• Sumanta Biswas : +91 9735621680 / Arnab Ganguly : +91 9874410391 / Sayoni Chaudhury : +91 8017577302
  • iacp@cuts.org

Energy Cooperation in the BBIN Region

Moving towards Energy Security through cross border Energy Cooperation

Together, Bangladesh, Bhutan, India and Nepal are home to 21 per cent of the world’s population . Notwithstanding the rich endowment of clean energy resources (natural gas, hydropower etc.), the region still predominantly depends on fossil fuel for meeting its energy needs which also includes electricity. With a sustained economic growth in the BBIN countries as forecasted by many studies, there will be a consequent increase in the demand for electricity in the region. With the heavy dependence on fossil fuels, the region also faces substantial climate change concerns.

Thus, to be able to cope up with the increasing need for energy in future and also to address sustainability concerns, there is an urgent need to explore opportunities for energy cooperation across borders in the BBIN region. This will helpto attain, among others, the following objectives:

  • Improving regional energy security
  • Lowering energy costs for the end consumer
  • Diversify the energy mix by promoting clean energy and thereby address climate change concerns

At present the region already has existing arrangements for cross border electricity trade and they are expected to gain further traction in the coming days. To this end, this chapter explores the opportunities and challenges involved in cross border electricity trade in the BBIN region.

1. An overview of the countries in the BBIN sub-region

1.1. Social and Economic Indicators

Countries in the BBIN region are typically characterised by moderate economic growth, coupled with problems of unemployment and poverty, dependence on imports and predominance of fossil fuel in the energy consumption basket .

The countries in the BBIN region have significant diversities in their demographic composition, socio-economic features, business environment, openness to trade etc.:

  • While India has the highest population, Bhutan has the lowest in the BBIN region
  • It is easier to start business in Bhutan and Nepal compared to India and Bangladesh as per the Ease of Doing Business rankings by the World Bank
  • In terms of openness to trade, Bhutan’s total export and import is 103.7%of its GDP which is highest compared to other countries in the BBIN region
  • In terms of net FDI inflows, Bhutan’s share of FDI as a percentage of GDP is twice compared to other countries in the region
  • In terms of dependence on energy resources, Bhutan and Nepal has the highest dependence on hydro power compared to India and Bangladesh which are predominantly dependent on Fossil Fuel.

1.2. Energy Reserves in the BBIN Sub-region

The potential total energy reserve of various energy forms in the BBIN region has been presented in Table 5 below. It is evident that there is significant variation in the energy reserves available in the BBIN region which offers opportunities for cooperation in regional economic cooperation in the energy sector. For example, if the hydropower capacity in Bhutan and Nepal be developed effectively, then the same can be exported to the other countries in the BBIN sub-region. Together accounting for a total 1,425.9 million population, India and Bangladesh provide an important market for the electricity imported from Nepal and Bhutan.

Table 5. Energy Reserves in the BBIN Sub-Region
Country Name Coal (million tonnes) Oil (million barrels) Natural Gas (Trillion Cubic Feet) Biomass (million tonnes) Hydro Power (Gigawattes)
Bangladesh 884 12 8 0 0
Bhutan 2 - - 27 30
India 90,085 5,700 39 139 150
Nepal - - - 27 83
Source: SAARC Regional Energy Trade Study, March 2010.

