Despite improvements to energy supply over the years, many Indian states still face frequent power shortages. Meanwhile, neighboring Nepal and Bhutan have large reserves of untapped hydro power with the potential to meet unserved demand for energy in major load centres. Investing in interconnections could also contribute to significant reductions in CO2 emissions. Today’s blog quantifies potential gains from an integrated South Asian power

Chattopadhyay, Deb

Fernando, P. N.

Wijayatunga, Priyantha D.

LSE Research Online

20/06/2017 Cheaper, cleaner, more reliable: Why invest in cross-border power-trading - IGChttp://www.theigc.org/blog/cheaper-cleaner-more-reliable-why-invest-in-cross-border-power-trading/ 1/4Authors DebChattopadhyayPower System PlanningGroup LeadWorld Bank Priyantha D CWijayatungaPrinciple EnergySpecialistAsian Development Bank Dr. P.N. FernandoFormer Manager for Eastregion's infrastructure,energy and ﬁnancialsectorsAsian Development BankPublished on: 9 Nov 2015Countries: AsiaResearch themes: Energy “Cheaper, cleaner, more reliable:Why invest in cross-border power-tradingDespite improvements to energy supply overthe years, many Indian states still facefrequent power shortages. Meanwhile,neighboring Nepal and Bhutan have largereserves of untapped hydro power with thepotential to meet unserved demand forenergy in  major load centres. Investing ininterconnections could also contribute tosigniﬁcant reductions in CO  emissions.Today’s blog quantiﬁes potential gains froman integrated South Asian power.The benefits of interconnection between any two power systems– be it cross-border or national – is well known. At the simplestlevel, an interconnection allows cheaper surplus generationfrom one system to supplant more expensive generation in theother. The two systems require less overall capacity since theycan now ‘rely on each other’ supply. Depending on (carbon andother) emissions intensity – interconnections may also reduceoverall emissions. Despite the potential, these principles havenot yet been widely applied.A regional power market has however been envisioned by theSouth Asian Association for Regional Cooperation (SAARC).Nepal and Bhutan have over 100 Giga Watt (GW) of largelyuntapped hydro power potential and are located very nearmajor load centres in India, Bangladesh and Pakistan that arestruggling to keep the lights on.Following the Regional Energy Trade Study (SRETS) publishedby SAARC in 2010, the Asian Development Bank (ADB)undertook one of the first rigorous techno-economic analyses toexamine the benefits of cross-border power interconnections inSouth Asia. The study quantifies economic and reliability gainsassociated with six of the near-term cross-borderinterconnection candidates including: India, Bangladesh, Nepal,Bhutan, Pakistan, Sri Lanka and Afghanistan/Central Asia. Theremainder of this blog outlines the key findings of this cost-benefit analysis.Nepal and Bhutan have over 100 Giga Watt (GW)of largely untapped hydro power potential and are220/06/2017 Cheaper, cleaner, more reliable: Why invest in cross-border power-trading - IGChttp://www.theigc.org/blog/cheaper-cleaner-more-reliable-why-invest-in-cross-border-power-trading/ 2/4“of largely untapped hydro power potential and arelocated very near major load centres in India,Bangladesh and Pakistan that are struggling to keep thelights on. ”Beneﬁt to Cost ratios, even for the most expensiveinterconnections are promisingly highThe (gross) benefits of the six interconnections calculated for2016/2017 are extremely promising, as illustrated by Figure 1below.Figure 1: Cost-Beneﬁt values of InterconnectionsNote: Case-2 for India-Nepal considers two scenarios: (a)Nepal builds all planned projects (2000 MW) reaching surplusstate; (b) 650 MW of planned capacity addition is delayed,producing a deficit state. Similarly, Case-5 for India-Pakistanalso considers two scenarios: (a) Short-term 250 MW transfer at220 kV; and (b) Medium/long term 400 kV transfer of 500MW.Even expensive interconnections such as the one between Sri-Lanka and India, which requires a submarine cable, stillproduce a benefit to cost ratio of 3.7*. Most of the otherinterconnections being explored require comparatively lowerinvestments due to shorter distances and the use of overheadtransmission lines, as such, their benefit-to-cost ratios are alsorelatively higher. The India-Bhutan interconnection in particularis expected to deliver 15,000 Giga Watt-hour (GWh) of hydroenergy per year (at full capacity) for a relatively low investmentof $140-160 million. The cost of which could be recovered in aslittle as six months based on an estimated $350 million ofsavings from fuel costs alone!20/06/2017 Cheaper, cleaner, more reliable: Why invest in cross-border power-trading - IGChttp://www.theigc.org/blog/cheaper-cleaner-more-reliable-why-invest-in-cross-border-power-trading/ 