…by replacing thermal plants in India where coal is the main raw material
Power trade: Hydropower supply from Bhutan would reduce carbon dioxide in India by about 10M tons in 2016/17 and could be as high as 40M tons annually by 2020/21.
This is because the hydropower generation from Bhutan would replace thermal plants in India where coal is the main raw material, according to a techno-economic study by the Asian Development Bank (ADB) on cross-border power trading.
Currently half of India’s total power generation is sourced from coal.
Given the grid reinforcement, the benefit from avoided operating cost of thermal plant is calculated around USD 350M a year, including USD 320M saved from fuel and coal costs and USD 30 million in ancillary services costs.
Large-scale hydropower import from Bhutan coupled with grid reinforcement structure could minimise the risk of a severe electricity shortage in India as its power demand is expected to grow to 1,390B units by 2016.
Even then India would still have to explore about 100,000MW to meet its demand.
“The present annual power exchange between Bhutan and India is a good example for possibilities between Nepal and India,” the report states.
In 2011-12, the annual net power transfer from Bhutan to India was 6,000 million units. This, the study indicate, is likely to grow significantly in future. It has been assumed that 11,000MW or 15,193M units of power transfer between the two countries would take place by 2020, should the grid reinforcement projects materialise.
The report, however states that India has to assume the role of a central hub in driving power trading in the region, at least initially because of geographical location and the sheer size of the power system with a significant appetite for large quantities of power.
“Such electricity trading would allow utilities to optimally utilise the available resources to satisfy demand across the whole sub-region,” the report states.
The report also states that exploring vast hydropower resources in Nepal and Bhutan is critical in the efforts of the electricity industry to supply the fast expanding demand in the region at the lowest cost, with minimum impact on energy security and environmental emissions.
However, it was also revealed that even though there are numerous large hydropower sites in Nepal in close proximity to major load centers in India, efforts to develop these resources have been minimal.
“In the case of Bhutan, few of such sites have been developed with a large potential yet to be exploited,” the report notes.
Meanwhile, the cross-border power trading in South Asia encompasses political, commercial and technical risks.
These uncertainties could further filter down to commercial risks in the form of exchange rates, taxes and duties, repatriation of earnings and transaction costs.
“A market-driven process for cross-border power trading together with a regulatory framework that enforces a strong economic discipline would maximise benefits from the development of interconnection projects,” the report recommends.