1.3. An overview of electricity sector in the BBIN sub-region: Composition and usage pattern

  • The countries in the BBIN sub-region are far behind their developed counterparts in terms of access to electricity. Among the countries in the BBIN region, Bhutan has the highest per capita electricity consumption at 2,600 kWh/capitaduring 2014 followed by India at 957 kWh/capita during the same period . Low population compared to other member countries in the BBIN sub-region is one of the key reasons for the high per capita electricity consumption figure of Bhutan;
  • Fossil based fuel is the most predominant source of electricity in the BBIN sub-region. While India is majorly dependent on coal for generating power, Bangladesh depends on Natural Gas. Although, Bhutan and Nepal are majorly dependent on Hydropower, Nepal has to import power to meet its demands. Nepal is also largely dependent on biomass for heating, cooking etc. purposes. To deal with the problems of frequent power cuts, even hydropower rich countries like Nepal and Bhutan imports diesel, petrol especially to run vehicles, diesel pumpsets and other diesel based activities.The consequent Carbon dioxide emission in the BBIN sub region is to the tune of 1898.46 million Metric Tonnes during 2014 with India accounting for bulk of the emission;
  • By 2020 electricity demand is likely to increase to 19.22 lakh GwH from the present level of 9.71 lakh GwH.
  • Table 2. Projected Electricity Demand in the BBIN sub-region
    Country Name Demand in GwH CAGR
    2010 2020
    Bangladesh 28,470 67,400 9%
    Bhutan 1,749 3,430 7%
    India 9,38,000 18,45,000 7%
    Nepal 3,200 6,910 8%
    Total 9,71,419 19,22,740 7%
    Source: Prospects for Regional Cooperation on Cross Border Electricity Trade in South Asia, 2013
  • Bhutan is the predominant exporter of electricity in the BBIN sub-region while India is the biggest importer of electricity;
2. Key Drivers for Cross Border Energy Cooperation in the BBIN Sub-region
  • Increasing access to electricity A significant percentage of the population belonging to the rural areas in the BBIN region has little or no access to electricity. Though the countries have adopted steps to increase the pace of rural electrification, a lot still needs to be done.Cross border electricity trade can play an instrumental role in reducing governments’ investment in increasing generation capacity.
  • Reduce loss of economic output due to Power Shortages Owing to dependence on Hydroelectricity generated from run of rivers which in turn are seasonal in nature, Bhutan and Nepal suffer from severe power shortages especially during winter when the rivers dry up. Bangladesh also suffers from severe power interruptions leading to significant economic losses to the tune of 0.5% of GDP. During Summer and Monsoon when demand for electricity is high,India also suffers from to peak power deficits and the consequent power cuts. These shortages impose a loss in economic activities in the region. Further, to deal with the situation, industries, commercial units and households have to depend on backup power viz. inverters, generators which trigger increase in the use of fossil fuel and hence add to the problem of carbon emission.
  • Lower dependency on fossil fuel and hence reduce carbon emission As pointed out earlier bulk of the energy consumption in the BBIN sub-region is dependent on fossil fuel and hence depends on oil imports. Except for India, refining capacity is limited in the other countries in the BBIN sub-region . Heavy dependence on a single fuel source is not desirable as it often limits the expansion capacity of a country and also endangers energy security. Further from the perspective of carbon emission also, use of fossil fuel needs to be reduced.
  • Effective use of seasonal complementarities There exist significant seasonal complementarities in electricity demand among countries in theBBIN sub-region . For example, during winter when the run of rivers become dry, Bhutan and Nepal import electricity from India and India exports electricity from Bhutan during summer and monsoon seasons . Owing to proximity of Bhutan and Nepal to the Northern and Eastern Grid in India, power exchange can be cost and time efficient.
  • Untapped hydropower potential The hydro power potential in Bhutan and Nepal taken together is 1,13,000MW . In addition, the hydro power potential for the North East India is 58,000 MW . If the potential is exploited effectively then the BBIN sub-region can become the largest provider of hydropower to the countries adjoining the sub-region.
3. Key Benefits from Cross Border Energy Cooperation in the BBIN Sub-region

3.1. System Operational Benefit

  • Optimal utilisation of time diversity, resources and ensuring stable electricity supply Cross border electricity trade can help in effective planningof generation, transmission and distribution of electricity in such a way that can take advantage of time diversity and peak diversity and ensure stable electricity supply across borders.It is estimated that India alone can reduce construction of 35,000 MW of coal fired power plantsand 6.5% of power sector CO2 emissions during the 2015-2040 period if the potential for cross-border electricity trade is effectively exploited.
  • Economies of Scale Countries with small electricity requirement cannot develop scale-efficient power plants unless a regional approach to share such capacities brings the desired economies of scale and hence lowers the cost of electricity generation.
  • Create investment opportunities Creating cross-border interconnected systems will require strengthening the existing generation, transmission and distribution network across countries in the sub-region.This will create substantial investment opportunities where private sector can participate.It is estimated that an effective implementation of regionally integratedelectricity market in South Asia will lead to an increase in the generation capacity by 750 GWbetween 2015 and 2040. This will lead to asaving in generation capacity in India and Bangladesh to the tune of 35 GW and 11 GW respectively; and capacity additions in Bhutan and Nepal to the tune of 9 GW and 52 GW respectively . Given that energy generation in India and Bangladesh is mostly driven by fossil fuel and in Nepal and Bhutan by hydropower, this also implies substantial lowering of emissions for the region as a whole.

