SOUTH ASIA REGIONAL INITIATIVE FOR ENERGY INTEGRATION (SARI/EI) Linking South Asia with Burma & Southeast Asia to Advance Cross Border Electricity Trade: A Political Economy Study Final Report July 2018 Linking South Asia with Burma and Southeast Asia: A Political Economy Study – Final Report Abbreviations AC Alternating Current ACE The ASEAN Centre for Energy ADB Asian Development Bank AMS ASEAN Member States APSCL Ashuganj Power Station Company Ltd. ASEAN Association of Southeast Asian Nations BBIN Bangladesh, Bhutan, India and Myanmar BEA Bhutan Electricity Authority BEA Bhutan Electricity Authority BERC Bangladesh Energy Regulatory Commission BIFPCL Bangladesh-India Friendship Power Company (Pvt.) Ltd. BIMSTEC Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation BOO Build Own Operate BOT Build Operate Transfer BPC Bhutan Power Corporation BPC Bhutan Power Corporation BPDB Bangladesh Power Development Board BSEC Black Sea Economic Cooperation BSR Balance and Settlement Regulation BSTP Black Sea Regional Transmission System Planning Project CA Constituent Assembly CAGR Compound Annual Growth Rate CCPP combined cycle power plants CEA Central Electricity Authority CERC Central Electricity Regulatory Commission CIS Commonwealth of Independent States CSO Civil Society Organizations D/c Double circuit DAM Day Ahead Market DC Direct Current DESCO Dhaka Electricity Supply Company DFID Department for International Development DGPC Druk Green Power Corporation DGPC Druk Green Power Corporation DHPC Dagachu Hydro Power Corporation DHPS Department of Hydropower and Power Systems DoED Department of Electricity Development, Nepal DPDC Dhaka Power Distribution Company EA The Electricity Act 2003 EGCB Electricity Generation Company of Bangladesh EMRA Energy Market Regulatory Authority ENTSO-e European Network of Transmission System Operators for Electricity EPF Electricity Power Forum ERC Electricity Regulatory Commission ESCO Electricity System Commercial Operator ETFC Electricity Tariff Fixation Commission FBCCI Federation of Bangladesh Chambers of Commerce and Industry FDI Foreign Direct Investment Page | I Linking South Asia with Burma and Southeast Asia: A Political Economy Study – Final Report GCC Gulf Cooperation Council GCCIA Gulf Cooperation Council Interconnection Authority GDP Gross Domestic Product GMS Greater Mekong Sub-region GNERC Georgian National Electricity Regulatory Commission GSE Georgian State Electrosystem GSE Georgian State Electrosystem GW Giga Watt GWh Giga Watt-hour HEP Hydro Electric Plant HVAC High Voltage Alternating Current HVDC High Voltage Direct Current Hz Hertz IBN Investment Board of Nepal IGA Inter-Governmental Agreement IGA Inter-Governmental Agreement IL&FS Infrastructure Leasing & Financial Services IPP Independent Power Producer ITC Interconnector Transmission Code JV Joint Venture kV Kilo Volt MNRE Ministry of New and Renewable Energy MOE Ministry of Energy MOEE Ministry of Electricity and Energy MOEP Ministry of Electric Power, Burma MoP Ministry of Power, India MOU Memorandum of Understanding MOWR Ministry of Water and Resources MPEMR Ministry of Power, Energy and Mineral Resources, Bangladesh MTOE Million Tons of Oil Equivalent MW Megawatt NEA Nepal Electricity Authority NGO Non-Governmental Organizations NVVN NTPC Vidyut Vyapar Nigam NWPGCL North West Power Generation Company Ltd. PDA Project Development Agreement PEA Political Economy Analysis PETA Power Exchange Trading Agreement PGCB Power Grid Company of Bangladesh Limited PGCIL Power Grid Corporation of India Limited PPA Power Purchase Agreement PRC People's Republic of China PSU Public Sector Undertaking PTA Power Trade Agreement PWG Planning Working Group QRPP Quick Rental Power Plant REB Rural Electrification Board RERA Regional Electricity Regulators Association of Southern Africa RGOB Royal Government of Bhutan ROW Right of Way Page | II Linking South Asia with Burma and Southeast Asia: A Political Economy Study – Final Report RPCC Regional Power Coordination Center RPCL Rural Power Company Limited RPGCL Rastriya Prasaran Grid Company Limited RPO Renewable Purchase Obligation RPP Rental Power Plants RPTCC Regional Power Trade Coordinating Committee RPTOA Regional Power Trade Operating Agreement RRB Regional Regulatory Board RTI Right to Information SAARC South Asian Association for Regional Cooperation SAARC South Asian Association of Regional Cooperation (SAARC) SADC Southern African Development Community SADC Southern African Development Community SAME SAARC Market for Electricity SAPP Southern African Power Pool SARCO SAARC Arbitration Council SARI/EI South Asia Regional Initiative for Energy Integration SARSO SAARC Regional Standards Organization SASEC South Asia Sub-Regional Economic Cooperation SDF