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1

Session-4 Theme Presentation on

Creating Conducive Environment-Regional Investment Framework for Mobilizing Investment in Regional Energy

Infrastructure projects in South Asia

Presented by

Rajiv Ratna Panda, Technical-Head, SARI/EI/IRADe

Conference on “Regional Energy Integration and Cross Border Energy Trade: A New Renaissance for Growth and Development of South Asia Region”19th

February 2020, Hotel Imperial, New Delhi, India

Confidential©2020Regional Investment Framework for Mobilizing Investment in Energy Infrastructure projects in South Asia “: by Rajiv Ratna Panda, Technical-Head /SARI/EI/IRADE::Conference on “Regional Energy Integration and Cross Border Energy Trade: A New Renaissance for Growth and Development of South Asia Region”19thFebruary 2020, Hotel Imperial, New Delhi, India

South Asia Regional Initiative for Energy Integration

High Level Panel Discussion on Creating Conducive Environment for Investment in Regional Energy Infrastructures Projects in South Asia

2

Marco Economic Growth & Level of Economic Integration of South Asia

Success story of South Asia Energy/Power Sector

Challenges of South Asia Energy/Power Sector

Emerging Trends and Future Scenario

South Asia Energy/Power Sector: Investment Requirements

Opportunities and Challenges: Future Energy Investment

Regional Investment Framework

Points for Discussions

Contents


3

Macro Economic Growth


4South Asia : One of most Populous Region in the world

South Asian Growth Story : Dynamic and Vibrant

South Asia 1.8 Billion (23% world Population)

China 1.39 Billion

India 1.35 Billion

EU 0.51 Billion

US 0.32 Billion Data Source: World Bank Data base

USAUS$ 21.43

Trillion

China US$ 14 Trillion

India US $ 2.9 trillion

Japan US$ 5.15 Trillion

Germany US$ 3.8 Trillion

South AsiaUS$ 3.66 Trillion

UK US $ 2.7 trillion

World 7.5 Billion

Source: IMF- World Economic Outlook (October 2019

and 5th Largest Economy in the World

3.4

5.2

2.2

2.7

6.7

5.2

-6

-4

-2

0

2

4

6

8

10

12

Real GDP Growth Annual Percent ChangeSource: World Economic Outlook (October 2019)

Africa (Region) East Asia Europe

North America South Asia Southeast Asia

South Asia : Fastest growing region in the world and Expected to Remain So in future

Source: IMF- World Economic Outlook (October 2019, https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/SAQ/EAQ/EUQ/SEQ/AFQ

5South Asia : Bangladesh, India–the fastest growing large economy among South Asian Countries

7.9

6.8

7.5

6.7

6.7

0

1

2

3

4

5

6

7

8

9

10

-20

-15

-10

-5

0

5

10

15

20

25

30 South Asian Country -Real GDP growth (Annual percent change) World Economic Outlook (October 2019)

Afghanistan Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka South Asia

Source: IMF- World Economic Outlook (October 2019, https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/AFG/BGD/BTN/IND/MDV/NPL/PAK/LKA

South Asia : Robust Growth

https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/AFG/BGD/BTN/IND/MDV/NPL/PAK/LKA

6

Economic Integration of South Asian Countries


7


South Asia : Yet ……………….. Least Integrated

7.6

57.5

35.5

6.3

16.0

63.8

23.1

15.5

13.7

46.5

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Intra-regional Trade Share (%) (Intra-regional trade to total trade of the region)

Central Asia Asia and the Pacific East Asia SAARCAfrica EU ASEAN Latin America and CaribbeanMiddle East ASEAN+3

Region

Intra-regional Trade Share

(%) 2018

EU 63.8Asia & Pacific 57.5

ASEAN+3 46.5

East Asia 35.5

ASEAN 23.1

Africa 16.0Latin

America & Caribbean 15.5

Middle East 13.7

Central Asia 7.6

SAARC 6.3

Source: The Integration Indicators Database https://aric.adb.org/database/integration ASEAN+3 consists of the 10 ASEAN member economies, the People’s Republic of China (including Hong Kong, China), Japan, and the Republic of Korea.