    Private companies like Tata Power, Reliance have started investing in the region to reap the economic benefits.

  • Optimised transmission network It may be observed that in some countries the load centres in one country are close to the generating station in its neighbouring country. It would then be easier and more economical to meet such loads from neighbouring countries. This will lead to reduced line length, reduced Transmission & Distribution (T&D)losses and less capital cost.
  • Environmental Benefits Estimates by World Bank on the impact of regional energy cooperation in South Asian Region shows that electricity generated from renewable resources (including hydro) will gradually replace those from coal and other sources. This will also be true for the BBIN region as well .

    Exploiting the immense hydro power potential of the North Eastern states of India along with that of Nepal and Bhutan, the region has a potential to become energy secure, without adding substantially to emission concerns. While strategic big hydro power plants are important to the region, considering their socio-economic and environmental concerns, they are to be approached through adequate consultations and impact assessments. In the shorter run, Small, Mini, Micro Hydro projects can well be the low hanging fruits for the region.

3.2. Economic and Financial Gains

  • Increase in economic activities Providing stable electricity supply to the consumers across borders will promote industrial and commercial activities which in turn will lead to significant economic gains.
  • Economic and Revenue gains Through effective regional cooperation in energy, the region will save US$226 billion (US$94 billion in 2013 price whendiscounted at 5%) in its electricity supply costs during the 2015-2040 period .For example, Bhutan’s revenue from power export reached US$ 214 million annually in 2008 from US$ 52 million during 2002-03 .
  • Cost effective power systems Optimal planning and use of resources are expected to get reflected in the electricity tariff structure of individual countries and is likely to benefit the end consumers in the process. However, concerns will be there in countries where electricity is heavily subsidised.
4. Existing models of regional cooperation in energy: International Experiences

4.1. The Greater Mekong Sub-Region (GMS)

The Greater Mekong Sub-region (GMS) comprises Cambodia, the People’s Republic of China (PRC), Lao People’s Democratic Republic (Lao PDR), Myanmar, Thailand, and Vietnam. Electricity cooperation in the region is characterised by trade between countries having varied energy resources. The Lao PDR, Myanmar, Vietnam, and the two PRC provinces account for about 94% of the hydropower resources in the region. Myanmar, Thailand, and Viet Nam possess natural gas deposits; Vietnam has the most oil reserves; and Yunnan Province, PRC holds the main coal deposits. Cross border electricity trade in the GMS have led to the following pattern of electricity trading :

  • Cambodia has been importing from the Lao PDR (south) since 2010, Thailand since 2009, and Viet Nam (South) since 2008;
  • The Lao PDR (North) has been importing from Thailand since the late 1990s and Yunnan Province, PRC since 2009;
  • Thailand has been importing from the Lao PDR (Hydropower) since 1971;
  • Viet Nam (North) has been importing from Yunnan Province, PRC since 2004;
  • Yunnan Province, PRC has been importing from Myanmar (Hydropower) since 2008.

The savings resulting from expanding the interconnection of GMS powersystems alone are estimated at $14.3 billion, mainly due to the substitution of fossil fuelgeneration with hydropower .

4.2. The Southern African Power Pool (SAPP)

The SAPP, or Southern African Power Pool, is an international power pool in Africa that aims at providing reliable and economical electricity supply to the consumers of each of the SAPP members.

The pool includes 12 countries in themainland African Region – Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho,Madagascar, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe. In SAPPcountries multiple interconnections were established between hydro-dominant and coal-dominantcountries to ensure that the systems do not become over-dependent on hydropower, which is proneto much more natural risks than coal .

SAPP has made it possible for members to delay capital expenditure on new plants due to the existence of interconnections and a power pool in the region. This is an important aspect in developing the economies of southern Africa.

4.3. The Nordic Pool

The Nordic Pool is the world’s first international exchange for power trading. It operates in Norway, Denmark, Sweden, Finland, Estonia, Latvia, Lithuania, Germany and the UK.

