The South Asian Power Grid

Linking mainland electricity grids is a practical form of regionalism that benefits all parties. With rising populations and finite capabilities, the only way for all countries to move ahead may be for all to work as a single regional unit. How about beginning by creating a viable electricty grid?. Sixteen years after SAARC's establishment, though it has made some progress in the areas of a region al preferential trading agreement and a free trade area (SAPTA, SAFTA), nothing as yet has happened on the regional trading of electric power. The Declaration of the Tenth SAARC Summit at Colombo in July 1998, does mention the need to develop "specific projects relevant to the individual needs of three or more Member States under the provisions of Articles VII and X of the Charter." One should note that the mention of "three or more Member States" has a special significance to regional water resources development, and this could open up the avenues of power trading between India, Bangladesh, Nepal and Bhutan. As of now, power-trading is carried out purely on a bilateral basis, and that too is limited to India and Nepal, with Nepal importing about 200 million units in 2000-01, and India and Bhutan, with Bhutan exporting about 1300 to 1400 million units..Present and Future Global Energy SceneFrom the perspective of the world production of electricity, thermals shoulder a major burden of 63 percent (coal – 38 percent, gas — 15 percent and oil — 10 percent) with hydraulic and nuclear contributing 19 percent and 18 percent each, respectively. It is estimated that the world gross hydropower potential is 40,500 tera watt hours per year (TwH/year). Africa and Australia do not have large hydropower potential, whereas North America and Europe have already exploited over 70 percent of theirs; and while Asia has tapped only 20 percent of its hydro potential, South America has done better by tapping 32 percent. Though the global reserves of non-renewable energies (fossil and nuclear) are adequate for the next century, there are two major problems associated with their exploitation: a dramatic increase in greenhouse gas emissions, which could lead to climate changes with dire consequences on hydrological system and sea level rise; and the non-acceptability of nuclear power, particularly after the Long Island (US) and the Chernobyl (USSR) accidents. The 11 September attacks in the US reinforce the vulnerability of nuclear power stations, which were previously opposed only by the environmentalists..As Table 1 indicates, the smaller SAARC nations have no fossil fuel resources, with Maldives having no energy resources of its own. Sri Lanka has already tapped over 60 percent of its hydropower potential and has recognised that, like Maldives, it cannot meet its energy requirement internally. Nepal and Bhutan are luckier with their vast untapped hydropower potential. Bangladesh has a substantial reserve of natural gas and it is quite cautious about its usage, knowing fully well that this is its only indigenous energy resource. Pakistan is endowed with both natural gas and hydropower. India, on the other hand, is endowed with substantial amounts of coal, hydropower, uranium and thorium deposits and even natural gas though, but with agrowing population, its energy requirement is escalating..Most of India, Pakistan and Bangladesh's energy needs are met with thermal power; Maldives is totally thermal. Sri Lanka, Bhutan and Nepal have hydro-dominated capacities. This energy distribution pattern could be the strength of this region. Countries could complement each other on the energy front and this could be the major area of convergence for SAARC activities. Though India's nuclear contribution at present is a mere 3 percent, it has huge nuclear deposits of Uranium (10,000 Megawatt equivalent – Mwe) and Thorium (300,000 Mwe). India is already the fifth largest producer of wind power in the world with 1260 Mw presently under operation..Power Trading in the Region.The central economy of the South Asian region is that of India and the economies of all other South Asian countries, perhaps with the exception of Pakistan, are mere satellites. India presently suffers from an energy shortfall of 30 billion units and, on the power front, from a shortage of 9,000 Mw. In order to mitigate this power shortage, India immediately needs to invest well over USD 10 billion. Of the five regional grids of India, the Eastern Grid is the only one that has excess capacity (3,000 Mw). This has been attributed to lower load growth than that projected by the forecast. Pakistan, on the other hand, has excess capacity to the tune of several thousand Mw. This excess is due to the recent surge in the private sector thermal power producers, making an impressive 3,878 Mw already commissioned (ie, 25 percent of the total installed capacity). Maldives, Sri Lanka, Nepal and Bangladesh are presently struggling to meet their own internal demands. Only Bhutan has been consistent in pushing a substantial 300 Mw of export to India. Hence, to strike a balance between shortages and excesses, regional power trading will be mutually beneficial..Pakistan and India.Despite the 1947 partition of India and Pakistan, about 20 