The formation of a robust cross-border framework in the South Asia region is expected to bring down the cost of electricity and allow India to achieve the flexibility to regulate the intermittency of power generated by its wind and solar farms.
There is tremendous economic value to cross-border electricity trade (CBET) within the Indian Subcontinent, say studies available on the subject. Given the humongous hydroelectric potential available with them, countries such as Bhutan and Nepal, stand to immensely benefit from the sale of electricity to India. Meanwhile, Bangladesh that has emerged as one of the fastest-growing economies in the region, could buy electricity from India or source it from Nepal through India to meet the increasing demand for the commodity from both its industry and aspirational population.
CBET will allow India to achieve the flexibility to regulate the intermittency of power generated by its wind and solar farms. "There is a huge scope for Bhutan's hydroelectric projects to function like our battery bands. Presently, most plants in Bhutan are run-of-the-river projects. But the new plants that are coming up have reservoir dams where water can be stored to be utilised to generate power whenever required," Rajesh Kumar Mediratta, Director, Strategy & Regulatory Affairs, India Energy Exchange (IEX) told INFRASTRUCTURE TODAY.
Moreover, an interconnected grid that would result from such a framework would benefit the entire region. Speaking to the magazine, Pankaj Batra, Project Director, SARI/EI/IRADe stated, "With an interconnected grid and cross-border trading of electricity, each country need not have individual generating capacity to meet its own peak, as the peak demands are staggered. With the transfer of electricity, each country can plan for lesser capacity, as well as lesser reserves that may be required when tripping happens. It is always economically beneficial to interconnect and share resources."
SYNERGY THROUGH INTER-CONNECTIVITY
The formation of a robust cross-border framework is also expected to bring down the cost of electricity by at least 7 per cent. According to Batra, the South Asia Regional Initiative for Energy Integration (SARI/EI) and Integrated Research and Action for Development (IRADe) would be conducting further research to determine the extent of such a reduction.
However, the power trading platform IEX's Mediratta was of the view that CBET might not have much of an impact on power tariffs as with the addition of a large amount of renewable energy into the grid, the per-unit prices are already at lower levels. "That in itself is creating a challenge for coal-based power plants as their plant load factor (PLF) is decreasing. For instance, in FY2019 the average PLF was around 60 per cent and this year it has so far been around 50 per cent. With that kind of decline in PLF, there is a need to create more demand for power." He felt that increased cross-border trade might help in pushing up demand.
Given the size of the Indian Subcontinent, there is tremendous variation in peak demand over the course of a year. This allows room for developing synergies for both grid integration and power trading. The gains for the creation of such partnerships have been further facilitated by improved interconnections between these countries.
This might, therefore, be the time to leverage those gains. Given the demand of a growing population, experts have pointed out that the grid thus created would be one of the biggest in the world. Another interesting aspect here is that a country such as Bangladesh, which doesn't have sufficient land for setting up renewable energy plants, can buy power from India. This, in effect, would also help it in meeting its commitment to cut down on carbon emissions under the Paris Agreement of 2015 by helping reduce its dependence on hydrocarbons like gas and fuel oil.
The United States Agency for International Development (USAID) has been supporting the programme for nearly two decades now. "USAID has been working to advance CBET in South Asia since 2000 through its South Asia Regional Initiative for Energy or SARI/E programme. When USAID started this programme, its focus was broader and it strived to promote energy cooperation in the region by working on three areas: cross-border energy trade, energy market formation, and clean energy development. Over the years, the focus has narrowed to cross-border electricity trade," pointed out Monali Zeya Hazra, Regional Energy Manager & Clean Energy Specialist, USAID India.
The agency has extended the SARI/E programme with IRADe till 2022 and will focus on transitioning South Asia from bilateral power trade to tri-and multi-lateral power trade and establishing the regional power market.
INFRA READINESS AND POLITICAL WILL
Amid all the developments, an important question that comes to mind is whether the necessary infrastructure required for rolling out this ambitious enterprise in a large and diversified region available. Experts aver that the infrastructure is largely in place, with plans already afoot to expand it further. For instance, the 400 kV double circuit line from Dhalkebar in Nepal to Muzaffarpur in India is likely to start getting its full load from this year. The line is presently charged at 220 kV. Bangladesh, too, has chalked out plans to establish interconnections through AC lines with India. The Himalayan kingdom of Bhutan is already enjoying strong AC interconnections with India. Meanwhile, Sri Lanka will get connected to the Indian landmass through either partly undersea and partly overhead cables or a completely overhead line. After obtaining the necessary clearances, the project is slated to be completed in three years from the date of commencement.
What has really helped to hasten CBET development is the emergence of political will. Here, experts point out, India's outreach to its South Asian neighbours in recent years has played a very important role. Batra felt that with everyone on the same page on the issue, the question that could most probably be asked was whether the country had adequate surplus power to supply its neighbours. "But that is a generic issue because even now we have got about 30-40,000 MW of stranded generating capacity. Such issues arise because distribution companies avoid feeding low-tariff consumers or consumers who get free electricity because that can add to their losses. However, even if you feed them, their consumption would be less than the consumption of households in cities. So, their demand is not likely to put any significant pressure on the overall capacity," he opined.
