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Gains from Nepal-India CBET
IRADe Study for SARISouth Asia Regional Initiative for Energy Integration(SARI/EI)
Nov, 2016 | New Delhi
Integrated Research and Action for Development (IRADe) 1
• Assess Techno economic Feasibility of CBET
• What are the economic gains to NEPAL and INDIA of such trade taking in to account earnings from export and its macro-economic impact on the economy
The Objective
• Power sector development strategies from 2012 to 2047
• Technology Model solved for every 5th year simultaneously
• Detailed Technology model with 288 time slices per year
• For each time slice demand must equal supply
• Technology model for each country has detailed plant wise data and options of different types of new plants
• Solution minimizes cost to meet specified demand and provides optimal solution and trade levels and prices for each 288 time slices for all the years
Approach
• However, trade will affect economic development and level of demand particularly true for NEPAL
• A macro- economic SAM based model covers the whole economy balances supply and demand for each sector, also investment and savings, balance of payment for each year, etc.
• So earnings from electricity export increases flexibility to import and resources to invest
• Higher Growth and higher domestic demand for electricity
• Iterate between the two models to get economically viable and technically feasible scenarios.
Approach (Continued)
INHET Model
INTec Model
INMac Model
IITec Model
IIMac Model
Elec
tric
ity
Dem
and
Gen
erat
ion
Mix
, Im
po
rts
& E
xpo
rts
Elec
tric
ity
Dem
and
,Fu
el a
vaila
bili
ty
Gen
erat
ion
Mix
, Im
po
rts
& E
xpo
rts,
Fu
el C
on
sum
pti
on
Macro Model Names:IIMac- IRADe India MacroINMac- IRADe Nepal Macro
Technology Model Names:IITec- IRADe India TechnologyINTec- IRADe Nepal TechnologyINHET- India-Nepal Hourly Electricity Trade Model
Nepal India
Impact of Electricity Trade on
Nepal
Nepal’s Imports/ Exports
190
22 60 100
212 465701
0 0 0 0 0
1018 1
582
0 0 0 0
0
500
1000
1500
2000
2020 2025 2030 2035 2040 2045
MkW
h
Nepal's Imports/ India's Exports (in MkWh)
BASE APT DCA
0 0 0.0
04
0.0
04
0.0
04
0.0
04
0
18
65
93
113
115
0 0.6
49
74 9
3 104
0
50
100
150
2020 2025 2030 2035 2040 2045
BkW
h
Nepal's Exports / India's Imports (in BkWh)
BASE APT DCA
Selected Years Nepal’s Imports/ Exports in APT
-1.0
-0.5
0.0
0.5
1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319
April May June July Aug Sept Oct Nov Dec Jan Feb March
GW
Hours of the day
2020 Imports Exports
05
10152025
1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319
April May June July Aug Sept Oct Nov Dec Jan Feb March
GW
Hours of the day
2025
05
10152025
1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319 1 7 1319
April May June July Aug Sept Oct Nov Dec Jan Feb March
GW
Hours of the day
2045
Change in Nepal’s Per Capita Electricity Demand
172259
366525
740
1010
251
476
736 796934
1500
174299
415551
776
1112
0
200
400
600
800
1000
1200
1400
1600
2020 2025 2030 2035 2040 2045
kW
h p
er
capita
Nepal's Per Capita Electricity Demand
BASE APT DCA
Year Base APT DPT
kWh per
capita
Change over
Base
% Change Change over
Base
% Change
2030 366 369 101% 49 13%
2045 1010 490 49% 102 10%
Gains over BASE in Per Capita Electricity Demand
Developmental Impact
6 10 14 2131
43
9.1
3341 47
58
88
6.3 1126 34
47
69
0
20
40
60
80
100
2020 2025 2030 2035 2040 2045
BkW
h
Total Electricity Use
BASE APT DCA
172 259 366525
7401010
251476
736 796934
1500
174299 415
551776
1112
0
500
1000
1500
2000
2020 2025 2030 2035 2040 2045
kW
h p
er
capita
Per Capita Electricity Demand
BASE APT DCA
Economy wide Impact
1 23
47
9
23
46
8
13
2 23
5
7
11
0
5
10
15
2020 2025 2030 2035 2040 2045
Tri
llions
NPR
BASE APT DCA
4057
80113
161
230
5070
98
139
198
284
4563
88
125
177
255
0
50
100
150
200
250
300
2020 2025 2030 2035 2040 2045
Thousa
nd N
PR
per
pers
on
BASE APT DCA
GDP
Private Consumption
BASE
APT
DCA
BASE
APT
DCA
Gains over BASE in GDP at Constant Prices
Year Base APT DCA
billion NPR Change over Base % Change Change over Base % Change
2020 1432 406 28% 136 10%
2025 2109 593 28% 222 11%
2030 3082 995 32% 414 13%
2035 4490 1297 29% 590 13%
2040 6537 1741 27% 733 11%
2045 9484 3666 39% 1328 14%
Cumulative
2012-2045
121589 35347 29% 14098 12%
Key Findings for NepalNepal’s hydro potential could be a source of large economically feasible electricity
export to India.
