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Will electricity trade usher in a new era of cooperation in South Asia?

The initial focus on a strong bilateral form of power trade has set the pace for future investments in viable interconnections in the region

Subhomoy Bhattacharjee  |  New Delhi 

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There is one element of connectivity between the South Asian nations happening on a modest scale. But it is not on the ground; instead it is on the wires, as trade. As Prime Minister Narendra Modi and his counterparts arrive at Kathmandu, for the revived Summit today, it is interesting to note that the seven countries forming the group have traded annually 19.8 terawatt hours (Twh) among themselves for the past couple of years. These countries, other than are Bangladesh, Myanmar, Sri Lanka, Thailand, and Bhutan.

It is puny by some reckoning, no doubt. Compared to the total production of by the nation, the traded volume is just one per cent. While Nordic countries trade upto 91 per cent of their total production, other west European countries like Germany and UK trade 49 and 47 per cent of their production. USA too has a large trade volume but it pales in comparison with its domestic production.

But other comparisons are more generous like those for trading in Latin America or even for Asean region, except Singapore. (Global Energy Statistical Yearbook). The volume of CIS inter country trade is 5 to 6 percent of their domestic consumption of electric (Eurasian Development Bank), but their trade is a follow through of the integrated grid they developed as constituents of the erstwhile USSR (please see table 1)

As of now almost all of the among the nations are government to government deals. It would be far more useful for these nations if they could participate as buyers or sellers in the exchange platforms, given the obvious demand and supply mismatch of electricity between the nations. for instance, is sitting on a huge additional generation capacity while shortages are building up in Bangladesh, Nepal, Sri Lanka and even Myanmar. (please see table 2) It has the lowest electricity access in the region with only 52 per cent of the population covered, compared with 100 per cent in Bhutan and Thailand. expects to reach the same level by 2019. Thailand has already taken steps in this direction, with imports from Laos, Malaysia and Cambodia making up 9 per cent of its total demand.

Still, the delays in inter country trade have more to do with the perceived sense of hostility among the neighbours that precludes most business deals from fructifying than any technical problems in transporting Yet compared to the difficulties that projects like optical fibre connectivity or highways face on the ground, the differences are more easy to solve for electricity trade, say experts. On the ground, there are more differences than common rules among each of the countries—given that several of them have come up from different colonial regimes. As the experts negotiating the contours of the India-Myanmar-Thailand Trilateral Highway have found, those differences can be as trivial as driving rules that each country follows. India, and have right hand drive, while vehicles in Myanmar use left hand drive. Thailand is again right hand drive but its neighbours to the east, Cambodia and Laos PDR are left handed. In comparison Europe had it easy. Except for UK, the continent had instituted the same traffic rules for trucks and passenger vehicles to be able to move seamlessly across the continent.

Abstracting from the problems on terra firma, it is not that is all that easy to set up in Asia. Like every other initiative, political differences had made this economic partnership also difficult. For five years under the banner of South Asia Regional Initiative for Energy Integration or Sari\EI, India’s energy think tank, IRADe and USAID were working towards promoting integration of energy systems to set up a Forum of Regulators and a Saarc Council of Experts and Energy Regulators.

It was supposed to develop a common grid based on a shared infrastructure, enveloping Pakistan and Afghanistan in the west to Myanmar in the east. But as India turns to its eastern neighbours, the rules have to be redrawn. Fortunately, as a power ministry official said, despite those changes some of the basic policies have come into place.

Two of those have happened in 2017. India’s Central Electricity Regulatory Commission and the Central Electricity Authority have issued draft regulations for power to flow along the wires. Originally conceived for the Saarc nations, the Central Electricity Regulatory Commission (Cross Border Trade of Electricity) Regulations, 2017 spell out the trade rules that can happily serve the Bimstec region too. It says “Any cross border trade in electricity between India and a neighboring country shall be allowed through bilateral agreements…”. Essentially power can be bought and supplied across the borders, between an Indian firm and a firm abroad that is either India owned or majority owned by the government of the country.

The subsequent draft Conduct of Business Rules issued by the Central Electricity Authority later in the year, makes it clear that an Indian power generation company will only be allowed to supply its entire production to a neighbouring country. The company cannot sell its surplus production to the Indian grid. A senior CEA official said there are security issues if the grids are allowed to be interlocked. “Indian Generating Stations supplying electricity exclusively to neighbouring countries may be allowed to build independent transmission system for connecting to the neighbouring country transmission system keeping technical and strategic considerations”.

Given the glacial pace at which other inter country agreements have moved these are fast moves. (please see chart 1) It was also necessary since India at 82 per cent and Thailand with another 10 per cent account for most of the grid capacity. Still the documents by themselves, would not help to make cross border energy trade or CBET as this is known to be galvanised. All the countries need to endorse the Indian CERC and CEA protocols for grid interconnection.

Yet as the data shows the initial focus on a strong bilateral form of has set the pace for future investments in viable interconnections in the region. The Irade-USAID report expects power trading through exchanges to come up as soon as the countries agree for “harmonisation of electricity codes and…the strengthening of institutional cooperation”. There are other issues too. Indian power sector even now is beset with coal shortages that affect supplies. Would the states look askew at supply of power to neighbouring countries, unless these problems are sorted out? And unlike road links, work on the power transmission links between the countries through difficult mountainous regions are expanding fast.( please see chart 1)

As Constantino Xavier, fellow at Carnegie India, notes, electricity trade “would be an important confidence-building measure for electricity-deficient states such as and Myanmar”.

1. Milestones in India’s power capacity links

—2013: India 500 MW high voltage line commissioned

—2014: India Nepal agreement signed

—2015: Dagachhu hydropower project in Bhutan for supply to India

—2016: India-Bangladesh 400KV transmission line commissioned with 100 MW of power exported to Dhaka

—2016: India Myanmar connectivity established for supply of 3MW from Manipur to Tamu (Myanmar)

—2017: RPower signs a 3000 MW power project at Meghnaghat in Bangladesh

—2017: Adani Power concludes agreement to supply 1600 MW to Bangladesh from its plant in Jharkhand

2. Proposed power transmission links Numbers

India—Bhutan three

India—Nepal two

India—Sri Lanka five

Thailand—Myanmar four

Bangladesh—Nepal two

Bangladesh—Bhutan one

Bangladesh—Myanmar one

First Published: Thu, August 30 2018. 13:39 IST