https://aric.adb.org/database/integration

8South Asia : Intra-regional trade (Asia) increased but is still low in comparison to other sub-regions of Asia

19.2

28.1

33.3

52.5

55.1

55.5

29.3

35.4

40

61.6

68.1

69.3

56.8

68.9

71.7

80.8

71.9

66.7

47.5

44.9

44.5

70.7

64.6

60

38.4

31.9

30.7

43.2

31.1

28.3

0 10 20 30 40 50 60 70 80 90 100

2000

2010

2018

2000

2010

2018

2000

2010

2018

2000

2010

2018

2000

2010

2018

Ce

ntr

al A

sia

East

Asi

aSo

uth

Asi

aSo

uth

east

Asi

a

The

Pac

ific

and

Oce

ania

Intraregional Rest of the World

South Asia : Intraregional Trade Shares by Asian Sub-regions

Intraregional Trade Shares (Asia) Rest of the World

Regional Investment Framework for Mobilizing Investment in Energy Infrastructure projects in South Asia “: by Rajiv Ratna Panda, Technical-Head /SARI/EI/IRADE::Conference on “Regional Energy Integration and Cross Border Energy Trade: A New Renaissance for Growth and Development of South Asia Region”19thFebruary 2020, Hotel Imperial, New Delhi, IndiaSource: Asian Economic Integration Report

9

Key Investment Scenario in South Asia


10

2018-Asia -512 B US $, North America -291 B US $ , South Asia-50 B US $

512

291 280

31

51

0

100

200

300

400

500

600

700

800

2010 2011 2012 2013 2014 2015 2016 2017 2018

Major Regions in the world FDI inflow(B US$ )South Asia is one of the Lowest

Asia North AmericaEast Asia EuropeSouth-East Asia Latin America and the CaribbeanSouth America South AsiaAfrica

3.6

42.2

2.3

-5

0

5

10

15

20

25

30

35

40

45

50

2010 2011 2012 2013 2014 2015 2016 2017 2018

FDI inflows, in Billion USDSouth Asia

Afghanistan Bangladesh Bhutan India

Maldives Nepal Pakistan Sri Lanka

South Asia : FDI Inflows

2018-India: 83% (42 B US $) , Bangladesh 7% (3.6 B US $), Pakistan 4% ( 2.3 B US $)

Source : UNCTAD Database, accessed on 9-02-2020

Source : UNCTAD Database, accessed on 9-02-2020


11

South Asia : Share of FDI in Asia , 9.1 % , East Asia & South-east Asia Dominates

7.8% 9.0%6.4% 7.3% 7.6% 9.3% 9.8% 9.0% 9.1%

-

100

200

300

400

500

600

2010 2011 2012 2013 2014 2015 2016 2017 2018

FDI I

nw

ard

(U

SD B

illio

n)

Global Inward FDI to Asia by Destination Sub-region

Southeast Asia East Asia South Asia

Central Asia The Pacific & Oceania % Share - SA

3.3% 4.0% 2.9% 3.4% 5.0%8.0% 7.8% 7.0% 8.6%

-

50.0

100.0

150.0

200.0

250.0

300.0

2010 2011 2012 2013 2014 2015 2016 2017 2018

FDI I

ntr

areg

ion

al (

USD

Bill

ion

)

Intraregional FDI Inflows—Asia

Southeast Asia East Asia South Asia

Central Asia The Pacific & Oceania % Share - SA

South Asia : FDI

South Asia : Share of Intraregional FDI in Asia , 8.6 % , East Asia & South-east Asia Dominates

Source: Asian Economic Integration Report Source: Asian Economic Integration ReportRegional Investment Framework for Mobilizing Investment in Energy Infrastructure projects in South Asia “: by Rajiv Ratna Panda, Technical-Head /SARI/EI/IRADE::Conference on “Regional Energy Integration and Cross Border Energy Trade: A New Renaissance for Growth and Development of South Asia Region”19thFebruary 2020, Hotel Imperial, New Delhi, India