Earlier development of trade infrastructure necessary for Nepal to satisfy its internaldemand in the short or medium term during the construction of hydro projects and usethe same infrastructure for export when hydro plants are ready.
APT leads to significant step up of growth of household per capita consumption, anindicator of improvement in well-being, which increases by 23% over the BASEscenario.
Per capita electricity consumption, traditionally strongly correlated with humandevelopment, increases by 50% in 2045 in APT scenario;
In APT scenario, net annual export revenue from the electricity trade is NPR 310 billionin 2030, which jumps by two and half time to NPR 840 billion in 2040, rises further toNPR 1069 billion in 2045. Delayed capacity addition reduces earnings.
GDP in 2045 with trade in APT is 39% higher than in the BASE scenario.
Investments in 2045 with APT becomes 33% of GDP, suggesting even more robusteconomic growth in the future.
Trade promotes industrialisation in the country as the share of industry in GDP becomes30% compared to 21% in BASE and since GDP is 39% larger, the level of industrialGDP doubles in APT. Industrialisation can create better paying employment.
Key Findings for NepalThe power capacity increases to 34.4 GW in 2045 with APT compared to
only 8.9 GW without trade
In the APT scenario, substantial power capacity is built through foreigndirect investment. The value of foreign inflow over 2012 to 2045 is 28931billion NPR. Of this 4649 billion NPR is used to fund investment in powercapacity this amounts to 51% of the total investment in power sectorthrough outside support.
Even a five-year delay in capacity creation in DCA reduces these benefitssubstantially compared to APT. In 2045 GDP is higher compared to BASEby only 14% (39 % in APT) and per capita consumption by only 10% (23%in APT).
Without electricity trade in the BASE scenario a number of storage typehydro projects are required to meet domestic demand.
With trade in APT, exploitation of hydro potential is through run of theriver (ROR) type plants, which are the cheapest and easiest to construct.In addition, ROR plants cause less environmental externality and humandisplacement compared to storage type plants.
Impact of Electricity Trade on
India
Economy wide Impact Compared to Base
-3861
-195338
-10941
-235475
2030 2045
BIL
LIO
N I
NR
APT DCA
Cumulated GDP Gains
Cumulated Consumption Gains
4124
29581
2526
18645
2030 2045
BIL
LIO
NS
IN
R
APT DCA
India's Cumulated Total Investment
670
2308
656
2113
655
2102
0
500
1000
1500
2000
2500
2012- 30 2012-45
Tri
llion IN
R
BASE APT DCA
India's Cumulated CO2 Emissions- Economy Wide
41
128
40
122
40
122
0
20
40
60
80
100
120
140
2012-30 2012-45
GT
BASE APT DCA
Key Findings for IndiaElectricity supply cost is lower as imported electricity is cheaper
than domestically produced one.
The domestic generation, capacity creation, and investment in thepower sector are reduced.
More importantly, as India plans to have large solar capacity as partof its ambitious renewable target, and peak in the system occurs inthe evening, available imported capacity in the evening helps toencounter solar intermittency and meeting peak.
It may be noted that India imports electricity from Nepal even whenits own hydro potential of 145 GW is fully utilized.
In APT per capita consumption in 2045 increases by 1.7% thoughGDP reduces by 6.33% compared to BASE.
In absolute terms however, the gain in cumulated consumption over2012 to 2045 is larger for India than in Nepal.
Key Findings for IndiaUse of energy commodities (coal and gas) for power
generation is lower, therefore their production and importneeds are lower.
Reduced use of fossil fuels reduces pollution and bringsenvironmental benefits.
As import is sourced from hydro plants with their flexibility ingeneration, it helps India to meet its renewable target byproviding balancing power.
The cumulated CO2 emission from 2012 to 2045 reduces by5.6% and 5.4% respectively compared to BASE scenario. This isimportant for India, which is increasingly playing a leadershiprole on climate change issues.
With reduced CO2 emissions by India, the world also gains.
The Way Forward
• Both Nepal and India gain significantly in economic and environmental terms
• To make CBET a reality – Many steps are needed
• Task Force reports have worked out the nitty-gritty of some 20 points in the SAARC agreement
• The Mock Trading will show how trading can be done easily
• This study has shown its desirability
• We need to build a larger consensus for which this study should help
• We are carrying out a similar study for India-Bangladesh trade
• Hopefully we can extend it to multilateral trade – Nepal-Bhutan-Bangladesh-India
• And hopefully to BIMSTEC countries
Thank you