The Nordic countries deregulated their power markets in the early 1990s and brought their individual markets together into a common Nordic market. Estonia, Latvia and Lithuania deregulated their power markets, and joined the Nord Pool market in 2010-2013.Deregulation was undertaken to create a more efficient market, with exchange of power between countries and increased security of supply. Available power capacity can be used more efficiently in a large region compared to a small one, and integrated markets enhance productivity and improve efficiency.

Now that transmission capacity and coupling is in place between the Nordic countries, the European continent and the Baltics, the power market covers large parts of Europe. This means that power from many different sources– hydro, thermal, nuclear, wind and solar enters the grid. This ensures a more ‘liquid’ market, where large volumes are traded daily, and a more secure power supply .

5. Emerging models of regional cooperation in energy in the BBIN sub-region

5.1. India – Nepal Electricity trade

Nepal is predominantly dependent on India for importing electricity. Electricity trading is governed by bilateral agreements. Both countries share a long border, which has 22 cross border power exchange facilities operational at 132/33/11kV.

The second Nepal-India inter-country cross-border transmission interconnection, called the Dhalkebar-Muzaffarpur 400kV line project, includes the strengthening of the sub-national transmission network in Nepal and the development of cross-border interconnection. This would add 1,000MW of cross-border transfer capability as per the availability and demand in the respective countries .Presently, Nepal has started importing 80 MW power through the Dhalkebar-Muzaffarpur line charged at 132 KV. Efforts are underway to step up import 200 MW at 220 KV, and then to 600 MW by December 2017 at 400 KV .

Asapartof the Power Development Agreement signed between the Government of Nepal and Government of the India, efforts are being undertaken to create the infrastructure to facilitate evacuation of power from the hydro Power Stations in Nepal[like Arun-IIIHEP(4x225MW)by SJVNL,Upper Karnali(900MW)and Upper Marsyangdi(600MW)HEPs by GMR,India] to India .

An agreement has been signed between Power Trading Corporation (PTC), India and Government of Nepal for purchasing 150 MW of power from Nepal for 25 years once the proposed transmission link between India and Nepal is established.

5.2. India – Bhutan Electricity trade

In Bhutan, all electricity is generated from hydro projects, and it is estimated that current capacity accounts for only 6% of the total potential. During dry seasons (particularly winter), Bhutan imports electricity from India. India imports Bhutan’s surplus power to meet its domestic demand during summer and monsoon seasons. Further, to strengthen the transmission network, HVDC corridors are under construction.India imports 1,542 MW of power from Tala (1,020 MW), Chukha (336 MW), Kurichhu (60 MW) and Dagachu (126 MW)Hydro Power plants of Bhutan .

5.3. India – Bangladesh Electricity trade

A memorandum of understanding (MoU) was signed in January 2010 between Government of India and Government of Bangladesh for bilateral Co-operation in the areas of Power Generation, Transmission, energy efficiency, Renewable energy, Consultancy services, Training & Development, Constitution of Steering Committee on Working Group and establishment of grid connectivity between India and Bangladesh etc.

According to this MoU, NTPC will export 250 MW power to Bangladeshfor a period of 25 years from the unallocated quota available with the Ministry of Power, India. The tarifffor this power trade is determined by CERC regulations. In addition, a PPA has been signed between NTPC and Bangladesh Power Development Board (BPDB) for supplying 250 MW of electricity over a period of 3 years to Bangladesh. At present India is exporting 500 MW and 100 MW of power to Bangladesh through the Baharampur-Bheramara and Tripura-Comilla inter-connection respectively. Tripura state government has agreed to sell another 100 MW of power to Bangladesh from the Manarchak Thermal Power Plant in West Tripura.

The Palatana Project: A Case in perspective

The central government-owned Oil and Natural Gas Corporation (ONGC) has commissioned its biggest 726 MW-capacity commercial power project in southern Tripura's Palatana, 60 km south of Agartala, Tripura.

Uniqueness of the project lies in the fact that the heavyequipment and turbines to Palatana have passed through Bangladesh’s territory by road and waterways from Haldia port in West Bengal. In return the project will supply 100 MW electricity to Bangladesh.

Further, the level of cooperation was successful in securing a 10 GBPS bandwidth gateway for the entire North East via Bangladesh.

