India Eyes Renewable Future to Beat the Heat, Says IEEFA

IEEFA Report Says Gas-Based Power’s Role to Diminish in Long Term

India’s scorching summers, a growing concern with rising peak power demands, may find relief in a shift towards renewable energy sources, according to a new report by the Institute for Energy Economic and Financial Analysis (IEEFA).

The report highlights the limitations of gas-based power, particularly its high cost without increased domestic gas allocation or the ability to blend imported liquefied natural gas (LNG). The study finds this method even less competitive in the medium term with the expected rise of cost-effective energy storage and increased renewable energy capacity.

“Gas plants have a limited role in peak power, even now,” says Purva Jain, Energy Specialist at IEEFA and the report’s author. “Innovative tendering for 24/7 renewable energy supplies, pursued by the government, will likely diminish their role further.”

IEEFA emphasizes the growing importance of Grid-scale Energy Storage Systems (ESS), including pumped hydro storage, in overcoming the variability of solar and wind power.

The report cites a previous IEEFA and JMK Research study indicating a surge in “renewable + ESS” tenders, with firm and dispatchable renewable energy (FDRE) tenders comprising 17% of the 69 gigawatts (GW) of renewable energy issued in fiscal year 2023-24.

With India grappling with an unprecedented heat wave, the government is taking steps to meet immediate power demands. This includes utilizing underutilized or non-operational gas-based plants.

However, IEEFA’s cost analysis suggests that even in the short term, cost-effectiveness relies on allocating more domestic gas with flexibility on minimum offtake requirements. The study indicates that partially utilizing gas-based power with a blend of domestic gas and LNG could significantly lower tariffs compared to relying solely on imported LNG.

The report also acknowledges a shift in peak demand hours towards daytime, when solar can play a bigger role, and towards months with higher wind power availability.

“While imported coal and gas may offer short-term solutions,” concludes Jain, “solar, wind, and storage are the more viable options for India’s future power needs.”