Cost-competitiveness of alternate fuel that may be used for power generation in India assumes importance for the potential LNG suppliers and the new Natural Gas suppliers to find out the basis for competing as a power supplier in future power generation projects in the country. The alternate fuel considered in the study conducted from 1996 to 2003 includes Fuel Oil, Imported Coal, Domestic Coal, Naphtha and Natural Gas. The power generation site is assumed to be a hypothetical location 200 km from the Western coast in Gujarat and located along the Hazira-Vijaipur-Jagdishpur (HVJ) pipeline.
Fuel-wise Assumptions
Fuel Oil:
Domestic price is marked to landed price. FOB Arab Gulf price used as international price
Calorific value assumed at 10,440 Kcal/kg
Heat rate assumed at 1,900 Kcal/Kwh
Auxiliary power consumption at the rate of 3%
Landed cost includes FOB price, freight, insurance, import duties, countervailing duty and domestic freight
To Top
Imported Coal:
Domestic price is marked to landed price. Coal imported from Australia
Calorific value assumed at 6,665 Kcal/kg
Heat rate assumed at 2,450 Kcal/Kwh
Auxiliary power consumption at the rate of 9.5%
Landed cost includes FOB price, freight, insurance, import duties, countervailing duty and domestic freight
To Top
Domestic Coal:
D grade Coal sourced from Western Coalfields located at a distance of about 1000 km from the project site
Calorific value assumed at 4,200 Kcal/kg
Heat rate assumed at 2,500 Kcal/Kwh
Auxiliary power consumption at the rate of 9.5%
Coal price assumed includes pithead price, royalty, Stowing Excise Duty (SED), domestic freight and sales tax.
To Top
Naphtha:
Domestic price is marked to landed price. FOB Arab Gulf price used as the international price.
Calorific value assumed at 10,500 Kcal/kg
Heat rate assumed at 1,900 Kcal/Kwh
Auxiliary power consumption at the rate of 3%
Landed cost includes FOB price, overseas freight, insurance, import duties, countervailing duty and domestic freight.
To Top
Natural Gas:
Delivered price includes Consumer price at Landfall (Rs.2,850/'000 scm in FY2003), Transportation charges on HBJ pipeline (Rs.1,150/scm for calorific value of 8,500 Kcal/scum), Royalty (10%), Sales tax (22%)
Calorific value assumed at 10,000 Kcal/'000 scm
Heat rate assumed at 1,900 Kcal/Kwh
Auxiliary power consumption at the rate of 3%
To Top
Findings
The variable fuel cost incurred in power generation in Rs./Kwh is presented in the following chart. Naphtha appears to be the costliest fuel followed by Fuel Oil. The economics of Domestic Coal, Imported Coal and Natural Gas are broadly comparable across the years.
To Top
Source: INGRES Estimates
However, the above analysis uses gas prices, which are currently subsidised (Rs.2,850/'000 scm or $1.5/mmbtu + transportation costs, sales tax and royalty). If we assume that the prices are decontrolled and become comparable to international Fuel Oil prices (Gas prices double to about $3/mmbtu), we see that while gas becomes costlier vis-a-vis coal (domestic and imported), it is still competitive vis-a-vis Fuel Oil and Naphtha.
Source: INGRES Estimates
To Top