Asia Pacific Region is the fastest growing region in the world and also the main source of economy, with an average GDP growth rate of 5.7 % (2017). Further, Asia contributes about 60% of global growth and three fourth comes from China and India1. About 60% of world’s population (4.3 billion people) lives in Asia Pacific Region and it includes most populous countries in the world viz. China and India2. Furthermore, maximum number of poor people in the world lives in this region (about 17% alone lives in South and South West Asia).
Asia Pacific region is blessed with huge and diverse natural energy resources such as Coal, Hydro, Gas, Oil, Solar, Wind etc. Out of estimated total global coal reserves of 892 billion tons, about 55% is available within the region whereas Oil reserves is about 20% of the international reserves (1,700 billion barrels)3. Natural gas is though evenly distributed, but bulk of proven reserves are concentrated in Middle East. Region has abundant renewable reserves such as Hydro, Solar and Wind. However, about 85% of total Asia Pacific energy resources are concentrated in few countries such as China, Russia, India, Iran, Turkey etc.; Whereas, other countries in the region have limited energy resources. In such scenario, where energy resources are concentrated in few countries and some countries have limited resources, inter-connectivity and trade of energy/electricity is one of the key driver for economic growth & social development of the region.
Asia Pacific Region contributes about 60% of global growth. Region blessed with diverse energy resources Coal, Oil, Gas, hydro, Solar, Wind etc. and about 85% of total Energy Resources are concentrated in few countries viz. China, Russia, India, Iran, Turkey etc., whereas other countries have limited energy resources.
Electricity demand in Asia and the Pacific is projected to be more than double between 2010 and 2035, increasing from 7,010.4 TWh in 2010 to 16,169.2 TWh in 2035. The annual growth rate will be 3.4% over the outlook period (through 2035) which is slower than the historical trend of 6.0% between 1990 and 2010. The electricity demand of the developing members will grow slightly faster, at an annual rate of 3.8% on average through 2035, and increase their share in the total electricity demand of Asia and the Pacific from 82.3% in 2010 to 91.1% in 2035 4. As energy demand is expected to rise exponentially in future, region needs to take necessary steps to enhance capacity addition including development of renewable energy resources and inter-connectivity in the region for optimal utilization of energy resources and to address climate change to achieve goal of SDG7 etc.
2. Status of Grid Connectivity in Asia Pacific Region:
2.1 South & South-West Asia (S-SWA) comprises of 10 countries India, Nepal, Bhutan, Bangladesh, Sri-Lanka, Pakistan, Afghanistan, the Maldives, Iran and turkey which constitutes 28.5% (approx.) of the world's population. India and Pakistan has diverse energy resources such as coal, hydro, renewable, whereas Iran and Turkey has huge Oil and Gas reserves. Nepal, Bhutan, Bangladesh have limited energy resources. Generation capacity in the S-SWA has grown from 203GW in 2000 to more than 569GW in 2018. As of 2018, major economies viz. India, the Islamic Republic of Iran and Turkey contributes 90% of the total installed capacity of the sub-region. Currently on the eastern side of S-SWA sub-region, Bangladesh, Bhutan, India and Nepal are interconnected and trade of electricity (Bilateral) of more than 3,000MW (approx.) is taking place, which is expected to increase substantially in future once the hydro projects under construction in Bhutan and Nepal are commissioned. On the western side, Pakistan and Afghanistan are interconnected with Turkey and Iran and are importing electricity from them. Pakistan and Afghanistan are also implementing to connect to central Asia through CASA 1000 Project. Sri-Lanka and The Maldives Islands are yet to be interconnected. South Asia Association of Regional Cooperation (SAARC) an intergovernmental Institution has been created by eight South Asian Countries for welfare of the people, including promoting energy cooperation and connectivity.
2.2 North-East Asia (NEA) comprises of 6 countries viz. China, Democratic Republic of Korea, Japan, Mongolia, Republic of Korea and constitutes about 21.5 % of World’s population. NEA has largest density of population, as it includes the state (China) with a population of more than 1.3 billion people. China and Russia are blessed with huge energy resources whereas Japan and Republic of Korea (DPRK) have limited natural energy resources. China is rich in Hydro whereas Russia is rich in Natural Gas reserves besides many minerals such as Uranium etc. NEA sub-region currently has a few cross border transmission interconnections though the first interconnection between USSR and Mongolia was put in place in seventies. The most developed Cross Border Transmission systems are between Russian Far East and Northeast China. Electricity trading in 2017 was nearly 5 TWh. However, there is no intergovernmental body/association to support/enhance cross border grid connectivity in the sub-region.
