Cross-Border Power Trading in South Asia a Techno Economic Rationale
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Cross-Border Power Trading in South Asia A Techno Economic Rationale Diversity in primary energy sources in South Asian countries and their electricity demand patterns both time-of-day as well as across different seasons open up opportunities for greater use of cheaper and cleaner resources for electricity generation reducing fossil fuel use in the region. Such sharing of resources through electricity trading requires electricity transmission system strengthening including planning and development of cross-border transmission lines. The paper presents the economic and reliability benefits of electricity trading among the South Asian countries with case studies involving six cross-border transmission lines. About the Asian Development Bank CROSS-BorDER POWER ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries reduce poverty and improve the quality of life of their people. Despite the region’s many successes, it remains home to the majority of the world’s poor. ADB is committed to reducing poverty through inclusive TRADING IN SOUTH ASIA: economic growth, environmentally sustainable growth, and regional integration. Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for A TECHNO EcONOMIC helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. RATIONALE Priyantha Wijayatunga, D. Chattopadhyay and P. N. Fernando NO. 38 ADB SOUTH ASIA August 2015 WORKING PAPER SERIES ASIAN DEVELOPMENT BANK 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines ASIAN DEVELOPMENT BANK www.adb.org ADB South Asia Working Paper Series Cross-Border Power Trading in South Asia: A Techno Economic Rationale Priyantha Wijayatunga, D. Chattopadhyay, Priyantha Wijayatunga is Principal Energy and P. N. Fernando Specialist, South Asia Energy Division, ADB. No. 38 August 2015 D. Chattopadhayay is Consultant, South Asia Regional Power Exchange Study, ADB. P.N. Fernando is Senior Advisor, South Asia Regional Power Exchange Study, ADB. ASIAN DEVELOPMENT BANK Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines www.adb.org © 2015 by Asian Development Bank August 2015 ISSN 2313-5867 (Print), 2313-5875 (e-ISSN) Publication Stock No. WPS157571-2 The views expressed in this paper are those of the author and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. Unless otherwise noted, "$" refers to US dollars. The ADB South Asia Working Paper Series is a forum for ongoing and recently completed research and policy studies undertaken in ADB or on its behalf. It is meant to enhance greater understanding of current important economic and development issues in South Asia, promote policy dialogue among stakeholders, and facilitate reforms and development management. The ADB South Asia Working Paper Series is a quick-disseminating, informal publication whose titles could subsequently be revised for publication as articles in professional journals or chapters in books. The series is maintained by the South Asia Department. The series will be made available on the ADB website and on hard copy. CONTENTS EXECUTIVE SUMMARY .................................................................................................................................... v I. INTRODUCTION .................................................................................................................................................. 1 A. South Asian Power Grid ............................................................................................................................. 2 B. An Overview of the Literature ................................................................................................................. 4 C. Economic Context for South Asian Power Trading in the Near Term ..................................... 4 D. Lessons from Power Interconnections in South Asia ..................................................................... 5 E. Risk Mitigation ............................................................................................................................................... 6 II. SCOPE OF STUDY ............................................................................................................................................... 7 III. METHODOLOGY ................................................................................................................................................ 7 A. Modelling ........................................................................................................................................................ 7 B. Case Studies ................................................................................................................................................... 9 IV. RESULTS ................................................................................................................................................................... 9 V. DISCUSSION ........................................................................................................................................................ 10 A. Case Study 1: Bhutan-India Power Transmission Reinforcement ............................................ 10 B. Case Study 2: India – Nepal 400 kV Cross-Border Interconnection ........................................ 11 Scenario 1: All planned capacity addition achieves to reach surplus state ............................. 11 Scenario 2: Nepal continues to be in a deficit state ....................................................................... 12 C. Case Study 3: India-Sri Lanka Submarine Link ................................................................................ 12 D. Case Study 4: Bangladesh-India HVDC Link .................................................................................... 13 Surplus state (Case 1) ................................................................................................................................ 13 Tighter demand-supply balance (Case 2 and Case 3) ................................................................... 13 E. Case Study 5: India – Pakistan 220/400 kV ....................................................................................... 14 Short term 250 MW power transfer: India-Pakistan ..................................................................... 14 Medium Term 500 MW power transfer: India-Pakistan ............................................................. 14 F. Case Study 6: CASA 1000 (Including India) .................................................................................... 14 G. Regulations For Unserved Energy Reduction Benefits ..................................................................15 H. Emission Reduction Impact ....................................................................................................................15 VI. CONCLUSIONS AND POLICY IMPLICATIONS ................................................................................. 16 VII. ACKNOWLEDGMENT .................................................................................................................................... 17 VIII. REFERENCES ........................................................................................................................................................ 18 TABLES AND FIGURES TABLES 1. Electricity Supply and Demand in SAARC Countries (2013/14) ........................................................... 2 2. Interconnection projects selected for case studies ................................................................................... 7 3. Results of the six case studies ........................................................................................................................... 9 FIGURES 1. Major drivers of power trading in South Asia ............................................................................................... 3 2. Simulation Overview ............................................................................................................................................ 8 EXECUTIVE SUMMARY The paper presents the results of a study on the economic and reliability benefits of electricity trading among the countries in South Asia encompassing the subregion containing Afghanistan, Bangladesh, Bhutan, India, Nepal, Pakistan and Sri Lanka. This study complied in 2013 built on the SAARC (South Asia Association of Regional Cooperation) Regional Energy Trade Study (SRETS) conducted by Asian Development Bank (ADB). Such electricity trading would allow utilities to optimally utilise the available resources to satisfy demand across the whole subregion. Maldives was not considered in the study due to its remoteness from the rest of the South Asian landmass and hence the difficulty in providing an electricity transmission interconnection. The study also considered the possibility of South Asian region benefitting from electricity trade with Central