Key Market – India

With wide-spread LPG infrastructure already in place, India represents a strong opportunity for LPG Power Generation, especially in regions of no natural gas grid and expensive diesel

Headlines on the outlook for LPG Power Generation in India:

  • Good opportunity in the short to medium term for LPG to displace diesel generation, either where there is no electricity grid access or where the grid is unreliable
  • Opportunity to utilise pre-existing LPG storage and distribution infrastructure from government schemes to promote LPG as a clean cooking fuel.
  • Long-term potential may be limited as grid extension and reinforcement will remove need for supplementary generation and electricity fuel mix will be dominated by cheap coal and increasingly low-cost renewables, especially onshore wind and solar PV.

 

Below, we discuss the key factors that influence the outlook for LPG Power Generation in India in more detail.

Energy prices – Electricity

Energy prices are greatly regulated in India and electricity prices are heavily subsidised: electricity prices for industrial and commercial users are double the rate charged to agriculture and domestic users, though there is considerable variation between States. On average, electricity prices are twice those of natural gas (see Figure 13).

Diesel is considerably more expensive, at roughly €0.2/kWh, and is predominantly used in areas without access to the electric grid or where the grid is unreliable. In the short to medium term there is an opportunity for LPG, which is considerably cheaper, to replace diesel in this fuel mix whilst the grid is extended and reinforced.

India 1

 

Electricity & natural gas grid infrastructure – Opportunity for LPG to displace diesel generation as supplement to expanding and unreliable electric grid

79% of India’s population has access to electricity (see Figure 14) and the government is working towards achieving universal access as a matter of priority. The population without access is concentrated in a relatively small number of states, notably Uttar Pradesh and Bihar. India faces chronic power shortages with frequent electricity grid failure as continued economic expansion coupled with greater access to electricity, urbanisation, and population growth places the grid under excessive pressure.

Back-up diesel generators are prevalent (over 90 GWe installed generating capacity), used especially by industrial and commercial customers and India’s growing middle class. This poses an opportunity for LPG as a cheaper alternative and much of the necessary distribution and storage infrastructure already exists due to previous government policies encouraging LPG as a clean cooking fuel.

India 2

 

Access to natural gas varies considerably across India (see Figure 15), with a few states such as Gujurat, Maharashtra, and Uttar Pradesh consuming more than 65% of the available gas, while other states have no access mainly due to a lack of pipeline infrastructure. India’s natural gas market has a supply deficit primarily resulting from low domestic production and inadequate transmission and distribution infrastructure, which has resulted in increased dependence on imported LNG.

There is a moderate opportunity for LPG Power Generation, though this is limited by a government focus on increased wind and solar PV deployment to meet rising energy demands instead of natural gas, whose share in the generation mix is not forecast to rise significantly.

India 3

Policy & regulatory framework – Policy focus is on electricity grid expansion coupled with increasing share of renewable generation; potential for LPG to benefit from favourable LPG policies in other sectors.

 

India has pledged to cut the emissions intensity of its economy by 33-35% by 2030 against a 2005 baseline. To achieve this, it aims to source 40% of electricity from renewable and low-carbon sources, especially onshore wind and solar PV. While this limits the potential for LPG power generation in the long-term, in the short and medium term there is a strong potential for LPG generators to be used in lieu of the electricity grid, which requires significant reinforcement to be suitable for decentralised generation e.g. solar PV and onshore wind.

India 4


Current LPG activities & deployment
– Dominant LPG use is in domestic sector as an alternative clean-cooking fuel

 

India has become the second-largest domestic LPG consumer in the world due to the Narendra Modi government’s rapid rollout of clean fuel plan for poor households and fuel subsidy reforms. This has resulted in the domestic distribution sector having the highest consumption of LPG (88%).

India produces about half of LPG for domestic consumption and has almost 18,000 LPG distributors and 182 million state- and company-wise customers. State-owned oil marketing companies (PSU OMCs) have a total of 188 LPG bottling plants all over India, and a total of 677 Auto LPG Dispensing Stations for catering to LPG demand in the automotive sector.