Economics of Regional Energy Cooperation: Nepal Case Study

1. Economics of Regional Energy Cooperation: Nepal Case Study Dr Priyantha D C Wijayatunga Head, Portfolio Management Unit Nepal Resident Mission Asian Development Bank 6th Japan-SAARC Energy Symposium 6-7 March 2013 Kathmandu, Nepal

2. Outline Need for Regional Cooperation Regional Energy Trade Study India-Nepal Interconnections Economic benefits Final Remarks

3. Regional cooperation? • Wide variation in resource endowments • Hydropower, coal, natural gas and other renewable energies • Sharing of low cost energy resources • Full potential not exploited • Economic opportunities energy exporting countries • Enhanced opportunities for climate change mitigation • Single fuel dominance • Energy resource diversification and energy security • Acute power shortages

4. Energy Sector • Traditional Fuel Use • Energy Access

5. Energy Sector …. Generation Composition • Demand Supply Gap

6. Energy Sector …. • Per Capita Resources Electricity Supplies • Region to add about 63000MW of coal power (2012-2017) • Will generate about 410 TWh per year • About 390 million CO2 emissions

7. Short distances to connect

8. SAARC Regional Energy Trade Study (SRETS) • Proposed projects • India-Nepal power interconnections • Dhalkebar to Muzaffarpur • Gorakhpur to Butwal • Bangladesh-India power interconnection • Western border of Bangladesh • Assist Bangladesh to import power from India • Bhutan-India interconnections • Catering increased hydropower development and cross-border trade • India-Sri Lanka interconnection • Establishment of a regional power market

9. Proposed interconnections

11. India-Nepal interconnections

12. India-Nepal Electricity Trade

13. Economic Benefits • Benefits of regional cooperation • Dhalkebar-Muzaffarpur transmission line • Analysis carried out with an investment planning model • Reduced integrated South Asia transmission network of 40 nodes and 166 transmission lines • “with” and “without” project scenarios.

14. Methodology

15. Economic Benefits ….. • Generation investments • Based on generation plans of the individual countries • Transmission capacity and electricity demand projections • Based on the national plans • Extrapolated in certain cases

16. Economic Benefits ….. • Benefit of cross-border transmission measured • Reduced generation costs both investment and operation • Reduced cost of unserved energy • Due to increased overall effective generation capacity at the disposal of each of the countries.

17. Economic Benefits ….. • Project estimated to cost $186 million • inclusive of in-country transmission network strengthening to support 1000MW of cross-border flows • The study analysed • Nepal reaching a generation surplus state by 2016/17 • Nepal remains a deficit state even by then • Accrued benefits $ 105-215 million per year • Cost of the transmission around $ 20 per year • Interconnector highly beneficial in both scenarios • Benefits far higher in the latter

18. Final remarks • Economic rationale for India-Nepal interconnections is high • High energy transfers • Significant difference in economic costs • Additional benefits • Climate change mitigation • Improved reliability

19. Thank you Priyantha D C Wijayatunga E-mail: pwijayatunga@adb.org