Mw of power trading continued between the two Punjabs at Jogindarpur. The 1948 Kashmir war did not affect this power trading and only in the early 1950s did the two countries themselves sever the interconnection at the border. A half-century later, after the Lahore talks between Atal Behari Vajpayee and Nawaz Sharif , the two countries started to explore the possibilities of Pakistan initially exporting 300 Mw of power into India, with the potential for trading ten times that amount later on. With a bankrupt paymaster, the Water and Power Development Authority (WAPDA), in Pakistan, the independent power producers (IPPs) saw the huge power hungry market of northern India as their saviour. Of course, this would be a win-win situation for all: for Pakistan, for the IPPs in Pakistan and for India itself. The wrestling match over the price of power—Pakistan's demand for 7.2 US cents per unit versus India's offer of 3 US vents per unit (based on India's refusal to pay the 4 cents capacity charge and 0.2 cents wheeling charge), terminated inconclusively when the Kargil skirmish erupted. The Agra Summit in 2001 was unable to thaw the two countries' relationship and restart negotiations. The 11 September attacks, the "Bin Laden affaire" on Pakistan's northern border, the 13 December attack on the Indian Parliament, and the ongoing sabre rattling between the two countries have again pushed power trading possibilities into the "deep freeze"..India and Bangladesh.Despite India's Eastern Regional Grid having a power glut of 3,000 Mw and the western zone of Bangladesh suffering from a power deficit of 300 Mw, there is, as yet, no power trading between the two countries. In February 1997 India and Bangladesh met in Delhi and agreed to exchange 150 Mw of power on a "just, reasonable and compensatory to each party" principle. Bangladesh was to import power for her western zone from West Bengal in India and, in return, India's eastern state of Tripura was to receive power from Bangladesh. However, actual trading of power between the two countries has not occurred so far..India and Bhutan.India and Bhutan, on the other hand, already have the largest regional power trade with about 320 Mw of trading from the 336 Mw Chukha and the just commissioned 45 Mw Kurichhu hydro projects. On average, Bhutan used to inject into the Indian grid about 1300 to 1400 million units per year. This power trading with India constituted 42 percent of Bhutan's gross national revenue in financial year 1997-98. The power tariff has recently been hiked up to 3.3 US cents per unit, and with Kurichhu's additional input, Bhutan could well be trading over 1600 million units annually and netting in a comfortable USD 53 million into her coffers. With another 61 Mw Basochu hydro project due for completion this year, this power trading will take a quantum leap in February 2005, when the massive 1020 Mw Tala hydro project will begin operation. The 400 Kilovolt (Kv) double circuit transmission lines linking Tala with the Eastern Grid will go through the Siliguri "chicken neck" and continue on to interconnect the Northern Grid through the 400/765 Kilovolt High Voltage Direct Current (Kv HVDC) transmission lines. India- Bhutan power trading is very much on..Nepal and India.During the last thirty years of Nepal-India power trading, the quantum had stagnated at 50 Mw. Recently, however, both the countries agreed to increase this power exchange to 150 Mw. The prevailing rate is about 4.5 US cents per unit at the 132 Kv level with an escalation of 8 percent per annum. During the last ten years, the balance of power-trade has been in India's favour with Nepal forced to import over 200 million units annually during the last four years. This chiefly emanated from the policy of pursuing the 400 Mw Arun III project for nearly a decade. With the commissioning of the 144 Mw Kaligandaki hydroelectric project at the beginning of 2002, Nepal is expected to turn this tide with an annual surplus of about 1,000 Gwh. This profitability will be possible only if Nepal can have access to the Indian market. But, sadly, the existing power exchange is on radial modes and not synchronous. The two existing major 132 Kv interconnections, as well as the two more agreed upon interconnections, are unfortunately in the power surplus Eastern Grid. The only 132 Kv interconnection to the power hungry Northern Regional Grid, Tanakpur-Bareilly, is used to import the free 70 million units that accrue from the Mahakali Agreement. Fortunately the planned and agreed Butwal-Gorakhpur 132 Kv interconnection with the Northern Regional Grid will help to trade Nepal's surplus power. The much talked about 6,480 Mw Pancheshwar Project on the Mahakali River, which could have broken ground on regional water resources cooperation in the whole SAARC region, is in limbo. So is the private sector-led cross border power trading 750 Mw West Seti Hydroelectric Project. Despite the government crying hoarse over its decade-old hydropower policy and tinkering around with the new Power Trade Agreement, the thirty years of power trading between India and Nepal is only tentative..The Opportunities.The SAARC region, despite having one of the lowest per capita energy consumption rates in the