Potential of cross-border electricity trade

Electricity trade has been taking place through long term bilateral contracts between the South Asian countries.

What are the facilities?

• The Central Electricity Regulatory Commission (CERC) introduced the Cross Border Electricity Trade (CBET) Regulations in 2019 to facilitate this in an efficient and transparent manner through energy exchange platforms.
• This was followed by the notification of CBET Rules in 2021 by the Central Electricity Authority, India. Pursuant to this, Inter-country power trade through the Exchange Market can help in discovery of competitive prices and optimal power procurement.

The case of Nepal –

• Nepal started optimally meeting its dry season demand by trading in India’s day-ahead market since April 2021. Nepal Electricity Authority (NEA) started selling surplus monsoon electricity through competition in the day-ahead market since June 2022.
• The NEA has stated that IC 4.50 billion has entered Nepal from the sale of electricity during the period of 4 months in electricity trade with India, till August. In August alone, the country earned ₹1.51 billion from the sale of electricity.
• According to the NEA, between May and August, over 780 million of electricity have been sold in the Indian market, earning about ₹7.2 billion.

Other countries in South Asia –

• Similarly, Bhutan started trading on Indian Day ahead market in January 2022, importing power for a maximum of 400 megawatt (MW) for import during the lean season.
• Bangladesh, too stands to benefit from CBET with India when it participates in India’s power market. Bangladesh’s reliance on fossil fuel to produce power has led to prohibitive costs and its generation is 560 kWh per capita.
• Through CBET, Bangladesh can import power from India, with the pricing of this energy being optimised through the country’s participation in spot markets.
• The country’s installed capacity for green energy currently stands at approximately 600 MW. By importing green power from across the border, Bangladesh’s current reliance on fossil fuel-fired power plants can decrease, and in time may usher more investments and efforts into growing the contribution from RE in its own energy mix. This will also drastically reduce its own carbon emissions.

Way forward –

As more of India’s neighbouring countries begin to participate in CBET, a South Asian power market will emerge which will allow for a price discovery that will be unique for the region. CBET will prove to be mutually beneficial for all participating countries and usher in economic and sustainable development to the entire region.

Source – The Hindu Business Line

QUESTION – How the cross border electricity trade among South Asian countries can empower the region with economic and sustainable development for all? Discuss in light of the recent initiatives.