2.3 South-East Asia (SEA) comprises of 10 countries viz. Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, Timor Leste, Vietnam and constitutes about 8.6% of the World’s Population. ASEAN and China has been long connected through cross-border power grids in the Greater Mekong Sub region (GMS). The cross border capacity under ASEAN APG inter-connections has increased to 5,212 MW from 3,489 MW in 2015. As per projections, ASEAN expects that power exchange will increase to 10,800 MW in 2020.(APAEC, 2015) . In South-East Asia sub region, three Inter-governmental Institutions are working to promote energy/electricity cooperation and connectivity viz. Association of Southeast Asian Nations (ASEAN), Greater Mekong Sub region (GMS) and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). Five ASEAN countries, Cambodia, Laos, Myanmar, Thailand and Vietnam, are members of the GMS. Two ASEAN members, Myanmar and Thailand and five members of South Asia viz. India, Nepal, Bhutan, Bangladesh and Sri-Lanka are members of the BIMSTEC group.
2.4 North Central Asia comprises of 8 countries viz. Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Russian federation, Tajikistan, Turkistan, Uzbekistan and constitutes about 1% of World’s Population. The electricity trade volume between the countries reduced drastically from 25GW in 1990 to 7.6GW in 1995, due to various factors. However, in 2017, Uzbekistan made changes in banking sector and radically changed its relationship with neighboring countries, which resulted in increase of import of cheap hydro power by Uzbekistan in 2018 from Tajikistan and Kyrgyzstan. In 2018, import/export of electricity increased to 4313 million KWh as compared to 2080 million KWh in 2016.
One of the major challenge for grid connectivity is lack of Trust and relationship, political uncertainty among countries. Asia Pacific region need to separate out their political interest vis-a-vis economic interest for the welfare of their People.
3. Challenges in promoting Cross Border grid connectivity: Broadly, Challenges/risks associated with Cross Border grid connectivity in Asia Pacific can be classified as: i) Lack of Trust and Geo Political Relationships/Political uncertainty: Lack of stable government, trust among the countries, political uncertainty, intra-regional boundary, political governance, security threats etc.; ii) Lack of common Policy, Regulatory & Legal framework: Lack of coordination of policies/ regulatory framework, Lack of coordinated transmission planning and system operation, harmonization of grid codes, absence of Institutionalization viz. forming association /forum of regulators for coordination of regulations and for coordinated transmission planning etc. iii) Financial and Commercial risks: financial closure of cross border power projects; taxes/duties, Common currency, tariff framework, Offtake risks associated with PPAs and Transmission Service Agreements, Open access and trans-country transmission wheeling framework, transparent dispute resolution mechanism etc.; iv) Cross Border Power Project Implementation challenges: Lack of transparent policies on Land acquisition, right of way, environmental clearances, contract enforcement etc.
4. Role of Inter-Governmental Institutions/Multilateral Development Banks & Regional/Global Institutions working to promote Grid connectivity: Country Governments in each sub-region have taken initiative and created Intergovernmental Institutions such as SAARC ( South Asia; 8 countries), BIMSTEC (Part of South Asia and South East Asia; 7 countries), ASEAN (South East Asia; 10 countries), GMS (South East Asia; 6 countries), ECO (South-South West Asia; 3 countries), SCO ( North East Asia and Central Asia; 8 countries), CAREC (Central Asia; 11 Countries), BCIM ( part of South Asia and North east Asia; 4 countries), to enhance collective economic growth, social development etc. for the welfare of their people and provide a common platform to work together in spirit of trust and friendship. These Inter-governmental Institutions have created Working groups, Expert Groups, Ministerial Groups, and Energy Centers etc. to promote energy cooperation and also processed signing of inter-governmental energy treaties and have created necessary fund mechanism to support construction of viable infrastructure projects as a part of their commitment to enhance energy cooperation. Primarily due to prevailing Geo-politics, lack of relationship and trust among the countries has impacted role of these Intergovernmental Institutions to play an effective role to enhance energy cooperation and connectivity in each sub region. Further, multilateral development institutions such as World Bank, ADB, USAID etc., are also playing active role in promoting grid connectivity on multilateral basis.
On Global/Regional level, Economic Social Commission for Asia Pacific (ESCAP) arm of United Nations is playing an important role to promote connectivity in Asia Pacific region. ESCAP has constituted Country nominated Expert Working Group (EWG) for enhancing energy cooperation and grid connectivity in the region. ESCAP’s EWG has developed Road Map (draft) which identifies critical areas such as i) Building Trust & Political Consensus; ii) developing Cross Border Electricity Grid Master Plan iii) implementing Intergovernmental Agreements on Energy Cooperation & interconnection; iv) Coordinate, Harmonize and Institutionalize policy and regulatory framework; v) move towards multilateral power trade and create competitive market for electricity; vi) Coordinate Transmission Planning and System operation etc. It is important for ESCAP to convert this Road Map into time bound Action Plan to achieve the goal of grid connectivity in Asia Pacific Region.