world, is fortunate in having the highest growth rate in energy consumption. South Asia has a 5.5 percent an average annual growth in primary energy consumption of 5.5 percent, whereas Europe and North America have mere 0.2 percent and 1.3 percent growth rates, respectively. Though the existing power trading in the region is dismal or non-existent, this high growth rate in energy consumption will inevitably force the region to trade in larger quantum of power..India is the engine of growth in the SAARC region. But this sleeping giant will have to wake up if it is to compete with the other Asian giant, China. While India's installed capacity has barely reached 100,000 Mw, China's capacity is three times that amount. The forecasted peak load of India at the end of its 11th Five Year Plan (ie, year 2011-12) is 176,647 Mw. This will mean that in the coming decade, India will need to install over 100,000 Mw of additional power plants. If it is to meet this demand, India might need to seriously look into cross border power trading and not limit itself to just its domestic resources..To be sure, the South Asia region is endowed with rich hydropower potential along the southern laps of the Himalayas (stretching from Pakistan, north and eastern India, Nepal and Bhutan), vast reserves of coal in India and also a sizeable amount of natural gas in Bangladesh, Pakistan and India. The exploitation and cross-border trading of electricity from these renewable and non-renewable energy sources would be mutually beneficial to the countries involved as well as to the developed countries that bring in capital and technologies..The Asian Development Bank's South Asia Growth Quadrangle and the American-financed South Asia Regional Initiative for Energy (SARI/E) projects are expected to help and create this win-win environment for all. The Union of Producers, Transporters and Distributors of Electricity (UCPTE) of Europe already trades in about 10 percent of its total power consumption. The Scandinavian countries have already set up spot market trading in electricity. The South African Power Pool (SAPP), initially started with five countries, is attracting neighbouring countries for the simple reason that the benefits accrued will be shared equitably..India's Northern Grid has a very high demand for power during the summer/monsoon period. This is due to the agricultural pumping load and the use of fans and air conditioners. This is also the time when the efficiency (i.e., the generating capacity) of the thermal steam turbines goes down due to high ambient air temperature. But the hydro-stations of Bhutan and Nepal could be running to their full capacities as the monsoon rivers would be in full discharge. This could be the time to carry out the planned maintenance of the steam turbines. On the other hand, in winter, hydrogeneration goes down with the fall in river discharge due to cold weather; the efficiency of steam turbines, however, goes up. This then could be the time to carry out the planned maintenance of the hydro-stations. At a time when the ideal hydro-thermal mix in a power system should be 40:60, India's hydro contribution has fallen to a low 25 percent in 1998 from an all time high of 44 percent in 1970. Similarly, Pakistan's hydro mix of 38 percent in 1994 has slid to 31 percent in 1998. Thus, the hydro-stations of Nepal and Bhutan are compatible and complementary to the thermal dominated Northern Grid of India and the thermals of Pakistan and Bangladesh..Sri Lanka is totally dependent on imported primary energy, as it has already developed a major portion of its only indigenous energy resource, hydropower. Hence, Sri Lanka is exploring the viability of the submarine link between India and Sri Lanka for its future electricity requirement. This way it could supplement its energy requirement from other regional resources or perhaps wheel down Bhutan and Nepal's hydropower or Bangladesh's gas-based power in the foreseeable future..The Hypothetical SAARC Grid.India is in the midst of interconnecting its five regional grids (Northern, Eastern, North-Eastern, Western and Southern) through 400/765 Kv AC and HVDC. This is expected to be complete by the year 2006. The present inter-regional power transfer capacity is a mere 5,500 Mw (5.5 percent) of its total installed capacity. In the year 2000-01, inter-regional energy exchange was 9,874 million units, just 2 percent of the total energy availability. Nearly 75 percent of this transfer was from the power surplus Eastern Region. The India-constructed 1020 Mw Tala Hydro Project in Bhutan is scheduled to be complete in February 2005. The direct off-shoot of this Bhutan project is the construction of the double circuit 400 Kv transmission lines in the Eastern Grid and the interconnection to the Northern Grid to wheel the eastern region's excess power. The construction of these extra high voltage transmission lines along the narrow Siliguri "chicken neck" fits in with India's long term scheme of developing the huge hydropower potential of the Northeastern states. This 400/765 Kv transmission line (Guwahati, Siliguri, Biharsharif, Varanasi, Kanpur, Delhi) could become the future SAARC grid if India so wants. Bangladesh, Bhutan, Nepal and even