12

Energy/Power Sector Scenario : Success story of South Asia


13


5.27

22.79

158.20

368.28

20.92

39.15

2.82

4.05

- 50.00 100.00 150.00 200.00 250.00 300.00 350.00 400.00 450.00 500.00

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

Rapid Capacity Addition : Power Installed Capacity (GW)




Bangladesh : 5.2 GW in 2010 to22. 8 GW by 2020, India : 158 GW in 2010 to 368 GW by 2020, Pakistan : 20.9 GW in 2010 to 39 GW by 2020

2012

2015

2018

2020

~1350 MW

~2076 MW

~2986 MW

~3560 MW

Across the Region - : India-Myanmar ~ 3-5 MW of CBET , Pakistan-Iran ~ 104 MW CBET, Afghanistan- Imports around 1000 MW collectively from Uzbekistan (326 MW) , Iran (164 MW) , Tajikistan (433 MW) ,Turkmenistan (77 MW) , Source: Compiled from Various Sources , PM Modi inaugurated Mangdechhu hydroelectric plant, Bhutan, Aug 17, 2019

Expansion in Cross Border Power Trade (MW)

Source: Compiled from various sources - IEA, World Energy Outlook-2019,https://data.worldbank.org/indicator/EG.ELC.ACCS.ZS?locations=BT-MV-IN-LK-AF-PK-NP-BD

https://www.iea.org/reports/sdg7-data-and-projections/access-to-electricity

https://data.worldbank.org/indicator/EG.ELC.ACCS.ZS?locations=BT-MV-IN-LK-AF-PK-NP-BD

14


5.27

22.79

158.20

368.28

20.92

39.15

2.82

4.05

- 50.00 100.00 150.00 200.00 250.00 300.00 350.00 400.00 450.00 500.00

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

Rapid Capacity Addition : Power Installed Capacity (GW)




Bangladesh : 5.2 GW in 2010 to22. 8 GW by 2020, India : 158 GW in 2010 to 368 GW by 2020, Pakistan : 20.9 GW in 2010 to 39 GW by 2020

2012

2015

2018

2020

~1350 MW

~2076 MW

~2986 MW

~3560 MW

Across the Region - : India-Myanmar ~ 3-5 MW of CBET , Pakistan-Iran ~ 104 MW CBET, Afghanistan- Imports around 1000 MW collectively from Uzbekistan (326 MW) , Iran (164 MW) , Tajikistan (433 MW) ,Turkmenistan (77 MW) , Source: Compiled from Various Sources , PM Modi inaugurated Mangdechhu hydroelectric plant, Bhutan, Aug 17, 2019

Expansion in Cross Border Power Trade (MW)

0%

20%

40%

60%

80%

100%

120%

2000 2005 2010 2015 2018 2019

Significant Achievement in Access to Electricity

Proportion of the population (%) with access to electricity

India Bangladesh Nepal Pakistan Sri Lanka Bhutan Afghanistan

Source: Compiled from various sources - IEA, World Energy Outlook-2019,https://data.worldbank.org/indicator/EG.ELC.ACCS.ZS?locations=BT-MV-IN-LK-AF-PK-NP-BD

https://www.iea.org/reports/sdg7-data-and-projections/access-to-electricity

https://data.worldbank.org/indicator/EG.ELC.ACCS.ZS?locations=BT-MV-IN-LK-AF-PK-NP-BD

15



23%

5% 5%

59%

99.20%

12%

95%

29%44%

0%

20%

40%

60%

80%

100%

120%

Renewable Gas Oil Coal Hydro

Green Has been Growing in SA countries,India: 13 GW in 2009 to 86 GW in 2020

Power Mix of South Asian Countries (2019)