One of the most vital enabler for higher energy cooperation in the BBIN region will be the creation of a regional power market and progressing beyond the bilateral arrangements for power trade that presently exist. This will be beneficial for both the generating and importing country. For e.g. Bhutan exports power exclusively to India, with a regional power market it can export power to both Bangladesh and Nepal leading to market diversification. The other important pillar for such regional market to function will understandably be a regional grid network that is interconnected. India’s North East region has a lot of hydropower potential and some projects are already underway. To be able to effectively utilise such potential, evacuation of the generated power is essential. The North East region being land-locked, evacuation will be much less expensive affair when done through Bangladesh, wherein Bangladesh can get its share of power and wheeling charges for sending power to eastern India through its territories. India already has extensive transmission lines in its border states with Bhutan, Bangladesh, and Nepal. With the right kind of policy and infrastructure initiatives, a regional power grid and market can be a reality that will not only ensure energy availability across the region, but also effective use of all transmission infrastructures, further lowering costs. In the medium-term, intraregional trade in electricity in the BBIN region can be promoted by enhancing the scope of the existing bilateral energy trade arrangements between the countries, into a multilateral trade arrangement within a regional framework. However, for such a regional power market to function, the countries in the region would need to harmonise and coordinate their legal- regulatory frameworks, technical and institutional procedures. To this end, a BBIN regional framework agreement on power trading can be an effective enabler.

Many regional and national projects are presently on or soon to be commissioned to cater to the increasing energy needs of the BBIN region. Some of the key national, bilateral and regional projects may be listed as follows:

Bangladesh India:

  • Doubling the capacity of the Baharampur-Bheramara transmission line from 500 MW to 1000 MW and the Tripura-Comilla line from 100 MW to 200 MW, for electricity trade between India and Bangladesh. India and Bangladesh are also negotiating a third Ideally the transmission networks need to be built in a way that facilitates evacuation of power generated in the India’s North East region via Bangladesh, thereby connecting it to India’s Eastern Grid and leading to the creation of a regional grid with inclusion of Bangladesh
  • Khulna 800 MW Dual Fuel (LNG/HSD) Combined Cycle Power Plant Project(imported LNG from India). The Bangladesh state-run North-West Power Generation Company will run the power plant with imported LNG supplied by H-Energy, a private sector entity from India.
  • 3,000 megawatt LNG-based power plant in Bangladesh with power plant at Meghnaghat (Narayanganj district), and a floating storage and re-gasification unit (FSRU) terminal at Maheshkhali Island (Cox's Bazar district). This is a joint initiative by Bangladesh Power Development Board (BPDB) and Indian Reliance Power. The LNG terminal is also expected to supply LNG to PetroBangla in addition to the power plant at Meghnaghat.

Bhutan India:

These projects are part of India and Bhutan framework agreement on hydropower development and trade,signed in July 2006 to develop 10,000 MW of hydropower from 10 large projects by 2020.

  • Punatsangchhu-I hydropower project is a 1200 MW run of river project on the Punatsangchu river in WangduePhodrang district of Western Bhutan. It is already under construction and is estimated capacity is 5700 million units of electricity in an average year. The project is expected to be completed in March 2020
  • Punatsangchhu-II 1020 MW Hydroelectric Project is also already under construction and is envisaged to generate 4360 MU in an average year.The project is expected to be completed in December 2017.
  • Mangdechhu hydroelectric project is a 720MW run-of-river power plant being built on the Mangdechhu River in Trongsa Dzongkhag District of central Bhutan.
  • NyeraAmariis a 442 MW hydropower project which is envisaged to come up in two stages, with two separate plant facilities in a cascading manner- one powerhouses with 125MW and the second with 317MW capacity, both to be constructed in Samdrupjongkhar, Bhutan.The project is estimate to generate 478 MU (million units) of energy from the first stage and 1,222MU from the second, totalling 1,700 MU. The detailed Project Report is under preparation and is expected to be completed in end 2017
  • Chamkharchhu is a 750MW Integrated hydropower project on the Chamkharchhu river in Zhemgang district of Bhutan. The project will be jointly implemented by the Druk Green Power Corporation and India’s National Hydroelectric Power Corporation.