Pakistan could use it to hook in their power and feed India's most power hungry and fastest growing Northern Grid..From Arunachal Pradesh in India to Baluchistan in Pakistan, there is a longitudinal difference of about thirty degrees. This roughly equates to a time difference of two hours between Guwahati and Quetta. This also means that the system peak of Bangladesh, India, Bhutan, Nepal and Pakistan will occur at different times. If the SAARC Grid were to exist then this would improve the load factors of the power system of the individual countries and thus ensure better utilisation of the system capacities of the SAARC countries..Varying Perceptions.Energy, including electric power, is the fuel that drives the economic growth of all countries. Due to the absence of a cordial political environment in the SAARC region, electricity, or for that matter any form of energy, is being seen as a commodity with "strategic importance". Hence, the countries would not want to depend on each other for their electricity needs even on a partial scale. In this charged political environment the fear of "supply disruptions" has always been the dominant, inhibiting factor. This was perhaps best expounded by Jaswant Singh, India's present Foreign Minister, when he said, "Energy is Security; deficiencies in this critical strategic sector compromises national security." This has indeed been one of the main stumbling blocks in regional power trading..The Washington based World Watch Institute has already identified India as one of the countries to be worst hit by water scarcity in this millennium. The India-Pakistan Indus River, the India-Nepal- Bangladesh Ganges River and the India-China- Bangladesh Brahmaputra River are all areas of "potential conflict". Power trading in clean renewable energy of substantial quantum means hydropower of substantial sizes. With the type of hydrological phenomena that South Asia is used to, this will mean large storage projects. The problems then get compounded: the upper and the lower riparian, the environmental concern and its mitigation, the benefits accruing from the augmentation, bilateralism or multilateralism, etc..The India-Nepal Kosi, Gandak and Mahakali Agreements have been cited as examples of how not to do the treaties in South Asia. The 6,480 Mw Pancheshwar multipurpose project, despite being signed and sealed in 1996, gets occasional dustings in Kathmandu and Delhi for the Detailed Project Report (DPR) sessions. The Multi-purpose Kosi High Dam will hopefully not take the Mahakali route. With Nepal always raising the flag on the sensitive "water issue", India shifted over in the 1980s to Bhutan, a more willing partner..With the huge 1020 Mw Tala project well under construction, India and Bhutan have already sighted the 180 Mw Bunakha and the 900 Mw Wang Chu for implementation. It is worth noting that the two countries are presently formulating the DPR for the massive 4,060 Mw Sankosh Multipurpose project. The above series of India-Bhutan joint ventures and the lack of it in Nepal exemplify how India wishes to tackle this dwindling regional resource. The South Asian countries' varied perception of water has been problematic in developing this clean renewable energy for cross border power trading..So far, the policies of the South Asian governments have been very much focussed on power sector restructuring, the electricity acts and regulations, the regulatory mechanisms and private sector participation. These policies are all inward looking to meet the domestic power demand through domestic supply arrangements. India still does not permit direct sales by IPPs outside the state it is based in "without the consent of the concerned competent government". India does not see cross border power trading as its national priority. It is focussed on meeting its demand through increasing its inter-regional power transfer capabilities. Cross border power trading for India is a mere appendix of the newly created Power Trading Corporation, which has been nominated as the nodal agency for such activity with Nepal and Bhutan. Besides Bhutan, Nepal is the only SAARC country to have cross border hydropower projects as its national priority. In spite of the Power Exchange Agreement with India, Nepal went a step ahead to sign the MOU on Power Trade Agreement with India – although some have argued that this policy, yet to be ratified by the Nepali Parliament, is unconstitutional..Once the environment and the policies are in place, the next formidable task is that of financing. India's 100,000 Mw of additional capacity in a decade means a requirement of about USD 100 billion for the generation component alone. Such amounts are simply not available for cash-strapped South Asian governments. It is precisely for this reason that the power sector has been subjected to reforms by the governments. These reforms will enable the private sector to pool its resources and supplement the governments' funds in the power sector. The experience gained so far, be it in Pakistan, India's Orissa and Maharashtra, or in Nepal and Bangladesh, needs to be taken with a pinch of salt. Even the US is having its hiccups with power sector reforms in its rich state of California. American Regulators