Potential gains from expanding regional electricity trade in South Asia

Abstract

The South Asia region is lagging behind many regions in regional electricity trading despite the huge potential for trade. Using an electricity system optimization model, this study quantifies the benefits of unrestricted cross-border electricity trade in South Asia during the 2015–2040 period. The study finds that the unrestricted electricity trade provision would save US$226 billion (US$9 billion per year) of electricity supply costs over the period (~ $100 billion when discounted at 5% rate). The ratio of benefits, in the form of reduction of fuel and other operating costs, to increased costs of generation and interconnection investment would be more than 5:1. The provision would reduce regional power sector carbon dioxide emissions by 8%, mainly through substitution of coal-based generation with hydro-based generation, although regional emissions would be well above current levels absent other policy interventions because of rapidly growing demand. To achieve these benefits, the region would need to add 95 GW of new cross-border transmission interconnection capacity; but at the same time it would avoid 36 GW of additional interconnection capacity between the regional grids within India.