SARI/Energy Integration

1. SARI/Energy Integration South Asia Regional Initiatives for Energy Integration (SARI/EI) Supporting Cross Border Energy Trade in South Asia Shanker Khagi USAID/Nepal March 7, 2013 Kathmandu, Nepal

2. Good Reasons for Cross Border Energy Trade SARI/Energy • Continuedpowershortageshampergrowthprospects • Regional complementarity • Seasonal Imbalances • Daily Imbalances • Strengthen economic environments • Provide for an improved quality of life • Energy security = Security

3. Change SARI/Energy Integration • Good reasons for change aren’t enough. • There must be the political will for change. • Political will reflects stakeholder expectations… • but also stakeholder concerns about the future • and how best to meet the challenges of the future • Concerns are generational • Change is generational

4. SARI/E Past SARI/Energy Integration USAID’s South Asia Regional Initiative for Energy (SARI/E) • Launched in 2000 • Completed its 3rd Phase in 2012 • Having successfully helped position stakeholders for the future • Looking to leveraging its success in a 4th Phase

5. SARI/E Past SARI/Energy Integration REGIONAL •SATURNNetworkformationandInductionof POWERGRIDasSATURNmember B M =Bilateraltrade =Multi-lateraltrade NEPAL •Expertreviewof TransmissionService AgreementsandKeyIssues BHUTAN •ExecutiveExchangeto BhutanPowerCorp. BANGLADESH •HVDCtraining at PGCILsub-station PAKISTAN •CASA1000AdvisoryServices M •SeniorLevel ExchangeProgramto IndianEnergy Exchange,PTCand CERC B B SRILANKA INDIA •BilateralElectricitylinkstoBangladesh, SriLankaandNepal •Spreadenergyexchangemodels& training •India-SriLankaSubmarinePower MALDIVES •MaldivesSubmarineCable InterconnectionStudy •WorkshoponAdvancingLowCarbon TransmissionInterconnection- InterconnectionReliabilityandStability StudyforCEB,SriLankaWindpower development •HVDCHands-ontrainingatPGCILsub- station GrowthThroughRegionalCooperation andCross-BorderEnergyTrade B .. .

6. Findings of a Political Economy Study 2012 SARI/Energy Integration 1. There are 2 Distinct Sub-Regions in South Asia • Eastern Sub-region (Bangladesh + Bhutan + India + Nepal + Sri Lanka) • Western Sub-region (Afghanistan + Pakistan) and 2. The concept of a Regional Energy Grid across South Asia is being superseded by a “Virtual Energy Grid” West East

7. Sub-regions SARI/Energy Integration East West No Markets … but represents important vision for trade Ongoing of conflict and worsening political uncertainty (instability) Several project opportunities – high risk / high reward • Strong interest in developing energy markets • Indian market is economic engine for Sub-Region • Growing number of interconnections with India • On track for “Virtual Energy Grid”

8. A Regional Energy Grid SARI/Energy Integration • A “Regional Energy Grid” – a transmission infrastructure linking the continental countries of South Asia – has been a long sought but unfulfilled objective. • Existing, Developing, Prospective connections between India and neighboring states: • Are they the beginnings of the “Regional Energy Grid”?

9. Cross Border Energy Trade SARI/Energy Integration

10. Weseethreeemerginginterconnection businessmodelsunderdevelopment…. SARI/Energy Integration SARI/EEmphasis Regionalenergymarket trade 3 Complexity Regionalbilateral • SouthAsiaRegional tradeviatransit country 2 •Bilateraltrade betweennon- neighboring countriesvia transitcountry •CASA1000 Tajikistanand Pakistanvia Afghanistan Trade-between neighboringornon- neighboring countriesvia regionalgrid throughregional market mechanisms, TradewithOther Regions-including CentralAsia,S.E. Asia BilateralTrade between neighboring countries •Smallerscope, easiertodevelop •Canusepower marketdriven modelfor facilitatingtrade throughtraderor nationalenergy exchange 1 • Time

11. Regional Energy Trading SARI/Energy Integration • 2007 – Guidelines for power exchanges in India • 2008 – Indian Energy Exchange – first ever power exchange in India • 2014 - With unification of India’s grids it will be possible for energy transactions between any two points in India • Subsequently - With connections to India, it will be also be possible for energy transactions between any two points in countries connected to India. • Without the requirement of building extensive international transmission networks, the Virtual Energy Grid can be used as soon as bi-lateral connections with India are in place.

12. Developing the Virtual Energy Grid SARI/Energy Integration • “Hardware” Interconnections: Technical challenges are manageable but get most of sector’s attention • “Software” is critical to enable interconnections to happen, and needs more focused attention: –Commercial trading arrangements –Legal and Regulatory issues –Media issues and public outreach

13. Priorities SARI/Energy Integration • Political consensus – legislation to permit cross border energy trade • Encouraging Public-Private Partnerships for cross border energy projects • Completing the interconnections between India and its neighboring countries • Harmonizing laws governing commercial energy trade among the countries • Establishing independent regulatory regimes in each South Asian country and harmonizing regulations governing cross border energy trade • Functionally restructuring the energy utility sector in each country. • Ensuring that retail energy tariffs are cost reflective in each of the countries.

14. SARI/EI Forward SARI/Energy Integration • Project Steering Committee formed – meeting on March 12 • Task Forces to be formed on • Policy, Legal, Regulatory • Generation & Transmission Infrastructure Planning • Energy Trading/Exchanges and markets • Coordinating with Supporting Institutions like SAARC, MDBs • Promoting Public-Private Partnerships

15. ThankYou! SARI/Energy 34