have now realised that capping the retail price to protect the interest of the consumers with the IPPs' wholesale price left totally unregulated to the market forces is a sure recipe to have the utilities bankrupted. It has also been realised that the reforms do attract private capital in the power sector. But the investors' perceived risks (political, commercial, regulatory etc) in this part of South Asia have exacted a much higher return, consequently leading to a higher electricity tariff. The recent Enron debacle in India may be gleefully greeted by the "we said so" chorus of the opponents of the Maharashtra Dahbol Project and the Karnali Chisapani hydroelectric project. But this glee is not going to help our tariff in the long run, as the risks to the investors have increased..The Indian tariff for coal-fired stations vary from US cents 1.6 per unit at the pit head to US cents 5.2 per unit at the load centre; whereas, that of the hydro stations vary from US cents 1.0 to 5.5 per unit. India gets Bhutanese hydropower at US cents 3.3 per unit. Nepal's power exchange rate with India at the border point on the 132 Kv level is about US cents 4.5 per unit. The Indo/Pakistan power trade talks hinged on the issue of 7.2 versus the 3 US cents per unit. Such kinds of low tariff could be an inhibiting factor in power trading. Private sector power purchase agreements be it in Nepal, Pakistan or India invariably have a much higher price tag of about 6 to 7 US cents per unit at the generator's terminal..Throughout the region, the IPPs' tariff is very much in the forefront, with some already at the courts. The impression that the IPPs are solely responsible for the utilities' bleeding to death is the utilities' way of hiding their deficiencies. South Asian utilities have a tremendous scope for improvement (capacity utilisation, losses, revenue arrears, manpower etc) and these should be seen as opportunities. The reneging of a signed, sealed and done PPA should not be the first line of defence of the utilities. The sanctity of the contract has to be honoured by all the signatories. There is also the tendency of the developer to be too greedy and chew a large project in an unsettled environment, very aptly known as "fishing in trouble waters". This is what Enron tried to do with its second phase 1400 Mw Dahbol project in Maharashtra, now stuck with billions of dollars already invested. Tariffs will continue to be the bone of contention in the foreseeable future in our part of the world. Power trading will only occur if the tariff is, to quote the Indo-Bangladesh draft Power Exchange Agreement, "just, reasonable and compensatory to each other." Though there will be some noises made on transmission line constraints in cross border power trading, this is not perceived as a major constraint..The Way Forward.Nature has been very kind to the SAARC region. Energy- wise, India is blessed with the tenth largest coal reserve in the world. At the present forecasted rate of Indian consumption, this reserve is expected to last more than a century. SAARC's Himalayas could still provide us with over 160,000 Mw of economically exploitable hydroelectric energy. What is more, this is renewable and clean energy on a planet already plagued by green house emissions. Pakistan and India have substantial natural gas, but Bangladesh's natural gas reserves far exceed their national requirements. Though non-renewable, natural gas has been termed as clean energy. Maldives and Sri Lanka have no more indigenous energy resources of their own and are compelled to import all their energy requirements..It is, therefore, high time that SAARC implement some beneficial cross border power trading projects. There are numerous constraints: the lack of a conducive geopolitical environment, the strategic commodity syndrome, policies that are driven more by national and less by regional requirements, absence of the regulatory mechanism on cross border trading, the huge financial resources crunch, the creation of an investorfriendly environment etc. But the prospects and the opportunities of power trading in the SAARC region are there as well: very well endowed with coal, natural gas and hydropower; at 5.5 percent average annual growth of energy consumption, the highest region-wise growth in the world; supplements/complements the development activities of the region. The European nations have been trading in power for decades. The ASEAN and the South African Pool countries are already ahead of us in this game..That the Tenth SAARC Summit at Colombo on subregional cooperation declared that, "the Heads of State or Government encouraged the development of specific projects relevant to the individual needs of three or more Member States." The Eleventh SAARC Summit will hopefully identify this "regional project", It is expected that this will be an energy-related project where cross border power trading will naturally ensue. One has to take note that India is both the "head and heart" of this South Asia region, and it must take the lead and become proactive so that this SAARC "regional project" together with the cross border power trading will materialise. This will help in uplifting the quality of life of the 1.3 billion South Asians.