Transcript Energy Security in South Asia: Constraints and Opportunities

Energy Security in South Asia:
Towards a Regional Energy Market
Kaushik Ranjan Bandyopadhyay
Asian Institute of Transport Development
Energy and Development Concerns in South
Asia: Some Essential Facts
• Burgeoning growth in population ( currently stands at 1359 million,
20 % of World Population)
• High income and capability poverty (Income poverty varies from
39.7 for Srilanka to 85.7 Bangladesh; HDI rank varies from 95 for
Maldives to 146 for Bangladesh)
• High dependence on imported oil (varies from around 25 % for
Bhutan to 100% for the Maldives)
• High energy poverty among the rural masses (completely isolated
from modern commercial sources of energy for cooking and
lighting)
• Traditional fuel i.e. biomass and firewood consumption as per
cent of total energy requirement is very high
• Per capita commercial energy consumption is at abysmally low
level but energy intensity (energy consumption per unit of GDP) is
considerably higher- hints towards inefficient energy utilization
Key Vulnerabilities in SA at the country level
• Low resilience to oil price volatility for each country
(oil demand is inelastic to price rise in short to medium
run)
• Limited reserves and major dependence on imported
oil from a clumsy non-cohesive cartel OPEC with a
very low historical compliance with the quota coupled
with geopolitical uncertainties, erosion of spare
capacity, influx of speculative elements.
• Limited scope of changing the existing energy
resource
base
or
achieving
technological
breakthrough (in the short to medium run) due to
cost considerations
Key Vulnerabilities (continued)
• Daunting challenge of ensuring universal electrification
especially providing access to rapidly growing poor rural
masses coupled with massive power outages, T&D losses
and power theft in each country
• Deforestation, environment degradation and high
morbidity and mortality of rural children and women
(due to exposure to indoor smoke) on account of using
biomass and firewood in inefficient traditional oven for
combustion.
• High energy subsidy (including considerable high subsidy
on fossil fuels)
• Institutional, capacity, regulatory and financial barriers
Addressing the vulnerabilities:
Broad Strategies
• Developing a regional risk pooling mechanism by making intergovernmental and institutional arrangement for jointly procuring oil
and natural gas
• Developing Strategic Reserves as oil shock contingencies
• Diversifying the sources of fuel supply by developing an efficient
regional market for trading especially in electricity and gas via
interconnected electricity networks or gas grid
• Developing a mechanism for RD&D and sharing geological and
other relevant data, knowledge, expertise, technology and
promoting capacity building at the regional level especially in
energy demand management measures (conservation and energy
efficiency), improving energy sector governance and in developing
alternate sources like renewable (hydro, solar, biofuel etc.)
• Encouraging initiatives at all level for developing energy
technology and charting out a broad technology perspective for the
region
• Facilitating in development and harmonization of regional
infrastructure, financial mechanism, and regulatory mechanism
Mapping the Commercial Energy Resource Base
of SA
• Afghanistan: Moderate gas/hydro power potential, but
large solar and wind potential
• Bangladesh: Large gas, coal and solar resource; low hydro
power
• Bhutan: Large hydro power, solar and wind potential
• India: Large coal, hydro, wind and solar; but moderate
gas/oil
• Maldives: Moderate wind but high solar potential
• Nepal: Large hydro potential and solar potential and
moderate wind
• Pakistan: High coal, gas, hydro, Low oil; but rich solar and
wind potential
• Sri Lanka: Moderate hydro, but large wind and solar
resources
Key Potential for Regional Energy Trading
• Intra-regional trade in electricity
– Hydro electricity exports from Nepal and Bhutan to India or
through India to Bangladesh, Pakistan and Srilanka
– Potential for increasing grid interconnections
• Inter-regional trade in oil
– Scope for regional cooperation for routing oil imports into the
region from far off countries like Venezuela in VLCC
• Transit trade in natural gas
– Trading gas between Central Asia and Middle East and India
would require pipeline transit through Pakistan and Afghanistan.
Importing gas from Myanmar to India would require pipeline
transit through Bangladesh. Countries providing transit could
also access gas for their own use. Pipelines for transit trade
under exploration- IPI ; TAPI ; MBI and QIPI
Potential Benefits of Energy Trading in SA
– Immense scope for innovation and achieving
economies of scale in energy production
– Improved energy security and reliability
– Reduced costs and prices through scale effects
– Optimal utilization of huge hydro-resources in
the region
– Institutional capacity building in the electricity
sector of the region
– Reduced impact on the environment
– Possibility of earning substantial export revenues
especially from electricity trade
– Eventual multiplier effects in terms of faster
economic growth
Existing Regional Electricity Trading Infrastructures in SA
•
•
Bhutan-India: Bulk of power generated at Hydro Electric Projects at Chukha
(336MW), Kurichu (60MW) and Tala (1020MW) in Bhutan, which have been
implemented with technical and financial assistance of India, is exported to
India after meeting the internal demand of Bhutan. India also exports power
to Bhutan during winter period when there is reduced hydro generation in
Bhutan. The cooperation between Bhutan and India in hydropower is
documented as a successful model energy trading in the region.
Nepal-India: The power exchange takes place between Nepal Electricity
Authority and utilities on the Indian side namely Bihar State Electricity Board
(BSEB),Uttar Pradesh Power Corporation Limited (UPPCL) and Uttaranchal
Power Corporation Ltd. (UPCL) India. India also supplies 70MW from Tanakpur
HEP (120MW) to Nepal under the Mahakali Treaty. Under the bilateral power
exchange, BSEB exports/imports power to and from Nepal where as, UPPCL
and UPCL only export power to Nepal. 21 interconnections facilities for power
exchange through 11kV, 33kV, 132kV transmission lines, out of which the
132KV transmission lines are only utilised .
