Potential Gains from Regional Cooperation and Trade of Electricity in South Asia

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1 Potential Gains from Regional Cooperation and Trade of Electricity in South Asia Govinda R. Timilsina and Mike Toman The World Bank, Washington, DC 5 th Asian Conference of IAEE University of Western Australia Perth, Australia February 2016

2 Disclaimer The views expressed in this presentation are those of the speaker s only, and do not necessarily represent the World Bank and its affiliated organizations

3 Presentation Outline Motivation Analytical approach Baseline results Results from full regional trading scenario Sensitivity analysis Conclusions

4 Motivation Why do we need expansion of cross-border or regional trade on electricity in South Asia? Supply deficit and huge room for demand growth Diversity on resource availability across nations and states/provinces Surplus hydro resource in some nations whereas a high demand for it in the others Peak load sharing due to seasonal disparity in demand Environmental and climate change obligations The region is lagging much behind from other parts of the world on regional electricity trading

5 Bihar Assam Nagaland Manipur Tripura Uttar Pradesh Mizoram Lakshadweep Arunachal Pradesh Andaman & Nicobar Kerala West Bengal Madhya Pradesh Meghalaya Rajasthan Sikkim Orissa Jharkhand Karnataka Jammu &Kashmir Andhra Pradesh Maharashtra Uttaranchal Tamil Nadu Haryana Chandigarh Himachal Pradesh Punjab Chattisgarh Gujarat Delhi Puducherry Goa ,028 1,112 1,132 1,222 1,340 1,380 1,527 1,547 1,615 1,651 Bhutan 1,743 India Pakistan Sri Lanka Bangladesh Nepal 2, Per capita electricity consumption As a multiple of India's consumption Brazil 4 China 5 South Africa 8 South Korea 16 US 22 Kuwait 30 Iceland 84 kwh in 2010 Source: World Bank (2013) for countries and PIB, GOI (2011) for Indian States

6 Nepal Bangladesh Pakistan India Sri Lanka Jammu & Kashmir Maharashtra Karnataka Tamil Nadu Punjab Meghalaya Jharkhand Andhra Pradesh Bihar Goa Himachal Pradesh Rajasthan Madhya Pradesh Nagaland Assam Kerala Sikkim Mizoram Chhattisgarh Haryana Union Territories Arunachal Pradesh Uttar Pradesh Gujarat Orissa West Bengal Manipur Uttarakhand Electricity Supply Deficit Available capacity below the peak load in (%) Source: National Electricity Authorities for Bhutan, Bangladesh, Nepal, Pakistan and Sri Lanka and CEA (2012a) for India

7 Sikkim Arunachal Mizoram Nagaland Manipur Tripura Meghalaya Goa Uttaranchal Himachal Pradesh Jammu &Kashmir Assam Union Territories Kerala Chattisgarh Jharkhand Bihar Orissa Delhi Haryana West Bengal Rajasthan Madhya Pradesh Karnataka Punjab Gujarat Uttar Pradesh Andhra Pradesh Tamil Nadu Maharashtra ,429 2,849 2,907 3,857 3,985 5,634 5,916 7,279 9,129 9,567 10,074 Bangladesh 12,069 12,557 15,072 15,101 16,129 Bhutan 17,464 Nepal Pakistan Sri Lanka 18, ,447 26,834 2,363 5,296 28,216 29,815 18,838 35,944 59,190 Future Demand Load Forecasts ( ) - MW Total Indian Peak Load = 381,000 MW Source: National Electricity Authorities for Bhutan, Bangladesh, Nepal, Pakistan and Sri Lanka and CEA (2012c) for India

8 Seasonal complementarity on electricity demand Monthly electricity demand Bangladesh India - NE Bhutan India - East Nepal India - North India - West Pakistan India - South Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Low Medium High Difference in color for across grids for a month indicates seasonal complementarity Summer or Monsoon season complementarity is the strongest as hydro rich Bhutan and Nepal have surplus power to export to high demand grids in India, Bangladesh and Pakistan Source: Timilsina, GR (2014), An Overview of Power System in South Asia, Incomplete Draft Paper

9 The Model Our focus is on a longer-term, planning horizon; The model jointly optimizes both generation and transmission interconnection systems; Key input data include: electricity load projections; capacity and operation costs and thermal efficiencies of each type of power plant; resource profiles for renewable energy sources; and fuel prices; The methodology and key assumptions were agreed among Bank Country Office and other experts in a regional meeting held in Kathmandu in November 2013.

10 Afghanistan Bangladesh Bhutan India Nepal Pakistan Sri Lanka South Asia Electricity Load Forecasts 5% 7% Annual Average Load Growth 6% 6% 5% 4% 5% 2% Official load forecasts received from government sources and exogenous to the model; For later years, especially after 2025, for which load forecasts are not available, they are projected based on population and income growth.