Bhutan India Bangladesh:

  • Dorjilung hydropower project is 1,125 MW hydropower project in the Lhuentse district of Bhutan, to be developed through a trilateral cooperation between Bhutan, India and Bangladesh. . This project is outside the 10000 MW agreement between Bhutan and India andsurplus power is expected to be exported to both India and Bangladesh once it starts generating. The idea was first discussed between the three countries as a SAARC sub-grouping on the issues of water and energy based on the SAARC Energy Cooperation Framework signed by all the SAARC countries in the 18th SAARC summit in November 2014

Nepal India:

  • Augmentation of Transmission network connections between India and Nepal is underway. As per the cross-border transmission line master plan, cross-border transmission lines will be constructed at 11 border points including the existing ones. While India is already exporting power to Nepal using existing infrastructure, augmentation of the transmission lines and related infrastructure is ongoing and will be crucial to enable higher volumes of two-way power trade between the countries. This includes the Muzaffarpur-Dhalkebar transmission lines (India already sending 80MW, Nepal’s plan is to import 600MW by end 2017), the Tanakpur—Mahendranagar transmission line (India sending 20 to 35 MW of power during dry season) and the proposed Butwal-Gorakhpur, Raxaul-Parwanipur and Kataiya-Kusaha cross-border transmission lines.
  • Project Development Agreement for the 900 MW Upper Karnali Hydro Power Projectwas signed on 22 September, 2014 between Government of Nepal and India based GMR Energy. It is a power export project to deliver power to India by a 400-kilovolt double-circuit transmission line. The estimated cost of NRs 140 billion (Rs 87.5 billion), the project will be one of the largest hydro power projects in Nepal and the one with the biggest foreign investment till date. The project is expected to generate about 3500 MUs of energy annually and 420 MUs of energy (12% of installed capacity) has been earmarked as free power to Nepal. The Nepal Electricity Authority will hold 27% free equity stake in the project including all project royalties and the 100% ownership of the project will be transferred to the Government of Nepal, at the end of the 25 year concession period . The Upper Karnali plant will create over 3,000 jobs and help reduce greenhouse gas emissions of nearly 2 million tons of carbon dioxide equivalent annually .
  • Located on the Lamjung and Manang districts, the Upper Marsyangdi is a 600 MW, export-oriented Peaking Run-of-River (PRoR) Hydel Power Project. Upper Marsyangdi-2 Hydro-Electric Project is a high head, run of the river scheme with storage capacity envisaged for installation of four generating units of 150 MW each giving a total installed capacity of 600 MW. The design energy per year is 2282.0 GWh. The associated transmission line is a 400 kV line being developed by Marsyangdi Transmission Co. Pvt. Ltd a wholly owned subsidiary of GMR Energy Mauritius Ltd . Efforts are underway to jointly develop the transmission corridor with the Nepal Electricity Authority. International Finance Corporation (IFC) is a co-developer of this project with 10% equity.
  • SoluKhola (Dudhkoshi) Hydropower Project is a run of river (RoR) storage type hydro power project situated at about 130 km south-east of Kathmandu. The Project has an installed capacity of 86 MW with an annual energy production capacity of 520.82 GWh .In November 2013, The Asian Development agreed to provide grant assistance of US Dollar twenty one million to the Government of Nepal to support a 10 year road map for hydropower development with the aim of generating an additional 10,000 MW of hydropower . The assistance included among others an update of feasibility study with detail engineering studies of DudhKoshi (300MW) hydropower projects.
  • Nalsing Gad hydropower is a 410 MW project located in Jajarkot District in Nepal on the river Nalsyau Gad, a tributary of the Bheri River in the Karnali Basin. The project is now in the stage of DPR preparation.

Other than those listed above there are several other projects planned/under construction in the region, both at the national and regional level. The Asian Development Bank (ADB) is providing financial assistance to many of the above listed projects and most of the Bhutan projects are being developed with assistance and loan from India. Many of these projects, including some of those listed above (e.g. Nalsing Gad project in Nepal), have had controversies surrounding them, mostly relating to displacement and environmental concerns. Two of the most controversial projects have been the 2000MW Lower Subansiri project along Assam-Arunachal border in India and the India and Bangladesh joint venture for a 1320 MW coal fired power plant at Rampal,Bangladesh.

