Power generation: nuclear power to the rescue – BR Research

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Power generation in November 2021 increased 14% year-on-year. The same increased by almost 9 percent for the July-November period year on year. These are good numbers, without being extraordinary. The suggestion from various quarters – that these figures indicate a switch to electric heating for natural gas users following the concessional winter package on additional electricity consumption – is unfounded.

It should be remembered that the government also considerably reduced the supply of natural gas to captive electricity producers, which should have led to increased consumption of the network by industrial users. While this step is good for the overall financial health of the electricity system, it should not be confused with organic demand growth of the same magnitude. What should also be borne in mind that the demand for power flattened and then fell just before and during Covid. Growth must be seen in this context.

Now let’s move on to the most important part, which is the mixing of the generations. Opposite, the production of electricity from heating oil more than doubled during the 5-month period to reach 5.6 billion units. The share of production soared to 9 percent, putting an end to all previous claims that oil-based electricity production was nil. The fuel bill exceeds 105 billion rupees, which is three times more year on year.

The inability of the authorities to organize the imported gas in a timely manner has sometimes resulted in the commissioning of OF-based factories before the ordering. At other times, it was the inability to remove electricity from RLNG-based plants that required OF-based generation to maintain base load. In some cases, FO-based production has followed the order of merit, due to a much more expensive RLNG, especially in the past two months where a number of RLNG-based factories were below l ‘shipping order of merit than a few factories based on FO.

System constraints have exposed the state of play of the energy chain, because the existing gas quota for power plants does not meet demand. It has been officially stated that in order for RLNG-based factories to receive adequate imported gas at all times, nothing short of a new terminal would do. It should be remembered that the government has its own priorities when it comes to natural gas supply, where domestic and fertilizer use takes precedence over the electricity sector.

Nuclear production was the savior, more than doubling in absolute terms and going. Without it, given the limited availability of LNG (also at record rates), the depletion of gas reserves and the declining supply of hydel – fuel oil production could have been even higher than ‘she was.

The fuel bill for the second month in a row skyrocketed to a monthly high, requiring an upward adjustment north of Rs 4.3 per unit. The October monthly adjustment instead of the FCA has only one month, where consumers were hit with a record high of Rs4.75 / unit. The average fuel cost for November 2021 is more than double the revised benchmark tariff of Rs3.74 / unit. The revised benchmark tariff is already up 50% compared to the same period last year.

The remaining winter months could see the same in terms of the generation mix.

There might be some breathing space in terms of monthly adjustments, but it would still stay north of Rs2 / unit, even at the best of times when crude oil does not rise above current rates. While most of the increase in the cost of fuel is inevitable, some could certainly have been better managed with more emphasis on solving technical constraints and effective communication on fuel supply.


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