Possibilities are also being explored in both countries for bulk power
transfer through HVDC
Other Potential Regional Electricity Trading
Possibilities under consideration
• Bangladesh-India: Possibilities are being explored for
establishing the electrical grid interconnection
between the two countries between Eastern region
of India and Western Grid of Bangladesh which could
amount to a cross-border power transfer of around
500MW across the two countries through HVDC.
• Srilanka-India: Possibilities are also being explored
for establishing a HVDC transmission system of about
1000 MW capacity using overhead lines and
undersea cables from Madurai in India up to
Anuradhapura in Sri Lanka
Some Notable Initiatives for Tapping the Potential Energy
Cooperation and Energy Trade under the Aegis of SAARC
• In 2005 the SAARC energy ministers agreed to cooperate in
harnessing all forms of energy in order to achieve the objective of
creating an ‘Energy Ring’ in South Asia. A special purpose vehicle
called SAARC Energy Centre was eventually created in order to
facilitate the process.
• In January 2007 The SAARC Secretariat finalised the terms of
reference of SAARC Regional Energy Trade Study (SRETS). The ToR ,
includes , among others, analysing the prevailing trade regimes, the
regulatory and legal frameworks of the Member States; examining
the international and regional best practices and their relevance as
well as applicability to the region; analysing various technological,
financial and commercial options for promoting trade and related
projects; examining the viability and modalities for development of
trans-national energy lines (electricity, gas and oil) keeping in view
the broader concept of the ‘Energy Ring’.
Some Notable Initiatives (continued)
• At the 15th SAARC Summit in August 2008 it was decided to
develop and conserve conventional sources of energy along
with a strong focus on alternate and renewable energy
sources, energy reforms, energy efficiency, transfer of
technology and energy trading
• In November 2008 in an expert group meeting, the concept
paper on SAARC Energy Ring had been finalised. The
meeting also decided that the member states would develop
common regional highways of energy within and across
region for movement of energy commodities and services in
a market-based environment. The meeting also discussed the
possibilities of harnessing hydro-potential in Bhutan and
Nepal; getting natural gas from West, Central and East Asia;
sharing expertise of India in wind and solar energy and of
Nepal in micro-hydro and the successful experience of CNG
technology in Bangladesh, India and Pakistan
Some Notable Initiatives (continued)
• In December 2008 a task force was constituted to evolve a
Common Template of Technical and Commercial aspects of
Electricity Grid Inter-connections among SAARC Member
States in order to have better understanding of the power
system of each country
• In January 2009 the SAARC Energy Ministers’ meeting
underscored on regional energy trade study, setting an action
plan on energy conservation and efficiency, discussed the
concept of the South Asian Energy Ring and the common
template on technical and commercial aspects of electricity
grid interconnections among SAARC member countries and a
concept paper on joint import of crude oil
Some Notable Initiatives (continued)
• All these issues received a renewed emphasis in the 16th SAARC
Summit held in April, 2010 at Thimpu, Bhutan. In the Summit
the state leaders emphasized the need to undertake studies to
develop regional energy projects, promote regional power trade,
efficiency, conservation and development of labelling and
standardization of appliances, and sharing of knowledge and
technologies.
Although the power trading in South Asia is still at its nascent
stage, the leaders recognised the importance of facilitating the
same on a priority basis in order to meet the electricity deficits
in the region. In this context, a proposal submitted by India on
preparing a roadmap for SAARC market for electricity (SAME)
on a regional basis supported by an enabling market in the
region has been well received. The proposal’s main emphasis is
on coupling the independent electricity grids of different
countries through HVDC (High Voltage Direct Current) links.
Some Critical Steps in Promoting Regional Energy Trade
Continue to recognising the immense potential benefit of
energy trade and remove any roadblocks (institutional,
political, financial or otherwise)towards exploiting efficiently
the vast energy resources of the region . Some essential
steps are:
• Facilitating the process of an Intergovernmental agreement for making
appropriate assessment of trade potential and facilitation of crossborder trade in electricity in a phased manner through
– formulation of coordinated scheduling and dispatch procedures
– facilitating open access for cross-country transmission
– facilitating congestion management procedures for cross-country electricity
transactions,
– facilitating in coordination among the national grid operators through agreement
on handling grid emergencies and financial settlement system.
• Promoting restructuring and reforms in the electricity sector of all the
SAARC countries for cross-country electricity transactions on commercial
basis just like any other commodity. The experience of India in
restructuring of electricity sector could provides a case in point.
Some Critical Steps (continued)
• Exploring avenues for expanding the electricity market window
already created in India to include the SAARC member countries in
generating a larger market place for buying and selling entities of each
country to participate voluntarily on the basis of their own needs and
perceived benefits.
• Facilitate in creating SAARC regulatory forum as a dispute settlement
mechanism for cross-border trading that is acceptable and binding to
all the participants for which a may have to be created.
• Promoting region procurement mechanism for fossil fuel imports and
Strategic Hydrocarbon Reserve that would insulate the economies in
SA from large price fluctuations
• Establish a corpus in the form of South Asia Regional Energy fund in
order to finance regional energy projects
• Facilitate in undertaking a detailed assessment of the energy
technology perspective of the region that includes developing
technologies for exploitation of large reserves of hydrates along south
Asia’s coastline and development of new technologies for generating
Hydrogen, Bio-diesel, and fuel cells in order to reduce reliance on
energy imports especially by the transport sector.