Although several steps have been taken in recent years to facilitate cross-border trade in electricity in South Asia, eventually a broad-based framework for the free flow of electricity and transactions would be required. This will not only enable the region to benefit from such trades like the EU does today but also help provide enhanced operational resilience to the regional grid, asserts Rajesh Kumar Mediratta, Director, Strategy & Regulatory Affairs, IEX.
How will India directly benefit from cross-border trade in electricity?
Firstly, the country now has surplus power and, as a result, our generating assets are under stress. The cross-border trade will help us to sell power outside of our borders. Initially, countries like Nepal and Bangladesh will remain buyers. Bangladesh can replace costlier sources of generation like gas and fuel oil with cheaper power from India. Nepal will remain a buyer as it is yet to install sufficient capacity. Secondly, as a buyer, India will source hydropower from Bhutan, which is currently not so cheap as the construction of such plants is getting costlier. But the advantage is that we will be able to get balancing power for our renewable energy capacity. 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. So, balancing power for renewables can come from Bhutan and Nepal, while Bangladesh will be a major buyer in the years to come as the country does not have any major sources of generation. The country can look at increasing the percentage of its power purchase from India for its overall energy mix.
There is also a lot of conversation around the price of electricity reducing for consumers. How will that be achieved?
The price of electricity need not decrease because we already have a lot of renewable energy added into the grid, with the current price is hovering between Rs 2.90 to Rs 3 per unit. And with increased generation through solar and wind, the prices are likely to decline further. 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. The cross-border trade can help create that demand for the system.
But what about the infrastructure required to facilitate such trades? Is it adequate?
For Bangladesh we have 1160 MW of capacity, which is still short of demand and more capacity can easily be added. With Bhutan, we have sufficient transmission capacity. Only with Nepal, we have put up a 400 kV double circuit line from Dhalkebar to Muzaffarpur, which is currently operating at 220 kV. However, we will soon see this line operating at full capacity. That will lead to the availability of more capacity, with more power flowing from India to Nepal. Although infrastructure is available, it is now falling short since with the addition of new transmission lines the demand is also rising. The addition of a 400 kV line would be good for only a few more years. We understand that Nepal has a huge capacity of 40,000 MW of hydro potential and to be able to exploit 5000-10,000 MW it needs additional transmission network. Whatever network is there currently is only for taking long-term requirements or the power purchase agreement that is already tied up. But to transact on the exchange they probably need more capacity. As we have sufficient capacity with Bhutan, whenever a new power plant comes up, we create equivalent transmission capacity. So, these three countries will now be very well connected. However, we need to also develop trade with Myanmar as we are currently only giving 3 MW power to the country. This can be increased with the addition of more transmission capacity. Earlier, we were contemplating a submarine interconnection with Sri Lanka but now the plan is to have an overhead transmission line as the sea is shallow. This will also help in reducing the cost of the transmission line itself.
As a power exchange, are you satisfied with the revised trading guidelines issued by CERC last year?
The central government had issued guidelines in December 2018 and these were to be followed by more detailed procedures from the Central Electricity Authority (CEA) and also regulation from the Central Electricity Regulatory Commission (CERC). The regulation from CERC is already in place. 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, they need to take approval from the nodal agency. The nodal agency is the Member Power System of CEA. The procedure was subject to approval from the Ministry of Power, but that is still pending.
What are some of the primary level challenges that you have encountered even as a framework is being readied to facilitate such trades?
As such, we don't see any challenges. This is the first phase of cross-border trade where the countries will come to trade on Indian power exchanges through Indian trading licensees. Earlier, there was no provision for any country to do any transaction through an exchange. However, guidelines issued last year have enabled that. In the next phase, we expect there to be a broader regulatory framework to allow a smoother way of doing transactions so that entities in South Asia can trade through exchanges without requiring any Indian entities. For instance, presently agencies such as Nepal Electricity Authority and Bangladesh Electricity Development Board are trading through Indian traders. However, in the final stage of evolution, we should permit any entity from Nepal, Bhutan and Bangladesh to buy and sell power.
Is there anything that we can learn from the regional power market in the EU?
In Europe, such transactions have been happening through exchanges. The EU has 28 members out of which a substantial number operate their power markets through exchanges. Out of 3000 billion units of transactions, anywhere between 30-40 per cent happen through exchanges. That is the kind of market we must have where you have resources from all over the region converging and forming a pool to discover very robust prices. 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 1372 billion units, which barely comes to 10 per cent. We can achieve similar integration first in the Bangladesh-Bhutan-India-Nepal (BBIN) region and later extend it to SAARC and ASEAN. In the next phase, we must also expand it to the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). An expansion on that scale would provide the regional grid with far greater operational resilience.
- MANISH PANT