Cross-border trading in electricity among the south-Asian countries

Abstract

This study examines the opportunities and potential for Cross Border Trading in electricity. The data available and the studies undertaken so far indicate that there is a good potential for such electricity trade among India, Nepal, Bhutan and Bangladesh. There are several historical factors which have been impeding the growth of a strong trade relationship among these countries. Several initiatives taken in SAARC forum and the adoption of SAFTA have so far made a limited impact in improving the trade climate in the region. However, the emerging story of strong economic growth fundamentals of the South Asian countries has provided a positive back drop for the renewed interest in the subject of Cross Border Trading in electricity. It has been recognised by the countries of the region that the economic growth cannot be sustained and accelerated without achieving energy security and expanding additional sources of energy availability on a long term basis. The study also analyses the data on electricity trading within the country and concludes that there is a healthy development of electricity market within the country. The successful functioning of electricity exchanges and the trades carried on by the trading licensees has improved the volumes and the depth of the short term electricity market in the country. The trading platform is mature enough to be extended for trading of short term electricity for imports and exports. The relevant provisions of Electricity Act, 2003 and the role of the Central Electricity Regulatory Commission (CERC) are also analysed in terms of their impact on development of electricity market in the country. The assessment of various risks associated with this segment of business and the desired responses from the standpoint of investors are also analysed. The study concludes by making several recommendations in terms of investor expectations of governmental policies and that of the role of the Regulatory regimes in these countries.