1. Economics of Regional Energy Cooperation: Nepal Case Study Dr Priyantha D C Wijayatunga Head, Portfolio Management Unit Nepal Resident Mission Asian Development Bank 6 th Japan-SAARC Energy Symposium 6-7 March 2013 Kathmandu, Nepal

2. Outline Need for Regional Cooperation Regional Energy Trade Study India-Nepal Interconnections Economic benefits Final Remarks 2

3. Regional cooperation? Wide variation in resource endowments Hydropower, coal, natural gas and other renewable energies Sharing of low cost energy resources Full potential not exploited Economic opportunities energy exporting countries Enhanced opportunities for climate change mitigation Single fuel dominance Energy resource diversification and energy security Acute power shortages 3

4. Energy Sector 4 Traditional Fuel UseEnergy Access

5. Energy Sector …. 5 Demand Supply Gap Generation Composition

6. Energy Sector …. 6 Per Capita Resources Electricity Supplies Region to add about 63000MW of coal power (2012-2017) Will generate about 410 TWh per year – About 390 million CO2 emissions

7. Short distances to connect 7

8. 8 SAARC Regional Energy Trade Study (SRETS) Proposed projects India-Nepal power interconnections Dhalkebar to Muzaffarpur Gorakhpur to Butwal Bangladesh-India power interconnection Western border of Bangladesh Assist Bangladesh to import power from India Bhutan-India interconnections Catering increased hydropower development and cross- border trade India-Sri Lanka interconnection Establishment of a regional power market

9. Proposed interconnections 9

10. 10

11. India-Nepal interconnections 11

12. India-Nepal Electricity Trade 12

13. Economic Benefits Benefits of regional cooperation Dhalkebar-Muzaffarpur transmission line Analysis carried out with an investment planning model Reduced integrated South Asia transmission network of 40 nodes and 166 transmission lines “with” and “without” project scenarios. 13

14. Methodology 14

15. Economic Benefits ….. Generation investments Based on generation plans of the individual countries Transmission capacity and electricity demand projections Based on the national plans Extrapolated in certain cases 15

16. Economic Benefits ….. Benefit of cross-border transmission measured Reduced generation costs both investment and operation Reduced cost of unserved energy Due to increased overall effective generation capacity at the disposal of each of the countries. 16

17. Economic Benefits ….. Project estimated to cost $186 million inclusive of in-country transmission network strengthening to support 1000MW of cross-border flows The study analysed Nepal reaching a generation surplus state by 2016/17 Nepal remains a deficit state even by then Accrued benefits $ 105-215 million per year Cost of the transmission around $ 20 per year Interconnector highly beneficial in both scenarios Benefits far higher in the latter 17

18. Final remarks Economic rationale for India-Nepal interconnections is high High energy transfers Significant difference in economic costs Additional benefits Climate change mitigation Improved reliability 18

19. Thank you Priyantha D C Wijayatunga E-mail: pwijayatunga@adb.org 19