4.1 Similarly, Global Energy Interconnection Development and Cooperation Organization (GEIDCO): A Nonprofit international organization which was established in 2016 in Beijing, China also promotes Global Energy Interconnection and meeting global demand through clean and green energy to serve the sustainable development of humanity. By the end of 2018, GEIDCO has 825 members from 112 countries and regions, involving 13 categories such as Energy & Power enterprises, Equipment Manufacture enterprise, Project Construction enterprise, Research Institutes and Universities etc. Recently, Govt. of India through its tender for “One Sun, One World and One Grid” has also shown its interest to promote development of Renewable Energy and grid connectivity on global level.
Way Forward: Adequate supply of energy /electricity is critical for all segment of life whether it is industry, agriculture, research, commerce, education, health etc. Cross-border trade of energy/electricity has enormous benefits such as optimal utilization of resources, power availability at competitive prices, to reduce dependency on fossil fuels imports, development of clean renewable energy to address climate change, enhancing access to electricity, enhancing energy mix, economic growth etc.
Cross-border energy/electricity trade is a win-win situation for all the countries by optimizing their energy resources for the economic growth & development of their region. For example, presently, in South Asia Sub-Region, out of eight countries, four countries viz. India, Nepal, Bhutan and Bangladesh are interconnected and more than 3000 MW of electricity is being traded. Bhutan by selling its surplus hydro power to India is earning more than 40% of Bhutan’s revenues (25% of its GDP) which helped Bhutan by increasing electricity access, creating new industries like cement and steel etc. Further import of 1,100MW of electricity by Bangladesh from India has benefited in reducing load shedding (1,048MW of load shedding in 2012-13 to 307MW of load shedding in 2014-15) and also in terms of annual savings (estimated) around Taka 40 billion (US$500 million app- Shahi’s [WU1] report). Similarly, import of 300-500MW of electricity by Nepal from India has benefited to meet its shortfall and to meet start up power/auxiliary consumption for the new hydro power projects which are under construction. India being net exporter of electricity at present, is benefiting from optimum utilization of generation assets and revenue earrings. This shows that Cross Border Energy/Electricity trade is a win-win situation for all the countries through which they can optimize their energy resources for the economic growth & development vis-a-vis for the welfare of their people.
Based on learning's of successful power pools/power exchanges, Asia Pacific region need to draw Road Map and time bound action plan with a commitment of each country for enhancing energy cooperation and grid connectivity. Intergovernmental Institutions, Multilateral Development Banks, Institutions working at Global/Asia Pacific and large countries need to align together to overcome the various challenges to meet the goal of grid connectivity in the region.
Successful Power Pools/power Exchange markets in the world such as Nord Pool, South African Power Pool, Western African Power Pool, PJM etc. shows that they have also faced all such challenges for grid connectivity in their regions including political commitment. However, they have been able to separate out their political interests vis-à-vis economic interests. They have also taken substantial time to overcome these challenges including political commitment to enhance grid connectivity, creating regional Institutional structure such as forum/association of regulators and transmission & Power System Operation etc. in their region.
Based on learning's of successful power pools/power exchanges, Asia Pacific need to draw an effective Road Map and time bound action plan with a commitment of each country for enhancing energy cooperation and grid connectivity in the region for optimum utilization of energy resources, development of renewable energy, economic growth and development for the welfare of their people and also to address climate change to achieve goal of SDG7. To achieve this, it is important that regional Intergovernmental Institutions, Large countries in the sub-region, World Bank, ADB, ESCAP, GEIDCO etc. need to unite and align together to promote energy cooperation and integration in the region. ESCAP being a neutral agency, can play a vital role in enhancing political consensus. Signing of Treaties/Agreement as commitment of the Countries and establishing regional institutions for coordination of regulations, transmission planning and system operations to enhance cooperation and connectivity can be followed up in line with successful examples of power pools/power exchanges. To promote investment, besides developing favorable investment guidelines, selling and buying countries can stake claim by forming joint venture/consortium for development of such common generation power projects. MDBs/ FIs would be more comfortable to fund such projects where more than 2-3 countries jointly stake claim to develop such power projects including associated transmission system for evacuation of power. As in each sub-region of Asia Pacific, energy/electricity trade is primarily bilateral and limited, it is important to focus each sub-region first to enhance energy cooperation and grid connectivity on multilateral basis in the medium term and it should be extended to whole of Asia Pacific region in the long term.
Vijay Kumar Kharbanda, Ex Project Director, IRADe/USAID & ED(PFC)