B ENEFITS OF R EGIONAL P OWER T RADE : A NALYSIS FOR C ENTRAL A SIA AND S OUTH A SIA Donghui Park Debabrata Chattopadhyay Husam Mohamed Beides Koji Nishida October 2019
O BJECTIVE AND S COPE OF W ORK • Review and assess country energy demand and resources, and examine potential of electricity trade among Central Asian countries and with neighboring countries in South Asia (mainly Afghanistan and Pakistan) • Identify interconnection upgrades and potential new cross-border transmission projects that will be necessary to support economic electricity trade in Central Asia • Support Central Asian countries in developing financial, commercial, and implementational frameworks for potential cross-border electricity trade 2
C ENTRAL A SIAN M ARKET : P RESENT S TATE • Significant interconnection capacity exists within Central Asia • But, historic trade has been well below interconnection capacity • Lack of coordination in generation economic dispatch and regional network management and planning • Synchronization is limited currently (KAZ, KGZ, UZB) – to be expanded with TAJ and potential with AFG • Very limited connectivity between Central Asia and South Asia • But this will change with implementation of CASA 1000 and TUTAP 3
R ATIONALE FOR THE C ENTRAL A SIA AND S OUTH A SIA R EGIONAL I NTEGRATION 1. Significant interconnection capacity exists within Central Asia that can be utilized to use surplus hydro in Tajikistan (TAJ) and Kyrgyzstan (KGZ) to support its neighbors 2. Yet total trade volume in the region has been at best 2.5% of regional demand 3. Energy rich Central Asia (Hydro in KGZ and TAJ, Coal in KAZ, Gas in KAZ and TUR, UZB) can support energy poor South Asia with the largest demand center in Pakistan and high demand growth expected in Afghanistan 4. Addition of interconnectors such as CASA- 1000 (under construction), TUTAP (under construction) and future ones would encourage further tapping into hydro and RE potential in Central Asia 4
M ETHODOLOGY • We use a least-cost planning and dispatch model to minimize system cost (including capital and operating costs) for all the countries in Central Asia plus Afghanistan and Pakistan over 2018-2030 • World Bank Electricity Planning Model (EPM) is used - multi-year mixed integer programming model for capacity and dispatch analysis • EPM models 7 countries as 15 zones and captures transmission constraints among the zones. It also considers chronological load curves for representative days for each year, solar/wind hourly profile for these days, spinning reserve requirements and hydro energy constraints • Benefit of interconnection is measured as systemwide cost (for 7 countries) without and with trade for the relevant regions for a range of scenarios as we discuss next • Benefits include: (a) avoided generation capex including reserve capacity that may be traded across regions (b) avoided fuel cost (c) avoided unserved energy (if any) 5
F OUR K EY S CENARIOS S TUDIED - R ATIONALE 1. Scenario 1: (Business-as-usual) We first simulate the scenario with energy trade restricted to historical level and reserve trade is restricted to zones within a country 2. Scenario 2: ( Central Asian trade) Next, we consider trade within Central Asian countries from 2022 including trade of reserve trade – difference in system cost w.r.t (1) is benefit of regional trade 3. Scenario 3: ( CASA-1000) Looking beyond Central Asian trade, we introduce CASA- 1000 from 2022 and regional system cost including that of PAK and AFG would yield additional benefits – difference in system cost w.r.t. (2) is the benefit of CASA-1000 4. Scenario 4: ( TUTAP) Finally, we further add TUTAP to (3) and the difference w.r.t (3) yields the incremental benefit of TUTAP 6
K EY S CENARIOS S TUDIED – D ESCRIPTION AND D EFINITION OF B ENEFITS AS ‘C OST D IFFERENCE ’ AMONG THE SCENARIOS 1. Energy trade up to historical-level of 2019 until 2030 – reserve trade only allowed within a country Cost Delta – difference btw 1 and 2 (Central Asia regional trade benefits) 2. Energy trade up to historical-level of 2016 until 2021, trade optimized from 2022 – reserve Total trade allowed among countries. System Cost Delta – difference btw 2 and 3 (CASA- Cost 1000 benefits with its PPA amounts imposed) 2019-30 (NPV) 3. Energy trade up to historical-level of 2016 until 2021, CASA-1000 lines start operation in 2022, CASA PPA amounts btw countries imposed – reserve trade allowed btw countries. Cost Delta – difference btw 3 and 4 (TUTAP benefits) 4. Energy trade up to historical-level of 2016 until 2021, CASA-1000 (CASA PPA imposed) and TUTAP lines start operation in 2022 – reserve trade allowed btw countries. 7
