B ENEFITS OF R EGIONAL P OWER T RADE : A NALYSIS FOR C ENTRAL A SIA - - PowerPoint PPT Presentation

BENEFITS OF REGIONAL POWER TRADE:

ANALYSIS FOR CENTRAL ASIA AND SOUTH ASIA

October 2019 Donghui Park Debabrata Chattopadhyay Husam Mohamed Beides Koji Nishida

• 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

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OBJECTIVE AND SCOPE OF WORK

3

CENTRAL ASIAN MARKET: PRESENT STATE

• 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
• f CASA 1000 and TUTAP

4

RATIONALE FOR THE CENTRAL ASIA AND SOUTH ASIA REGIONAL INTEGRATION

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

• 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)

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METHODOLOGY

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

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FOUR KEY SCENARIOS STUDIED - RATIONALE

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KEY SCENARIOS STUDIED – DESCRIPTION AND DEFINITION OF BENEFITS AS ‘COST DIFFERENCE’ AMONG THE SCENARIOS

• 1. Energy trade up to historical-level of 2019 until 2030 – reserve trade only allowed within a country
• 2. Energy trade up to historical-level of 2016 until 2021, trade optimized from 2022 – reserve

trade allowed among countries.

• 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.

• 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. Total System Cost 2019-30 (NPV)

Cost Delta – difference btw 1 and 2 (Central Asia regional trade benefits) Cost Delta – difference btw 2 and 3 (CASA- 1000 benefits with its PPA amounts imposed) Cost Delta – difference btw 3 and 4 (TUTAP benefits)

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

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INDICATIVE KEY RESULTS - OVERVIEW

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INDICATIVE KEY RESULTS: BENEFITS OF TRADE (TOTAL)

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✓ Regional Power Trade Scenarios 2019-2030 Accumulated NPV (in 2019 $m) ✓ Cost Delta (cost savings)

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 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
• 4

Reserve violation: $m

1,198

• 13

Total Cost: $m

3,549 2,032 584 Definition of benefit CA regional trade benefits CASA-1000 benefits TUTAP benefits

Cost Delta – difference btw 1 and 2 Cost Delta – difference btw 2 and 3 Cost Delta – difference btw 3 and 4

MAJOR BENEFIT FROM TRADE WITHIN CENTRAL ASIA ($3.5 billion over the next decade)

INDICATIVE KEY RESULTS: UNDERSTANDING THE BENEFITS

Vast majority of the benefits come from capex and fuel cost savings. There is some savings from avoided reserve capacity violation within Central Asia from early years which can be avoided by simply allowing countries to share reserve The fuel cost component is almost entirely attributable to avoided gas based generation costs with gas generation substituted by hydro

1 235 2 311 2 452 (89) (118) (135) (205) (147) (143) 1 414 2 341 2 815 (4) (4) (8) 1 198 1 198 1 184 (1 000)

• 1 000

2 000 3 000 4 000 5 000 6 000 7 000 CA regional trade benefits CA regional + CASA-1000 benefits CA regional + CASA-1000 + TUTAP benefits

$ million

Capex: $m Fixed O&M: $m Variable O&M: $m Total fuel Costs: $m Unmet demand costs: $m Reserve violation: $m 1 791 2 620 3 242

• 38

26 (109) (94) (166) (268) (229) (293)

• 6

6 (1 000) (500)

• 500

1 000 1 500 2 000 2 500 3 000 3 500 CA regional trade benefits CA regional + CASA-1000 benefits CA regional + CASA-1000 + TUTAP benefits

$ million

Gas: $m LNG: $m HFO: $m Coal: $m UR: $m

Benefits from Fuel Cost Savings

MAJOR BENEFIT FROM TRADE WITHIN CENTRAL ASIA ($3.5b over the next decade). CASA-1000 adds $2b on top and TUTAP another $0.6b [all benefits in discounted terms]

INDICATIVE KEY RESULTS: CENTRAL ASIAN TRADE BENEFITS (ANNUAL)

Plot shows annual undiscounted benefits from Central Asian trade only (i.e., difference between scenarios 1 and 2) Total undiscounted benefit over 2019- 2030 is $6.3 billion Over 2021-2023, significant capex savings occur as regional trade is

• ptimized going beyond historical trade

Beyond 2022 – fuel cost savings become the dominant form of savings (mostly from gas)

In 2019 – capacity reserve trading violations occur in some countries that could be avoided through regional trade even keeping within historical trade limits

• 400
• 200

200 400 600 800 1 000 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

$ million

Capex: $m Fixed O&M: $m Variable O&M: $m Total fuel Costs: $m Unmet demand costs: $m Reserve violation: $m

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INDICATIVE KEY RESULTS: ATTRACTIVE TRANSMISSION CORRIDORS TO EXPAND [SCENARIO 3 WITH CASA-1000 INCLUDED]

There are significant transmission expansion opportunities within Tajikistan, from Tajikistan to Uzbekistan, Uzbekistan to Afghanistan and Tajikistan to Pakistan

Utilizatio n % 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

TAJ_S PAK_N

91% 89% 89% 89% 88% 88% 88% 88% 88%

TAJ_S TAJ_N

100% 100% 100% 100% 100% 100% 100% 100% 100% 95% 94% 95% 100% 100%

TAJ_S UZB

98% 100% 100% 100% 100% 98% 97% 100% 99%

TAJ_S AFG_TAJ

35% 38% 40% 44% 44% 41% 48% 56% 64% 72% 74% 77% 79% 81%

UZB AFG_UZB

43% 43% 43% 43% 20% 88% 70% 82% 81% 82% 85% 88% 85% 85%

UZB TUR

77% 75% 77% 77% 77% 77% 77% 77% 77%

KAZ_N KAZ_S

74% 77% 81% 78% 74% 78% 74% 41% 47% 53% 46% 40% 35% 36%

• Central and South Asia (Pakistan and Afghanistan) demand by 2030 will reach 87,762 MW and incur

a total system cost over 2019-2030 of $119 billion and a generation capital expenditure of $29 billion

• ver the same period – this is a very steep challenge that must explore all possible options
• A potent option that we explore in this study is to expand regional trade using existing

interconnections followed by linkages between Central and South Asia.

• The former strategy alone to expand trade within Central Asia may bring a benefit of $3.6 billion

through better exploitation of hydro plants especially in KGZ and TAJ, shared planning reserve margin, and fuel cost savings due to the shift from gas to hydro

• CASA-1000 can further add another $2 billion to these benefits for TAJ hydro to support demand in

Pakistan and Afghanistan; furthermore TUTAP adds another $0.6 billion on top in benefits

• There are further significant transmission expansion opportunities within Tajikistan, from Tajikistan to

Uzbekistan, Uzbekistan to Afghanistan and Tajikistan to Pakistan

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CONCLUDING REMARKS