The 15th Regulators & Policymakers Retreat 2014

Transnational Trade of Electricity

 

A N M ObaidullahFormer Research Fellow (Energy Trade)

SAARC Energy Centre

 

Goa, India1st August, 2014

PresentationOutline

■ Scenarios of SMS

■ SAARC Declaration and Vision

■ Electricity Trade & Governing Frameworks

■ Lessons ...

■ Remarks

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Scenarios of SMS

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Regional Analysis

Strength

Sizable Population – still relatively young and with a growing middle class;

Good track record in economic growth; Collective growth; Abundant natural resources, biodiversity,

wide range of productive capabilities in agriculture, manufacturing & services;

Opportunity

Strategic location; Strong historical & cultural links; Potential to increase energy, water &

food production and to play pro-active role in responding to supply crises;

Potential to develop regional economic hub;

Weakness

Huge gap & pronounced disparities in rule of law and governance;

Absence of an effective regional grid; Large unskilled workforce; Lack of harmonized policies; Absence of regional strategy;

Threat Lack of internal cohesion to formulate a

long-term regional development strategy; Unresolved intra and extra regional

territorial disputes and ethnic conflicts; Inability to collectively manage climate

change, energy security & regional disasters;

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Estimated Primary Energy Demand of SMS (mtoe)

Country

2014 2015 2016 2017 2018 2019 2020

Dmd Unspecifi

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Afg 0.81 0.54 0.85 0.59 0.91 0.65 0.96 0.72 1.02 0.80 1.08 0.88 1.14 1.00

Bgd 30.02 0.38 31.90 0.41 33.89 0.44 36.00 0.47 38.25 0.48 40.64 0.49 43.17 0.49

Bhu 0.50 0.35 0.53 0.37 0.57 0.40 0.60 0.42 0.64 0.45 0.68 0.48 0.73 0.51

Ind 539.44 35.01 563.18 36.40 587.98

37.84 613.90 39.35 640.99 40.92 669.29 42.55 698.87 44.25

Mal 0.64 0 0.67 0 0.71 0 0.76 0 0.80 0 0.84 0 0.91 0

Nep 12.12 9.55 12.45 9.70 12.79 9.83 13.14 9.94 13.50 10.04 13.87 10.10 14.24 10.14

Pak 66.51 2.90 68.99 2.72 71.55 2.49 74.22 2.19 76.98 1.83 79.84 1.39 82.81 0.87

Slk 12.86 3.68 13.29 3.25 13.72 2.82 14.17 2.39 14.63 1.93 15.11 1.43 15.60 0.90

8%Source : IEPSA: VISION 2020, Obaid

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Estimated Electricity Demand VS Primary Energy in SMS

Country 2014 2015 2016 2017 2018 2019 2020

Afg. (GW) 0.624 0.689 0.761 0.841 0.930 1.027 1.135

MTOE 0.54 0.59 0.65 0.72 0.80 0.88 0.97

Bdg. (GW) 9.047 9.786 10.512 11.291 12.128 13.027 13.993

MTOE 10.60 11.46 12.31 13.23 14.21 15.26 16.39

Bhu. (GW) 0.320 0.342 0.366 0.388 0.411 0.436 0.462

MTOE 0.35 0.37 0.40 0.42 0.45 0.48 0.51

Ind. (GW) 240 259 280 302 326 353 381

MTOE 262.38 283.15 306.11 330.16 356.40 385.92 416.53

Mal. (GW) 0.160 0.177 0.197 0.219 0.243 0.269 0.299

MTOE 0.19 0.21 0.23 0.26 0.28 0.32 0.35

Nep. (GW) 1.272 1.387 1.510 1.641 1.770 1.907 2.052

MTOE 1.39 1.52 1.65 1.79 1.94 2.08 2.24

Pak. (GW) 32.362 34.951 37.747 40.767 44.028 47.551 51.355

MTOE 36.64 39.57 42.74 46.16 49.85 5384 58.15

Sri. (GW) 3.393 3.655 3.936 4.239 4.566 4.917 5.296

MTOE 3.84 4.14 4.46 4.80 5.17 5.57 6.00

52%Source : IEPSA: VISION 2020, Obaid

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Hydropower Potential of SMS

Source : IEPSA: VISION 2020, Obaid

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Energy Trading of SMS

Country Coal Pipeline Gas/LPG

Oil & Petroleum Products

Electricity

Imp. Exp. Imp. Exp. Imp. Exp. Imp. Exp.Afghanistan N N Y N Y N Y NBangladesh Y N Y N Y N Y NBhutan Y Y Y N Y N Y YIndia Y Y Y Y Y Y Y YMaldives N N Y N Y N N NNepal Y N Y N Y N Y YPakistan Y N N N Y N Y NSri Lanka N N Y N Y N N N

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Bilateral Electricity Interconnection in SMS

- Upto 150 MW from India

- Over 16 links of 132/33/11KV

- Upto 1400 MW to India

- 9 links of 400/220/321KV

- Upto 500 MW from India

- 1 link of 400KV

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SAARC Declaration and Vision

Declaration of 15th SAARC Summit and …

● The Heads of State Governments of SAARC in its 15th SAARC Summit held in Colombo in 2008 recognized the need to expeditiously develop regional and sub-regional energy resources in an integrated manner and the trade in energy.