11 Baseline Results: Installed Capacity (MW) Installed Capacity (GW) Ratio of 2040 to 2015 capacity Afghanistan 1 7 Bangladesh Bhutan 4 15 India Nepal 1 9 Pakistan Sri Lanka 3 12 South Asia 325 1,067 Afghanistan Nepal Pakistan Bangladesh Bhutan Sri Lanka South Asia 3.3 India 2.8

12 Baseline Results: Capacity Mix 100% 90% 80% 70% 60% 50% 40% 30% 59% 3% 1% 2% 92% 75% 75% 11% 30% 2% 57% 30% 34% 7% 64% Others Gas Coal Hydro 20% 10% 30% 0% Bangladesh India Pakistan Sri Lanka

13 Baseline Results: Investment Requirement Cumulative (undiscounted) investment over the period Total 859 India 518 Pakistan 206 Bangladesh Bhutan Sri Lanka Afghanistan Nepal

14 Baseline Results: Power Sector CO2 Emissions Power sector GHG Emissions (Million tco2) Ratio of 2040 to 2015 GHG Emissions Bangladesh 9.1 Bangladesh India 915 2,660 Pakistan Sri Lanka 6 24 South Asia 1,021 3,387 Pakistan Sri Lanka South Asia India 2.9

15 Afghanistan Bangladesh Bhutan India Nepal Pakistan Sri Lanka Total Full Trading - Impacts on Installed Capacity Changes in total installed capacity from the baseline in 2040 by country (GW & %) 52.1 (560%) (51%) 3.6 (62%) 9.1 (0.5%) (-4%) (-17%) (4.5%) (-8%)

16 Gas Turbine Hydro Coal Wind Combine Cycle Full Trading - Impacts on Installed Capacity Changes in total installed capacity from the baseline in 2040 by technology (GW and %) 71.6 (42%) (6%) (-15%) (-9%) -6.6 (-6%)

17 Afghanistan - Pakistan Bangladesh - India Bhutan - Bangladesh Bhutan - India Nepal - Bangladesh Nepal - India Pakistan - India Sri Lanka - India Full Trading - Impacts on Grid Interconnection Change in cross-border interconnection capacity from the baseline (GW) 50,265 3,300 10,015 8,538 5,400 2,117 14, In the baseline, there would be only 9,425 MW of cross-boarder interconnection Capacity (India-Bhutan: 7800 MW, India Nepal: 1125 MW and India Bangladesh: 500 MW)

18 5,238 23,304 41,656 5,600 2,300 2,850 1,050 Grid Interconnection (more Details) Grid interconnection capacity in the baseline and regional trading scenarios (MW) Afghani stan Pakistan 4,800 10,100 Baseline Northern India Western India Regional Trade 10,677 48, ,078 7,178 9,777 7,810 Nepal Southern India Eastern India 500 2,117 9,600 7,800 1, Bhutan 1,400 3,600 North Eastern India Sri Lanka 9,115 8,538 Bangladesh

19 Regional Trading Scenario: Impacts on Electricity Supply Costs 21 Changes in total investment and fuel costs over relative to baseline (Billion US$) Investment -114 Fuel cost savings Savings/Investment ratio exceeds 5

20 Bangladesh Regional Trading Scenario: Impacts on Power Sector CO2 Emissions India Pakistan Sri Lanka Total Changes in cumulative CO2 emissions from the baseline (Million tons and %) 12-1,170 (-32.8%) -2,949 (-6.5%) -322 (-7%) -4,429 (-8.2%)

21 Sensitivity Analysis Seven sensitivity analysis Increased demand Increased coal price Lower availability of hydropower due to climate change Lower costs of renewables (wind and solar) Sub-regional trading instead of full regional trading Delays in planned or committed projects Carbon pricing

22 Sensitivity analysis: Higher demand growth If the electricity demand in each country grows 1% more each year than assumed in the baseline (regional demand for electricity increases 6.2% on average instead of 5.2% assumed in the baseline), then: Baseline Regional Trade Installed Capacity 24% 24% Transmission Interconnection 16% 22% Total cost for electricity supply 28% 29% CO2 Emissions 19% 21%

23 Sensitivity analysis: Higher coal price If the growth of coal prices increases by 1% more than assumed in the baseline (1.9% instead of 1% in the baseline): Installed Capacity Baseline Coal (-5%); Hydro (1%);Wind (4%); CC (43%) Regional Trade Coal (-4%); Hydro (4%);Wind (12%); CC (21%) Transmission Interconnection -15.5% -2.5% Total cost for electricity supply 6.3% 5.6% CO2 Emissions -1.6% -2.2%

24 Sensitivity analysis: Higher price and lower availability of hydro If the capital cost of hydro increases by 10% and availability of hydro generation decreases by 10% due to drought: Installed Capacity Baseline Coal (0.5%); Hydro (- 2%);Wind (3%); CC (3%) Regional Trade Coal (2%); Hydro (- 1.3%);Wind (5%); CC (3%) Transmission Interconnection -0.2% -2.1% Total cost for electricity supply 2.2% 3.6% CO2 Emissions 1.2% 2.3%

25 Sensitivity analysis: Lower costs for wind and solar If the capital cost of wind decreases by 24% (from US$1900 to US$1440/kw) and capital cost of solar decreases by 32% (from US$2200to US$1490/kw): Installed Capacity Baseline Coal (-2%); Solar (64%);Wind (25%); CC (-5%) Regional Trade Coal (-2%); Solar (98%);Wind (34%); CC (-2% Transmission Interconnection -4% -5% Total cost for electricity supply -1.6% -1.9% CO2 Emissions -1.8% -1.3%

26 Key Conclusions All countries in South Asia will gain from regional electricity cooperation over the ; the benefits-cost ratio at the regional level exceeds 5. Although the contribution of cross-border trade to meet India and Pakistan s total electricity demand would be relatively small (approximately 5%, because of their large size of demand), it would absorb almost all economic potential of hydropower resources in Afghanistan, Bhutan and Nepal. Regional trade enhances the exploitation of cleaner source of electricity generation; power sector CO2 emissions reduces by 8%.

27 Full Paper Link 06/26/090224b082f93b46/1_0/Rendered/PDF/How0much0could0peration0and0trad e00.pdf

28 THANK YOU Govinda R. Timilsina Sr. Research Economist Development Research Group The World Bank 1818 H Street, NW Washington, DC 20433, USA Tel: Fax: