Why Grid India Is Turning To More Gas Based Power

The move comes amid weather forecasts indicating below-normal rainfall across the country during the June–September monsoon season. The projected requirement is in addition to the 2.6 gigawatts (GW) of gas-based generation capacity already available from isolated field stations. The assessment is based on projected demand, planned and forced outages of generating units, hydro, renewable generation profiles and present weather information available at Indian Meteorological Department (IMD), according to the Grid India’s advisory issued on June 10. Three key factors Grid India cited three major considerations for this resource adequacy assessment. These include historical data for the mentioned months, planned upcoming capacity, proposed planned outages and prevailing forced outages, and uncertainty and variability of renewable energy generations. “The above assessment will be reviewed in late Jun-26 and an updated/modified outlook will be provided, if required,” the advisory added. While gas accounts for only a small share of India’s overall generation mix, it plays a crucial rebalancing role during evening peak hours, especially during pre-monsoon summer months, when solar output drops. Typically, around 10 GW of gas-fired capacity is relied upon during peak summer. This year, however, the conflict in West Asia has cast a shadow over fuel availability for gas-based power plants. Amid concerns over supply disruptions, the government has moved to prioritise gas allocation to certain sectors during periods of shortage. According to officials, only about 5 GW of gas-based generation capacity is currently available. The situation has been compounded by forecasts of below-normal rainfall during the monsoon season, prompting hydroelectric power stations to conserve water in their reservoirs, officials familiar with the matter told The Indian Express. “Reservoirs serve a dual purpose — irrigation for agriculture and electricity generation. Until the monsoon gains momentum in July, the priority is to preserve water levels. That is why the requirement for additional gas-based generation has become more important,” an official aware of the matter said. Hydro role in meeting peak demand This year’s situation stands in contrast to last year, when hydroelectric power played a crucial role in meeting evening peak demand and providing vital grid-balancing support. However, forecasts of below-normal monsoon rainfall have altered the equation. With hydro generators prioritising reservoir conservation, their ability to provide flexible peak-hour generation has become more constrained. Thus, gas-based power plants are expected to shoulder a larger share of the balancing requirement during evening peak hours. The growing reliance on gas-fired generation is also reflected in a rise in spot-market purchases of natural gas by power sector entities. As per the data provided by the Indian Gas Exchange (IGX) — the country’s leading gas-trading bourse — the power sector companies purchased 13,92,500 million Metric Million British Thermal Units (MMBtu) of natural gas between June 1 and June 23. The same stood at nil during June last year often attributed to lower demand due to rain. Notably, gas-based power plants in India are increasingly relying on the spot market to meet their requirement this summer as the conflict in West Asia disrupts supplies under long-term import contracts and clouds fuel availability. Between April 1 and May 31, power-sector entities purchased 45,07,850 MMBtu of natural gas from the spot market, which is 340.4% higher than the corresponding period in 2025. The rise in purchases came despite a sharp increase in spot-market gas prices amid supply disruptions due to the conflict in West Asia. The average spot gas price stood at Rs 1,606 per MMBtu in April, up 43.5% from Rs 1,119 per MMBtu a year earlier. Prices rose further to Rs 1,857 per MMBtu in May, a jump of 77.5% over Rs 1,046 per MMBtu in May last year. In June, the average spot gas price stood at Rs 1,846 per MMBtu.