SAARC Development Fund SEA Southeast Asia SEB State Electricity Board SREDA Sustainable Renewable Development Authority STEM Short Term Electricity Market TAU Technical and Administrative Unit TEAS Turkish Electricity Generation-Transmission Corporation TEIAS Turkish Electricity Transmission Company TEK Turkish Electricity Company TETAS Turkish Electricity Wholesale Company TSA Transmission Service Agreement TSO Transmission System Operator UAE United Arab Emirates UNCTAD United Nations Conference on Trade and Development USAID United States Agency for International Development USEA United States Energy Association WB World Bank WEC Water and Energy Commission, Nepal WR Western Region WZPDCL West Zone Power Distribution Company Ltd Page | III Linking South Asia with Burma and Southeast Asia: A Political Economy Study – Final Report Table of Contents 1 EXECUTIVE SUMMARY ............................................................................................................................. 1 2 INTRODUCTION ........................................................................................................................................ 4 2.1 ABOUT SOUTH ASIA REGIONAL INITIATIVE FOR ENERGY INTEGRATION (SARI/EI) ..................................................... 4 2.2 CONTEXT AND OBJECTIVE OF THIS REPORT ......................................................................................................... 4 2.3 REGIONAL GROUPINGS IN SOUTH ASIA AND SOUTHEAST ASIA ............................................................................... 5 2.1 REGIONAL GROUPINGS – KEY COMPARISONS .................................................................................................... 8 2.2 BILATERAL COOPERATION FOR ELECTRICITY TRADE IN SOUTH ASIA ....................................................................... 10 2.3 BILATERAL COOPERATION FOR ELECTRICITY IN SOUTHEAST ASIA .......................................................................... 18 2.4 KEY DRIVERS FOR REGIONAL CROSS-BORDER ELECTRICITY TRADE .......................................................................... 18 2.5 KEY CHALLENGES AND RISKS ......................................................................................................................... 20 3 INTERNATIONAL EXPERIENCE IN CROSS-BORDER ELECTRICITY TRADE ................................................... 22 3.1 SOUTHERN AFRICAN POWER POOL (SAPP) .................................................................................................... 22 1.4 GREATER MEKONG SUB-REGION (GMS) ........................................................................................................ 24 3.5 GULF COOPERATION COUNCIL (GCC) ............................................................................................................ 27 3.2 TURKEY – GEORGIA INTERCONNECTION .......................................................................................................... 30 3.3 BLACK SEA REGION POWER MARKET INTEGRATION............................................................................................ 34 4 POLITICAL ECONOMY ANALYSIS: COUNTRY LEVEL & SUB-REGIONAL LEVEL ........................................... 37 4.1 BANGLADESH ............................................................................................................................................ 38 4.2 BHUTAN .................................................................................................................................................. 47 4.3 INDIA ...................................................................................................................................................... 54 4.4 NEPAL ..................................................................................................................................................... 64 4.5 BURMA .................................................................................................................................................... 70 4.6 SUB-REGIONAL POLITICAL ECONOMY ANALYSIS ................................................................................................. 76 4.7 REGIONAL RISK ASSESSMENT ........................................................................................................................ 81 5 BURMA: A BRIDGE BETWEEN SOUTH ASIA AND SOUTHEAST ASIA ......................................................... 82 5.1 POLITICAL, SOCIAL AND MARKET DYNAMICS ................................................................................................... 82 5.2 HARMONIZATION OF ENERGY POLICIES ........................................................................................................... 86 5.3 LEGAL AND REGULATORY FRAMEWORK