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Indian Gas Exchange sees surge in gas volumes as power plants drive demand

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In Short:

Gas trading on the Indian Gas Exchange (IGX) saw a significant increase in May due to high power demand from gas-based power plants. 49 lakh mmBtu were traded, nearly six times more than last year. Gas prices have eased in the international market, increasing demand. With the ongoing heatwave in India, peak power demand hit a record high of 250 GW. The arrival of the monsoon is expected to reduce gas demand for power generation.

In the wake of high power demand and increased operations of gas-based power plants to meet the rising demand, volumes of gas traded on the Indian Gas Exchange (IGX) increased multifold in May compared to the same period a year ago.

Rising power demand

The ongoing heatwave in several parts of the country, largely northern, northwestern and central India, has led to a surge in power demand.

So far in May about 49 lakh mmBtu (million metric British thermal units) have been traded on the exchanges, nearly six times more than 8.5 lakh mmBtu in May last year, according to data from IGX.

“We have traded 49 lakh mmBtu equivalent to 1.5 LNG vessels and it is double of what we did last month. The increase in volume is largely due to power demand. Initially, there was some shortage of gas as the demand was not expected. Further demand from CGD (city gas distribution) is also increasing as the supply of APM gas is declining,” said Rajesh Kumar Mediratta, MD and CEO of IGX.

In April, the trading volumes on the IGX stood at 24.8 lakh mmBtu.

Among other measures to ensure uninterrupted availability of power, the Union government has already directed gas-based power plants to operate at full capacity. The plant load factor (PLF) of the 62 gas-based plants which account for about 25 GW has also increased. In April 2024, the PLF of gas-based power plants stood at 21.4%, against 14.2% in April last year. PLF is the measure of a power plant’s capacity utilisation. It is the percentage of energy sent out by the power plant in terms of installed capacity in that period.

Gas-based power plants have usually not been significant players in the power sector. However, the recent easing of gas prices in the international market has led to improved demand for fuel across segments including power generators.

On Thursday, India’s peak power demand hit an all-time high of 250 GW with the mercury surging in several parts of the country. In the national capital, temperatures have been hovering around the 50 degrees Celsius mark after breaching 52 degrees on Wednesday.

The highest temperature on Thursday was recorded at 48 degrees at Sri Ganganagar in Rajasthan, according to the India Meteorological Department (IMD).

It also said that the heatwave is likely to subside in the coming days. This would also reduce the load on power plants since power demand for cooling requirements would ease.

The southwest monsoon which arrived early in Kerala on Thursday, has advanced into parts of northwest Bay of Bengal, remaining parts of Tripura, Meghalaya and Assam and most parts of sub-Himalayan West Bengal and Sikkim, IMD said on Friday.

IGX’s Mediratta was of the view that with the arrival of the monsoon demand for gas on the exchange from power generators would lessen in the days ahead.

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