SARI/Energy Integration

South Asia Regional Initiatives for Energy Integration (SARI/EI)

Shanker KhagiUSAID/Nepal

March 7, 2013Kathmandu, Nepal

Supporting Cross Border Energy Trade in South Asia

SARI/Energy

Good Reasons for Cross Border Energy Trade

• Continued power shortages hamper growth prospects

• Regional complementarity• Seasonal Imbalances • Daily Imbalances • Strengthen economic

environments • Provide for an improved

quality of life • Energy security = Security

SARI/Energy IntegrationChange

• Good reasons for change aren’t enough. • There must be the political will for change. • Political will reflects stakeholder

expectations… – but also stakeholder concerns about the future – and how best to meet the challenges of the future

• Concerns are generational • Change is generational

SARI/Energy IntegrationSARI/E Past

USAID’s South Asia Regional Initiative for Energy (SARI/E)

– Launched in 2000

– Completed its 3rd Phase in 2012

– Having successfully helped position stakeholders for the future

– Looking to leveraging its success in a 4th Phase

SARI/Energy Integration

NEPAL• Expert review ofTransmission ServiceAgreements and Key Issues

..

SARI/E Past

.

INDIA• Bilateral Electricity links to Bangladesh,Sri Lanka and Nepal• Spread energyexchange models &training

B• Senior LevelExchange Program toIndian EnergyExchange , PTC andCERC

PAKISTAN• CASA 1000 Advisory Services

B

SRI LANKA• India-Sri Lanka Submarine PowerTransmission Interconnection-Interconnection Reliability and StabilityStudyfor CEB, Sri Lanka Wind powerdevelopment• HVDC Hands-on training at PGCIL sub-stationB

MALDIVES• Maldives Submarine CableInterconnection Study• Workshop on Advancing Low CarbonGrowth Through Regional Cooperationand Cross-Border Energy Trade

REGIONAL• SATURN Network formation and Induction ofPOWERGRID as SATURN member

M

BHUTAN• Executive Exchange toBhutanPower Corp.

BANGLADESH• HVDC training atPGCIL sub-station

BM

= Bilateraltrade

= Multi-lateraltrade

SARI/Energy IntegrationFindings of a Political Economy Study 2012

1. There are 2 Distinct Sub-Regions in South Asiai. Eastern Sub-region

(Bangladesh + Bhutan + India + Nepal + Sri Lanka)

ii. Western Sub-region (Afghanistan + Pakistan)

and 2. The concept of a Regional

Energy Grid across South Asia is being superseded by a “Virtual Energy Grid”

West East

SARI/Energy IntegrationSub-regions

East• Strong interest in developing

energy markets

• Indian market is economic engine for Sub-Region

• Growing number of interconnections with India

• On track for “Virtual Energy Grid”

West• No Markets … but represents

important vision for trade

• Ongoing of conflict and worsening political uncertainty (instability)

• Several project opportunities – high risk / high reward

SARI/Energy IntegrationA Regional Energy Grid

• A “Regional Energy Grid” – a transmission infrastructure linking the continental countries of South Asia – has been a long sought but unfulfilled objective.

• Existing, Developing, Prospective connections between India and neighboring states: – Are they the beginnings of the “Regional Energy

Grid”?

SARI/Energy Integration

Cross Border Energy Trade

Com

plex

ity

1

SARI/Energy Integration

We see three emerging interconnectionbusiness models under development….

Bilateral Tradebetweenneighboringcountries

• Smaller scope,easier to develop

• Can use powermarket drivenmodel forfacilitatingtradethrough trader ornational energyexchange

Regional bilateraltrade via transit

Regional energy markettrade

• South Asia Regional

•

Trade - betweenneighboring or non-neighboringcountries viaregional gridthrough regionalmarketmechanisms,Trade with OtherRegions - includingCentral Asia, S.E.Asia

Time

SARI/E Emphasis

country2

• Bilateral tradebetween non-neighboringcountries viatransit country

• CASA 1000Tajikistan andPakistan viaAfghanistan

3

SARI/Energy IntegrationRegional Energy Trading

• 2007 – Guidelines for power exchanges in India

• 2008 – Indian Energy Exchange – first ever power exchange in India

• 2014 - With unification of India’s grids it will be possible for energy transactions between any two points in India

• Subsequently - With connections to India, it will be also be possible for energy transactions between any two points in countries connected to India.

• Without the requirement of building extensive international transmission networks, the Virtual Energy Grid can be used as soon as bi-lateral connections with India are in place.

SARI/Energy Integration

Developing the Virtual Energy Grid

• “Hardware” Interconnections: Technical challenges are manageable but get most of sector’s attention

• “Software” is critical to enable interconnections to happen, and needs more focused attention:

–Commercial trading arrangements

–Legal and Regulatory issues

–Media issues and public outreach

SARI/Energy IntegrationPriorities

1. Political consensus – legislation to permit cross border energy trade

2. Encouraging Public-Private Partnerships for cross border energy projects

3. Completing the interconnections between India and its neighboring countries

4. Harmonizing laws governing commercial energy trade among the countries

5. Establishing independent regulatory regimes in each South Asian country and harmonizing regulations governing cross border energy trade

6. Functionally restructuring the energy utility sector in each country.

7. Ensuring that retail energy tariffs are cost reflective in each of the countries.

SARI/Energy IntegrationSARI/EI Forward

• Project Steering Committee formed – meeting on March 12

• Task Forces to be formed on– Policy, Legal, Regulatory– Generation & Transmission Infrastructure Planning– Energy Trading/Exchanges and markets

• Coordinating with Supporting Institutions like SAARC, MDBs

• Promoting Public-Private Partnerships

SARI/Energy

34

Thank You!