviable for these power producers, which had factored in a price of $26 to $36 while quoting tariffs under PPAs, said experts familiar with the developments.

These power producers have faced an escalation in production cost after Indonesia changed its mining law in 2010 to make the price of coal produced in that country on a par with international prices. Adani and Tata approached Appellate Tribunal for Electricity, which allowed a compensatory tariff to both companies in April 2017.

However, a year later, the Supreme Court overturned the decision and disallowed the compensatory tariff. “After the Supreme Court verdict, they (Adani and Essar) have been declaring less, or often, nil availability of power,” said a senior official of GUVNL. “We are meeting the demand by increasing generation in our own power stations and by purchasing power from power exchanges.”

Reeling under pressure, Tata, Adani, and Essar have offered to sell 51% of stake in their plants to GUVNL at a token price of Re 1 each.

Rising prices of spot liquefied natural gas (LNG) too has rendered huge installed capacity idle. Of the total installed capacity of 6,562MW, only 1,400MW to 1,600MW power is being generated. Those in the know explained that spot LNG prices have surged to $10 per MMBTU, while $4 per MMBTU price is viable for power generation in the state.