Workshop on Regional Electricity Trade and Market Development Cross-border Electricity Trade and Tariffs April 23, 2014
Cross-border Electricity Trade (CBT) Flows within which part of the transmission network providing a direct connection to networks of neighboring countries is used, and refers to import, export and transit. 2
Cross-border Trade: Challenges Ability to transfer power across border; Non-discriminatory access to networks; Cooperation among interconnected countries; Monopolistic nature of transmission system operator (TSO) and independence; and Harmonizing rules and regulations. 3
Cross-border Trade in the USA ~ 3,200 utilities. ~ 2.7 million miles of power lines. ~ $400 billion/a worth of electricity sales. Source: NERC 4
European Cross-border Trade ~ 445 utilities. ~190 thousand miles of transmission lines. ~ 3.8 million GWh/yr. of power sales. 5
Lessons Learnt from Cross-border Trade Address security of supply concerns; Empower regional entities to make decisions (policy, planning, pricing and settlement rules); Build the necessary physical infrastructure; Provide clear substance and process of regulatory review (certainty for investors); and Develop power pools for sustained cross-border trade. Source: Castila Report to the World Bank and RERA, 2009 6
Mekong Power Grids Source: Economic Consulting Associates, the World Bank - ESMAP Report 2010. 7
Mekong Regional Interconnections 8
9
Greater Mekong Regional Grid 2025 10
Greater Mekong Integrated Market High Growth GMS Integrated Scenario Scenario Discounted Costs ($ billion) 1,268 1,123 New capacity (GW) 319 238 Coal-based (GW) 126 72 Hydropower (GW) 85 83 Nuclear (GW) 17 10 Gas (GW) 45 40 Others (GW) 47 35 Increase in CO 2 Emissions 1,815 1,141 (Mt Equivalent) Source: ADB 11
Barriers to Cross-border Trade Uneven infrastructure; Lack of uniformity on Cross-border tarification; Lack of harmonized regulatory and policy framework; and Tariffs to be cost reflective and incentivize investors. 12
Issues for Interconnection Increasing physical cross-border capacity or better allocation of the existing capacity; Capacity purchases and energy transactions (Transmission System Operators and Power Exchanges); Suboptimal use of capacities and lack of transmission capacity; and Harmonized policy and regulatory framework; and Treatment of losses related to national and transit systems and congestion management. 13
Market Structure and Instruments - 1 Energy Markets: Real time, day ahead, and forward; Hourly or daily prices; Pool (auction) or bilateral; Market controls; Aggregate purchasing; 14
Market Structure and Instruments - 2 Capacity Markets: Market products; Pool (auction) or bilateral; Who is to manage congestion; and Who conducts the auction and enforces the rules. 15
Policy Reforms Eliminate subsidies; Attract new investments; Promote technical and economic efficiency; and Develop cost reflective tariffs. 16
Power Wheeling Connection charge; Loss charge; Congestion charge; and Expand scope of service. 17
Tariffs Capacity charge; Variable energy charge; Variable inland transportation charge; Transmission charges; and Other ancillary charges. 18
Regulation of Tariffs Coverage of justified costs and appropriate return on assets; Improvement of operational efficiency within regulated activities with reasonable and efficient investments; and Justified development and operation of the transmission network in a manner that ensures safety and quality electricity supply. 19
Issues in Cross-border Trade Umbrella agreements to facilitate CBT; Legal and regulatory agreements and their administration; Adequacy of legal and regulatory systems; Transparency in information sharing; and Control over supplier; 20
Operational Issues Synchronization between two systems; Grid code harmonization; Security standards and operational protocols; and Adequacy of load dispatch and communication facilities to handle the CBT. 21
Role of Regulator in Cross-border Trade Issue licenses; Approve terms of PPAs; Approve the recovery of cost through tariffs; Approve agreement to export electricity. Approve transmission wheeling agreements in transit countries; Mandate access to T&D facilities; and Approve domestic and CB transmission charges. 22
` Cross-border Regulatory Decisions Source: Regional Electricity Regulatory Association (RERA) 23
Thank you! mian_zia@hotmail.com 24