I NDICATIVE K EY R ESULTS - O VERVIEW 1. We first look at benefits of trade at a high level, namely, total benefits that arise from trade within Central Asia vis- à -vis inter-regional trade with South Asia in cumulative NPV terms over 2019-2030, i.e., a small fraction of the life of the interconnection assets 2. The drivers of these benefits, composition of benefits and their time trend and the generation substitution that is the genesis of trade, provide important insights into the specific contributions of regional trade 3. We identify the critical intra-country and cross-border links that are very heavily (up to 100%) utilized that are good candidates for new investments 4. As an important aside – we also note as solar PV costs continue to fall – regional trade would also facilitate rapid expansion of solar generation capacity across the region 8
I NDICATIVE K EY R ESULTS : B ENEFITS OF T RADE (T OTAL ) ✓ Regional Power Trade Scenarios 2019-2030 Accumulated NPV (in 2019 $m) 2019-2030 accumulated NPV 1. Historical trade-level up to 2030 2. Central Asia trade optimized 3. CASA-1000 4. CASA-1000 and TUTAP Capex: $m 28,621 27,385 26,310 26,169 Fixed O&M: $m 15,053 15,142 15,171 15,188 Variable O&M: $m 20,438 20,644 20,585 20,581 Total fuel Costs: $m 54,302 52,889 51,961 51,487 Unmet demand costs: $m 41 45 45 49 Reserve violation: $m 1,895 698 698 711 Total Gross Cost: $m 120,351 116,802 114,770 114,186 Cost Delta – difference btw 1 and 2 Cost Delta – difference btw 2 and 3 Cost Delta – difference btw 3 and 4 ✓ Cost Delta (cost savings) 2019-2030 accumulated NPV Difference btw 1. and 2. Difference btw 2. and 3. Difference btw 3. and 4. Capex: $m 1,235 1,075 141 Fixed O&M: $m -89 -29 -18 Variable O&M: $m -205 58 4 Total fuel Costs: $m 1,414 928 474 Unmet demand costs: $m -4 0 -4 Reserve violation: $m 1,198 0 -13 Total Cost: $m 3,549 2,032 584 Definition of benefit CA regional trade benefits CASA-1000 benefits TUTAP benefits MAJOR BENEFIT FROM TRADE WITHIN CENTRAL ASIA ($3.5 billion over the next decade) 9 9
I NDICATIVE K EY R ESULTS : U NDERSTANDING THE B ENEFITS $ million 7 000 MAJOR BENEFIT FROM TRADE WITHIN CENTRAL ASIA ($3.5b over the next decade). CASA-1000 6 000 1 184 adds $2b on top and TUTAP another $0.6b [all 1 198 5 000 benefits in discounted terms] 4 000 2 815 2 341 1 198 3 000 Vast majority of the benefits come from 2 000 1 414 capex and fuel cost savings. There is some 2 452 2 311 1 000 1 235 savings from avoided reserve capacity - (89) (118) (135) (205) (147) (143) (4) (4) (8) CA regional trade benefits CA regional + CASA-1000 benefits CA regional + CASA-1000 + TUTAP violation within Central Asia from early (1 000) benefits years which can be avoided by simply Capex: $m Fixed O&M: $m Variable O&M: $m allowing countries to share reserve Total fuel Costs: $m Unmet demand costs: $m Reserve violation: $m Benefits from Fuel Cost Savings $ million 3 500 6 26 3 000 The fuel cost component is almost entirely 6 38 2 500 attributable to avoided gas based 2 000 - - 3 242 1 500 generation costs with gas generation 2 620 1 000 1 791 substituted by hydro 500 - (109) (94) (166) (229) (268) (293) CA regional trade benefits CA regional + CASA-1000 benefits CA regional + CASA-1000 + TUTAP (500) benefits (1 000) Gas: $m LNG: $m HFO: $m Coal: $m UR: $m
I NDICATIVE K EY R ESULTS : C ENTRAL A SIAN T RADE BENEFITS ( ANNUAL ) Plot shows annual undiscounted $ million benefits from Central Asian trade only 1 000 (i.e., difference between scenarios 1 and 2) 800 600 Total undiscounted benefit over 2019- 2030 is $6.3 billion 400 Over 2021-2023, significant capex 200 savings occur as regional trade is 0 optimized going beyond historical trade 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 -200 Beyond 2022 – fuel cost savings become the dominant form of savings -400 (mostly from gas) Capex: $m Fixed O&M: $m Variable O&M: $m Total fuel Costs: $m Unmet demand costs: $m Reserve violation: $m In 2019 – capacity reserve trading violations occur in some countries that could be avoided through regional trade even keeping within historical trade limits
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