Cross-Border Interconnectors in South Asia: Market-Oriented Dispatch and Planning

Regional trade in South Asia has progressed well over the last decade to exceed 3 GW in interconnection capacity, connecting India with Bhutan, Bangladesh and Nepal. We present an analysis of the benefits of the next 10.6 GW of interconnection capacity under construction and planning stages across four major corridors connecting five countries, including the proposed HVDC interconnector between India and Sri Lanka. It is important that these interconnectors are assessed not only for long-term benefits as part of a least cost portfolio of investments, but also for short-term, market-based benefits that can be gained from new opportunities for cross border electricity trade (CBET) in India's power exchanges. The Electricity Planning Model (EPM) is developed for analysis of regional markets. A combination of market price driven short-term dispatch analysis and long-term planning optimization (for 2019-2035) is conducted using EPM. The analysis shows a strong economic case for development of a South Asian Regional Electricity Market (SAREM). Conservative estimates of (discounted) benefits exceed $1 billion accrued over only 10-12 years for each of the incumbent four major corridors. The short-term analysis using historic spot prices in the Indian Energy Exchange (IEX) also reveals a strong case with annual benefits in the range of $100-400+m pa for these corridors. The model is made available to system operators and planners in the region and used for building their capacity to develop further assessment and inform policy dialogues.