● The Summit also stressed the urgent need to develop the regional hydro potential, grid connectivity and gas pipelines.

● SAARC Energy Ministers and Expert Group on Energy also highlighted the importance of regional electricity trade.

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Proposed SAARC Energy Ring

Legend

EAST : Myanmar; West : Iran; CA : Central Asia (Tajikistan, Kyrgyz Republic, Uzbekistan)Smallest width represents : Electricity Transmission InterconnectionMedium width represents : Gas Pipeline InterconnectionLarger width represents : Oil Pipeline/mari-time InterconnectionDotted line represents :Technology, Knowledge, Energy Service Sharing

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Schematic Diagram of Future SAARC Power Grid

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Transnational Power Trade : Tajikistan to Singapore

Source : Harry Dhaul, Director General, IPPAI

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Environmental Scanning

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Milestones of ASEAN Economic Cooperation

46 Years

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Electricity Trade and Governing Frameworks

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Major Governing Frameworks of SMS

Country Governing Frameworks

Afghanistan ■ Electricity Law of Afghanistan ■ Electricity Sector Policy

Bangladesh ■ Electricity Act 1910 ■ Bangladesh Energy Regulatory Commission Act■ National Energy Policy ■ Private Sector Generation Policy■ Policy Guidelines for Private Participation in Power Sector

Bhutan ■ Electricity Act 2001 ■ Bhutan Hydropower Policy 2008

India ■ Electricity Act 2003 ■ Tariff Policy■ National Electricity Policy

Maldives ■ Energy Policy of Maldives

Nepal ■ Electricity Act 1992 ■ Water Resources Act 1992■ Hydro Power Development Policy 2001 ■ Water Resources Strategy 2002

Pakistan ■ Electricity Act 1910 ■ Electric Power Act 1997■ National Electric Power Regulatory Act ■ Policy for Generation Projects

Sri Lanka ■ Sri Lanka Electricity Act 2009■ Public Utilities Commission of Sri Lanka Act 2009■ National Energy Policy and Strategies of Sri Lanka

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Licensing Authority and Utilities of SMS

CountryGeneration Transmission Trading

Authority Utility Authority Utility Authority Utility

Afghanistan MEW/AERA DABS MEW/AERA DABS MEW/AERA DBAS

Bangladesh BERC BPDB, IPP BERC PGCB PD, MPEMR*

BPDB*

Bhutan BEA DGPC BEA BPC BEA BPC

India CERC/SERC IPP,CPP,CP, GC,SEB

CERC/SERC PGCI MEA/CERC PTC

Maldives MEEW/MEA STELCO, IPP MEEW/MEA STELCO - -

Nepal MWR NEA, IPP MWR NEA MWR NEA

Pakistan NEPRA WAPDA, PEPCO, KESC, IPP

NEPRA NTDC MWP WAPDA, NTDC

Sri Lanka PUC CEB, IPP PUC CEB - -

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Licensing

● License is required for electricity generation, transmission and trading in all the SMS, with some exceptions;

● Terms and conditions for getting license and rules and regulations for licensees are different for different SMS;

● Harmonized rules and regulations need to be developed for issuing license for generation, transmission and trading business under SAARC electricity trade agreement;

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Critical Issues for Harmonized Licensing

● Identification (if not) of nodal regulator or executing agency for issuing license for regional electricity generation, transmission and trading for all SMS;

● Regulatory authority/executing agency may, make regulations for giving exemption to the utilities to be involved in SAARC regional electricity trade business, if it complies with the technical standards relating to electricity generation, transmission and trading business and fulfill the specified conditions, which a licensee shall have to observe under the license, or the Act, or the regulation of the respective SMS;

● All utilities of SMS, already having license from their respective authorities, shall be deemed to be a generation/transmission/trading licensee for SAARC regional electricity trade;

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Transmission and Load Dispatch

● Implementation of electricity transmission and load dispatch activities are different for different SMS;