3/4“Figure 2: Cross-border power trading(Source: ADB, Cross-border power trading in South Asia: Atechno-economic rationale, August 2015).Notes: (i) The arrows indicate the potential flow and directionof power between countries once the interconnection is inoperation; (ii) interconnections between India and Bhutan,Nepal and Bangladesh (Cases 1, 2 and 4) are anticipated to beoperational in the next 5 years, while interconnections betweenIndia and Sri Lanka, Pakistan, and Central Asia (Cases 3,5 and6) are expected to be longer-term (5-10 years).Interconnections have the potential to improve thereliability of regional power systemsAlthough the supply situation in India has vastly improved overthe last decade, several of its states continue to face both peakand energy shortages. If we consider the case of the India-Bhutan interconnection, power sharing has the potential tosharply reduce the amount of electricity demand that currentlygoes unmet (primarily on the Indian side). Valued at $555 perMWh , another $1.5 billion would be added in annual benefitsfrom approximately 3,000 GWh, or 20% of the electricitytransfers that could be used to meet unserved energy demand.India also faces a shortage of coal and gas; more importantly,there is a yawning gap between demand and supply of theseresources which is expected to emerge over the coming years.Interconnections with regional neighbors would form aformidable part of the solution to further improve the Indianpower system, particularly with respect to reliability. Importinghydro-power from Bhutan and Nepal would tremendously helpIndia preserve its coal/gas reserves.Interconnections with regional neighbors wouldform a formidable part of the solution to furtherimprove the Indian power system, particularly withrespect to reliability. ”Economic savings potential also exists for power trading amongpredominantly thermal systems like India – Bangladesh andIndia- Pakistan. Primary energy resources and power generationcapacity and efficiency are much more limited in Bangladeshand Pakistan, which forces these systems to rely significantly onexpensive oil-based power generation, or face major powercuts. The India-Bangladesh High Voltage Direct Current(HVDC) link that went live on October 2013 demonstrates thispoint with over 90 per cent utilisation of the link over the lasttwo years, and an estimated savings of Taka 40 billion per year(or ~$500 million).[1]Regional power-sharing may contribute to signiﬁcantreductions in CO  emissions2220/06/2017 Cheaper, cleaner, more reliable: Why invest in cross-border power-trading - IGChttp://www.theigc.org/blog/cheaper-cleaner-more-reliable-why-invest-in-cross-border-power-trading/ 4/4In addition to economic gains and improved energy reliability,interconnections would also help reduce carbon dioxide (CO )emissions. For India in particular, older, less efficient coalplants have an average emission intensity of 1,350 tonne ofCO  per GWh. Looking just at the value of hydropowergeneration transferred from Bhutan to India, CO  emissionscould be reduced by 10 million tonnes per year by 2016/17, andas much as 40 million tonnes, by 2020/21.[1] The collective fuelcost savings (from all six interconnection cases) is close to $300million and the corresponding reduction in annual COemissions in India from reduced reliance on coal-basedgeneration would be over 13 million tonnes.  The longer termfuel cost savings of importing 40,000 GWh of hydro electricityfrom Bhutan alone would be 3-4 times as high.ConclusionsIn summary, there are some compelling arguments in favor ofestablishing regional power-sharing interconnections for SouthAsia. The growing volume of trade between India and Bhutanand between India and Bangladesh has already started puttingthe value of these interconnectors on a firmer footing. The setof six near-term interconnection possibilities discussed in thisblog represents a small fraction of the interconnectionpossibilities that exist for the region. It is important that policymakers, planning bodies, system operators, investors and donoragencies collaborate to identify and prioritise further investmentopportunities to make the SRETS vision a reality.*Benefit to Cost ratio of 3.7 is based on $186 Million inexpected benefit / $50 Million in expected cost[1] R.V. Shahi, Foreign Investment in Bangladesh: SpecialSession on Power Sector, 29 March 2014.[2] The expected CO  reduction in India alone due to Bhutan-India interconnections is expected to be around 0.1% (2016/17)of the emission in 2010 (power sector) and it can grow to 0.4%by 2020/21 (INDIA’S CO  EMISSIONS PATHWAYS TO2050, Imperial College and UCL, Jan 2013)2222222

Cheaper, cleaner, more reliable: why invest in cross-border power-trading

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