Batra felt that Nepal especially would be under pressure to export excess production to markets like India and Bangladesh, once the significant expansion of its hydroelectric projects is achieved this year. "Several of their hydropower plants, with a consolidated capacity of around 1000 MW are currently under construction. The country's whole load is around 1300 MW. Those plants are likely to be commissioned within a year. Now, when that happens, they will also need to export that excess electricity," he pointed out. In the long-term, Batra sees things working out to everyone's advantage.
"It's a win-win situation for everyone. Like, whenever there is a low inflow season in the case of Nepal and Bhutan, they can import electricity from India. And during the high hydro season, they can export to India, under barter or banking of power arrangements," he added.
HUGE GROWTH POTENTIAL
With things still being in the initial stage, the very small size of the market presents yet another growth opportunity. "Currently, the day-ahead market for electricity in India is only 50 billion units and it is expected to increase to 60 billion units by next year. Our short-term market is still very small. It is 120 billion units of the short-term market out of a total energy production base of 1,372 billion units, which barely comes to 10 per cent," pointed out Mediratta.
In 2019, India's Central Electricity Regulatory Commission (CERC) had notified new trading regulations for cross-border deals. "Now, we are waiting for procedures because in the guidelines there is a provision that anyone who wants to do cross-border trading either from India or overseas, needs to take approval from the nodal agency. The nodal agency is the Member Power System of Central Electricity Authority (CEA). The procedure was subject to approval from the Ministry of Power, but that is still pending," stated Mediratta.
In the final stage of the evolution of such a grid, Mediratta would like to see anyone from the Subcontinent being able to buy and sell power directly without having to go through an Indian entity.
Besides, necessary technical guidelines for the proposed grid also need to be adopted by all regional stakeholders at the earliest to ensure its smooth functioning.
Transitioning to Regional Power Market
SARI/EI programme with IRADe has been extended till 2022 and will focus on transitioning South Asia from bilateral power trade to tri-and multi-lateral power trade and establishing the South Asian Power Market.
USAID has been working to advance cross-border electricity trade (CBET) in South Asia since 2000 through its South Asia Regional Initiative for Energy or SARI/E programme. According to Monali Zeya Hazra, Regional Energy Manager and Clean Energy Specialist, USAID/India, when USAID started this programme, its focus was broader and it strived to promote energy cooperation in the region by working on three areas: cross-border energy trade, energy markets formation and clean energy development. Over the years, the focus has narrowed to cross-border electricity trade.
The initial years of SARI/E, from 2000 until 2003 (Phase 1) and from 2004-2007 (Phase 2), focused on bringing together energy stakeholders from the region to build trust and networks. During this period, USAID focused on regional policy development, information sharing, and familiarisation with the regulatory and institutional structures of the national power systems of South Asian countries. It also helped the countries to dig deeper into the benefits of sub-regional cooperation. One of the early SARI/E studies, the Four Corners Electricity Interconnection Study in 2004, was especially important in identifying the scope, opportunities and mechanisms for energy cooperation among Bangladesh, Bhutan, India and Nepal (BBIN).
Encouraging interconnectedness and study
During Phase 3 of the SARI/E programme, several pre-feasibility studies were conducted to build consensus on the initial shortlist of priority regional energy projects and providing the initial base for pursuing more detailed feasibility and design efforts. SARI/E played a prominent role in supporting the interconnection between India and Bangladesh through the Baharampur-Bheramara link, which has resulted in 1000 MW of power trade between the two countries. Likewise, SARI/E conducted the pre-feasibility study on the India-Sri Lanka transmission interconnection that resulted in an MoU between the governments of India and Sri Lanka to establish a high-capacity transmission power link (HCTPL). SARI/E also supported the India-Nepal power trade by providing early support for the Dhalkebar-Muzzafarpur line through a pre-feasibility report and technical assistance to the Nepal Electricity Authority on the transmission service agreement.
Enhanced focus on electricity trade
From 2012, the focus narrowed to cross-border electricity trade with the fourth and current phase of the programme, renamed as South Asia Regional Initiative for Energy Integration (SARI/EI). SARI/EI is implemented by Integrated Research and Action for Development (IRADe), an Indian think-tank. This phase is different from the earlier phases as it involves the countries governments through three inter-governmental task forces. These task forces focus on harmonisation of policies, regulations and legislation, the advancement of transmission interconnection and establishment of South Asian power markets. Several technical studies such as harmonisation of grid codes, regional regulatory framework, market rules, regional guidelines on investment framework, macro-economic benefits of power trade between India and Nepal, etc., have been completed as a part of this phase. Also, SARI/EI is also extending technical support to regional institutions such as South Asian Forum of Infrastructure Regulators (SAFIR), South Asian Association for Regional Cooperation (SAARC) Secretariat and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).
Awareness and capacity building
Realising the importance of institutional and human capacity, over the years USAID has focused on increasing awareness and building capacity as a core element of all phases of the SARI/E programme. Several workshops, customised pieces of training, and executive exchanges have been held on a wide range of issues, such as power trade, planning and due-diligence of large hydro-power plants, tariff development, power markets and transmission inter-connections for both HVDC and synchronous grids.
SARI/EI programme with IRADe has been extended till 2022 and will focus on transitioning South Asia from bilateral power trade to tri-and multi-lateral power trade and establishing the South Asian Power Market. Besides, the US government recently announced Asia EDGE (Enhancing Growth and Development through Energy), a US whole-of-government effort to grow sustainable and secure energy markets throughout the Indo-Pacific region.