● In some countries, these are handled by separate organizations and in some countries these are handled by integrated organization;

Country Transmission Load Dispatch Afghanistan DABS DABS Bangladesh PGCB NLDC Bhutan BPC BPC India PGCI NLDC, RLDC Maldives STELCO STELCO Nepal NEA NEA Pakistan NTDC NTDC Sri Lanka CEB CEB Consumpti

on

Generation

TSO

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Critical Issues for Harmonized Load Dispatch

● Identification of nodal agency for electricity transmission and load dispatch;

● Separation of Load Dispatch and Transmission Business from Power Trade Business;

● Management of Load dispatch for regional electricity trade by a government company/organization;

● Open access to transmission services to all participating utilities in a non-discriminatory and transparent manner;

● Views of government owned transmission utility of SMS for issuing license to private transmission companies;

● Procedure and guidelines of SAARC Grid Code for electricity grid interconnections and load dispatch;

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Electricity Trade

Except India, none of the SMS have nodal agency for electricity trade.

Country Authority Utility

Afghanistan MEW/AERA DBAS

Bangladesh PD, MPEMR* BPDB*

Bhutan BEA BPC

India MEA/CERC PTC

Maldives - -

Nepal MWR NEA

Pakistan MWP WAPDA, NTDC

Sri Lanka - -

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Critical Issues of Electricity Trade

Except India, none of the SMS have nodal agency for electricity trade. To promote SAARC regional electricity trade, following issues may be considered:

● Each SMS would identify nodal agency for SAARC regional electricity trade;

● SAARC Independent System Operator (SISO) may be established as a common platform to provide real time information on supply, demand and transmission constraints;

● Forum of SAARC Electricity Regulatory Commission of SMS would promote development of SAARC regional electricity market including trading;

● Forum of SAARC Electricity Regulatory Commission of SMS would regulate electricity trading;

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Electricity Tariff

● Tariff setting is the most difficult part of the SMS and is subsidized all over the region;

● Cross-border tariff may be developed based on transparent process of competitive bidding as per SAARC Electricity Trade Code;

● Transmission tariff/wheeling charge may be based on transmission capacity, average marginal costs plus losses as per SAARC Electricity Trade Code;

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Dispute Resolution

● Dispute resolution procedures and its authority are different for different SMS;

● Except India, none of the SMS have separate authority for dispute resolution in electricity sector. To have a common platform for dispute resolution, following issues may be considered:

► The SMS may establish a SAARC Appellate Tribunal for Electricity to hear appeals against the orders of the FSERC;

► The Appellate Tribunal shall be guided by the principles of natural justice and the Appellate Tribunal shall have powers to regulate its own procedure;

► The Appellate Tribunal may transmit any order made by it to a civil court of SMS having local jurisdiction and such civil court shall execute the order as if it were a decree made by that court.

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Electricity Regulatory Commission

Structure of electricity regulatory commission is different for different SMS.

Country Regulator FunctionAfghanistan MEW/AERA ElectricityBangladesh BERC Electricity and GasBhutan BEA ElectricityIndia CERC/SERC ElectricityMaldives MEEW/MEA ElectricityNepal MWR ElectricityPakistan NEPRA ElectricitySri Lanka PUC Electricity ++ ....

To regulate SAARC electricity trade, a Forum of SAARC Electricity Regulatory Commission (FSERC)

may be established;

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Key Functions of FSERC

● Issue formal license to the utilities subject to having license from the respective SMS;

● Facilitate regional transmission and wheeling of electricity;

● Determine wheeling charges & trading margin;

● Regulate electricity sale, purchase and trading process;

● Approve SAARC Electricity Grid Code, Trade Code;

● Adjudicate upon the disputes and to refer for arbitration;

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Lessons …

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Energy TradeEnergy Trade

Regulators

Security

Geopolitics

Society’s Culture & Behavior

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Eco

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Energy TradeEnergy Trade

Regulators

Security

Geopolitics

Society’s Culture & Behavior

Su

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Eco

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Energy Trade Power Trade

Regulators

Security

Geopolitics

Su

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Cost of Security VS

Cost Advantage of Trade

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Concluding Remarks ...

In the globalized world, regional cooperation is no longer a dream but reality.

In spite of being one of the richest regions both in terms of natural and human resources, South Asia has the highest number of poor, illiterate, malnourished and unemployed people in the world.

Comparative advantages of regional resources should be utilized in a win-win manner where regional cooperation can flourish.

Effective and modern electricity market will promote energy security & economic stability to the benefit of all SAARC countries.

Teeming millions in South Asia are looking for their better future through regional cooperation, particularly in Electricity.

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Major Issues for Power Trade