Capacity utilization of gas power plants at all time low

MUMBAI: Gas Power plants’capacity utilization is at all time low due to sustained domestic gas supply shortage. The situation is unlikely to improve in the next 1-2 years. This is a negative for Torrent Power, GVK Power, GMR and Lanco Infra. Also Reliance Power’s one project of 2400 MW will be affected.

In the last three years, the gas production in Indian has fallen by 34%, adversely affecting the capacity utilization of the gas based power plants in India. In February 2013, the capacity utilization was 28%, lowest till date.

Importing gas is an expensive option and will increase the cost of generation by 100%. The demand for such expensive power will not be there given the weak financial health of the state electricity boards. As a result all, the built up capacities of these power companies will remain idle. Also another 8 GW gas power plants are under construction. This will delay the return on the investments made in these power plants. And the situation is unlikely to improve until the domestic gas production picks up or a successful restructuring of the SEBs is done.