The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) is an international organisation involving a group of countries in South- and Southeast-Asia. These are: Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal. The main objective of BIMSTEC is technological and economic cooperation among South- and Southeast- Asian countries.
Recently, BIMSTEC leaders met during the BRICS summit in Goa on October 16, 2016, where they decided to expedite the signing of the BIMSTEC Memorandum of Understanding (MoU) on grid interconnection, given the high potential of renewable energy sources in the region, for energy cooperation and promoting regional energy trade.
Clean energy resources
With the recent ratification of the Paris agreement on climate change by India, the country needs to (i) achieve a 30-35% reduction in intensity (emissions per unit of GDP) in 2030 vis-a-vis 2005 and (ii) source 40% of the electricity from non-fossil fuel sources by 2030. Recently, the ministry of power also revised its target upwards, to have 60% of the electricity from non-fossil fuels by 2027.
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The predominant renewable energy sources are wind and solar. But a problem with renewable energy sources is variability/uncertainty; so, they need back-up generating resources during the non-operating period. These variabilities/uncertainties are best handled with grid interconnection, fast-acting ramp up/down resources like hydro and gas, and large regional power pool. The regional power pool has many potential benefits, including:
1. Reduced or postponed costs: Lower operation costs due to energy exchange and lower investments in power generation due to least cost development of regional energy resources and reduced cost of maintaining power generation reserves.
2. Improved conditions on the supply side: These include reduced coincident peak load of the regional power pool; mutually utilised power generation reserves for interconnected national power grids; increased robustness of power supply to meet unexpected events, such as variability of wind and solar, load growth above forecast and/or delayed commissioning of generation/transmission projects.
Amongst BIMSTEC, Nepal uniquely possesses rich natural resources like hydro, wind, solar, etc, which can facilitate the process of having carbon-free BIMSTEC countries.
But as far as grid interconnection is concerned, only Bhutan and Bangladesh have been interconnected with India synchronously and asynchronously, respectively, whereas Nepal is operating radially. The regional interchange at present is to the tune of 2,200 MW. The technical, commercial, legal and regulatory issues have been well-settled and trading is working satisfactorily. Similarly, there are many international success stories of electricity power pool amongst countries in Europe, Central America, South America, Africa and East Asia. Powergrid had also prepared a feasibility report for interconnection with Sri Lanka through overhead/undersea cable and also with Myanmar for Tamanti hydroelectric project. Therefore, it would not be difficult to interconnect all the BIMSTEC countries, including Thailand, with proven high-voltage direct current (HVDC) technology wherever the need be.
Before introduction of multilateral energy exchange, the first step in regional power pool starts with two neighbouring countries signing for cross-border trading of energy services through a bilateral cooperative framework. This has been successful with four countries, i.e, India, Nepal, Bhutan and Bangladesh for several years. Thus, establishment of multilateral energy exchanges, though complex with regards to settlement approaches and requirements of greater verification, would not be difficult.
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One of the main reason for not having large interconnection and regional trading is that every country is working isolated and there is no single agency to integrate them and trade the power. In line with international practices, it is suggested that a dedicated ‘power pool’ for energy trading and a special purpose vehicle for grid interconnections be established amongst BIMSTEC countries to take it forward.
The critical success factors in creating power pool are;
1. Common legal and regulatory framework: Governments and the transmission system operators (TSO) of their respective national grids should be able to define a common legal and regulatory framework to facilitate achievement of regional objectives. These involve the preparation of “Intergovernmental memorandum of understanding” granting permission for the utilities to make a contract and providing guarantees regarding obligations resulting from an interconnection contract. As also an “Inter-utility memorandum of understanding” among participating national power utilities defining ownership of assets and key principles to be followed on establishing, putting in place and enforcing rules of practice covering technical planning, operations, and commercial aspects of regional power system integration.
2. Durable framework for system planning and operation: To maintain flexibility in setting up of a viable, multi-country, organisational structure to leverage the individual and collective capabilities of TSOs (a) have to plan for and implement cross-border interconnections, (b) harmonise the operational rules of practices for their interconnected national power grids, (c) put in place a transparent, fair, and viable commercial framework for cross-border trading in energy services.
3. Equitable commercial framework for energy exchanges: Power utilities must exchange a range of energy services such as (a) lowering of generation capacity reserve requirements, (b) ability to achieve scale economics, (c) opportunity to interchange economy energy, (d) increased load and fuel diversity, (e) opportunities of sale of surplus firm energy, (f) emergency support on major breakdowns. It must have a clear, transparent and harmonised set of commercial rules of practice, which are adhered by the interconnected national utilities.
It may be observed that this is the right time for India to assume a leadership role for establishment of “BIMSTEC power pool” and a SPV for grid interconnections amongst BIMSTEC countries as a part of MoU, likely to be signed amongst countries during the fourth summit this year in Nepal.
The author is former chairman & managing director of the Power Grid Corp of India Ltd. Views are personal