India heat wave drives up gas-based power generation and LNG demand

India's natural gas-based power generation has surged in May on the back of heat wave conditions, driving up demand for more LNG cargoes for prompt deliveries in June from state-owned energy companies.

Indian gas-based power generation was 4,646.53 million kWhr as of May 29 for the month of May, compared to 2,631 million kWhr a year earlier, according to data by Central Electricity Authority. India's gas-based power generation was strong in August 2023 and September 2023, but did not rise above 4,000 million kWhr in that period, the data showed.

Generating 5 million units of electricity requires around 1 MMcm of natural gas, according to market participants in the power sector. This implies consumption of around 891.36 MMcm of gas during May or 29.71 MMcm/d, which is roughly an equivalent of over 10 LNG cargoes for the month.

The CEA does not provide separate data for power generation based on regasified LNG and domestically-produced natural gas.

However, in the first quarter of 2024, total gas consumption in the power sector grew 1.4% year on year, to 14.8 MMcm/d, according to S&P Global Commodity Insights data. Imported gas or RLNG consumption by power plants increased by 45.5% year on year in the first quarter to about 2.7 MMcm/d, while domestic gas consumption increased only marginally from 11.9 MMcm/d to 12.1 MMscm/d in the same period.

Around 74% of India's electricity mix is coal-based, around 13% is from renewables like wind and solar, around 8% is from hydro, around 3% from nuclear and only around 2% from natural gas.

"The hot weather has caused power demand to reach new record highs. On May 29, daily power demand reached 242.3 aGW, beating the previous record of 237.9 aGW, set just five days earlier. During May 2023, daily power demand only reached a high of 215 aGW," Andre Lambine, power analyst at Commodity Insights said.

"Gas-fired power generation averaged 6.9 aGW between May 23-29, which is more than double compared to the same period in 2023," he added.

LNG procurement

Market sources said that NTPC has been consuming 9-10 MMcm/d of RLNG on average and Torrent Power has been consuming 5-7 MMcm/d on average.

In previous years, a significant portion of gas-based power generation has been through domestically produced gas, but an increasing amount of this premium fuels has been allotted to the fertilizer and city gas distribution sectors, leading to gas power plants operating below capacity.

The current heatwave, lower global spot LNG prices and a government push to avoid power supply disruptions in the election season have helped boost overall gas-fired power generation and open up room for more LNG to be channeled into power plants.

Indian companies have had to step up spot market purchases as inventories have dropped due higher gas demand from the power sector. Indian gas importers have already purchased at least nine cargoes from the spot market for deliveries in June, Commodity Insights trade data showed.

Market sources said that GAIL conducted an auction to purchase RLNG from the domestic market twice for a total of around 80 MMcm for the second half of May, part of which is expected for power sector usage.

Heat wave demand

"India's recent heatwave has impacted areas in the Northwest the most. Between May 23-29, Cooling Degree Days in Delhi and Bhopal increased by an average of 20% year on year, but individual days were up to 50% higher on the year," Lambine said.

Meanwhile, the India Meteorological Department (IMD) issued a red alert for heat wave across the northern and central states of Rajasthan, Delhi, Punjab, Haryana, Chandigarh, and Madhya Pradesh earlier this week, according to Press Trust of India.

Several towns and cities recorded maximum daily temperatures of over 49-50 C this week, disrupting daily life and driving up power demand for air conditioning, coolers and ceiling fans.

One region in the Indian capital of New Delhi logged a maximum temperature of 52.3 C mid-week, which would be the highest ever temperature recorded in the city if correct; prompting officials to investigate the accuracy of the weather station, according to local media reports.

Peak power demand in the capital rose to an all-time high of 8,302 MW on May 29, the first time it has crossed the 8,300-MW mark, and power distribution companies had estimated a peak of 8,200 MW this summer, PTI reported.

Platts assessed West India Marker, the benchmark price for LNG cargoes delivered to western coast of India, Dubai and Kuwait, for July at $11.788/MMBtu on May 30, according to the data by S&P Global Commodity Insights.