6. Key Challenges

Policy Challenges:

Harmonisation of policies and regulations across borders is very crucial component in the implementation of an effective regional cooperation arrangement. Lack of harmonious policy framework is a major hurdle towards development of a regional power market in the BBIN region. On the lines of the SAARC Framework Agreement on Energy Cooperation, a framework agreement on energy cooperation in the BBIN region can help a lot towards bringing policy harmonisation and enabling regional trade. Some of the policy and regulatory challenges faced by the regionare mentioned below:

  • Electricity sector reforms are at various stages of implementation among countries in the BBIN region. India being one of the pioneers in initiating the reform process, in Nepal the Nepal Electricity Regulatory Commission is yet to become fully effective;
  • The National Electricity Policies in the sub-region do not have dedicated focus on development of a competitive market across BBIN region;
  • While power exchanges are in effect and fully operational in India, such platforms are yet to be established in the other countries in the BBIN sub-region. One of the reasons being the dominant role played by state owned companies in the generation, transmission and distribution of electricity;
  • Electricity trade between India and other countries in the BBIN sub-region take place on the basis of bilateral agreements. The tariff so determined often is not reflective of the market demand and supply scenario;
  • Trade in electricity across borders is often limited by the fact that a licensee willing to export or import power has to enter into an agreement with their Governments.
  • Comprehensive regional policy mapping needed to understand the synergy or lack of it amongst the policies of the countries of the region and hence identifying the harmonisation needs.

Infrastructural / Technical constraints:

  • Absence of any Grid Code/Grid Discipline in cross border electricity trade;
  • Limited transmission network for cross border electricity trade;
  • Significant T&D losses among countries in the BBIN sub-region.

Political Challenges:

  • Political stability and National security in the BBIN sub-region is a major cause of concern;
  • Issues pertaining to tariff fixation has political backlashes and in this context fixation of a uniform tariff for electricity trade could be challenging.

Investment Challenges/ Financial Constraints:

  • In the context of promoting cross border electricity trade, Investment in the BBIN region will be important for exploiting the existing hydro power potential and also to strengthen its generation, transmission and distribution network. Given the poor financial conditions of the state owned utilities in the BBIN sub-region, investment has to be pumped in by the private sector with emphasis on foreign direct investment (FDI), which in turn will require an effective FDI Policy for each of the countries and the region as a whole.
  • Investment in the sub-region is also limited by lack of clarity, harmonisation and predictability of policies, technological limitations, rationalisation of electricity tariff and various political concerns.The investment climate needs to ideally enable and encourage private power developers and distribution companies to invest in the region. A framework agreement on energy cooperation in the BBIN region that can form the basis of future cooperation efforts will help a lot towards bringing policy harmonisation and enabling investment.
7. Key Recommendations
  • A concerted effort by all the four nations to put in place a framework agreement on energy cooperation in the BBIN region
  • A cross border steering committee needs to be instituted to facilitate multi-lateral dialogue on How and Whatneedsto be done to address the bottlenecks;
  • National Energy Policies to be framed so as to promote regional cooperation in energy and dovetail with provisions of a BBIN framework agreement on energy cooperation.
  • Governments to create the required ecosystem to facilitate competitive market for electricity exchange with minimal Government intervention;
  • Need for financial assistance from various Multilateral Financial institutions to facilitate investment in the BBIN sub-region especially for strengthening the transmission network;
  • Member countries to put in place Acts/Policies/Regulations for promoting cross border trade in electricity;
  • A preferential approach among BBIN member countries to promote electricity trade. For example, electricity trade to be exempted from export tax, import duty, transit tax etc.
  • A multilateral regulatory body to be put in place that will be empowered toexert Grid Discipline and penalise licensees in required;
  • Regulations pertaining to open access, licensing etc. needs to promote participation from private players in the cross border electricity trade.
  • A common platform for periodic knowledge exchange amongst the policy makers, regulators, subject matter experts, research institutions, utilities, civil society organizations and media is required
8. Conclusion

There is an urgent need to promote cross border electricity trade in the BBIN region not only to facilitate energy security but also for holistic development of the region.Cross border electricity trade can followeither of the three international models discussed in the chapter or can take the major learnings from the existing models and synthesize a new model suited to regional needs.

The GMS and SAPP models in the cross border electricity trade is especially interesting since in both the cases there is an attempt to rationalise fossil based electricity generation and replace the same with cleaner sources.

However, the process of mainstreaming and institutionalising cross border electricity trade takes long time and the good part with the BBIN sub-region is, the process has already started though on a bilateral basis. The same needs to be up-scaled which will require political consensus among the policy makers coupled with investment support.