Green Energy (RE+ Hydro) in most of the Countries

37 37 38 39 39 41 41 43 44 45 45 45

94 102 113132

152168

189211 218 223 226 230

1316

18

25

28

35

39

4657

6978

86

0

50

100

150

200

250

300

350

400

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

India Electricity Installed capacity Growth (GW)

Large Green Energy Capacity Addition

Hydro Thermal* Nuclear RES

148159

174

200

223

249

275

305

327344

356368

42%

47% 48%

57.07

0

10

20

30

40

50

60

70

Bangladesh(2018-19)

India (2020) Nepal (2019) Pakistan(2018)

Significant Private Sector Participation in Generation

% Power Capacity by Public Sector (MW)

% Power Capacity by Private Sector (MW)

Bangladesh -42%, India , 47%, Nepal-48%, Pakistan-57%

16

Energy/Power Sector Scenario : Challenges


17


2976

1149 969 725 658 548 375 190 100

3132

3927 4197

5908

7819

9401

10496

12993

0

2000

4000

6000

8000

10000

12000

14000

Electric power consumption (kWh per capita)

Despite High Economic Growth, Rapid Capacity Addition, Per Capita Electricity Consumption is low

Source: Compiled and Calculated from various sources I Bhutan , India, Sri Lanka, Pakistan, Bangladesh**, Nepal, Afghanistan * Maldivies I Afghanistan, Bhutan and Nepal are calculated values I USA , South Korea , Saudi Arabia, JAPAN, EU, South Africa, CHINA –data is 2014 world Bank database.

http://www.nsb.gov.bt/publication/files/SYB_2019.pdf

http://www.nsb.gov.bt/publication/files/SYB_2019.pdf

https://www.ceb.lk/front_img/img_reports/1567487133Statistical_Digest_2018.pdf

https://nepra.org.pk/publications/State of Industry Reports/State of Industry Report 2018.pdf

https://www.bpdb.gov.bd/bpdb_new/resourcefile/annualreports/annualreport_1574325376_Annual_Report_2018-19.pdf

https://www.nea.org.np/admin/assets/uploads/supportive_docs/annual_report_2076.pdf

https://www.nsia.gov.af:8080/wp-content/uploads/2019/11/Afghanistan-Statistical-Yearbook-2018-19.pdf

https://www.worlddata.info/asia/maldives/energy-consumption.php

18


Economy

% of firms experiencing

electrical outages

No. of electrical

outages in a typical month

If there were outages, average duration of a

typical electrical outage (hours)

If there were outages, average

losses due to electrical outages (%

of annual sales)

Percent of firms owning or sharing a

generator

If a generator is used, average proportion of

electricity from a generator (%)

Days to obtain an electrical connection

(upon application)

% of firms identifying

electricity as a major constraint

All Countries 58.4 6 4.5 4.3 35 18.4 34.8 32.8

East Asia & Pacific 56.8 4.2 3.4 3 35 16.2 18 18.2

Europe & Central Asia 31.4 0.8 3 1.2 18.7 8.3 35.6 21.9

Latin America & Caribbean 64.8 2.1 2.7 1.7 26 14.5 32.1 36.6

Middle East & North Africa 50.2 13.8 8.7 5.1 41.3 26.8 53.1 37.8

South Asia 66.2 25.4 5.3 10.9 45.4 24.4 55.1 46.1

Sub-Saharan Africa 76.2 8.3 6.4 7.8 51 26.9 35.4 41.2

Source: https://www.enterprisesurveys.org/en/data/exploretopics/infrastructure , This is computed using data from manufacturing firms only.

Quality is a Concern, reliability and availability of Electricity infrastructure

South Asia : reliability & availability of Electricity infrastructure is concern. Need to focus on Quality

https://www.enterprisesurveys.org/en/data/exploretopics/infrastructure

https://www.enterprisesurveys.org/en/methodology

19


Source: https://www.enterprisesurveys.org/en/data/exploretopics/infrastructure

Economy

Percent of firms

experiencing electrical

outages

Number of electrical

outages in a typical month

If there were outages, average

duration of a typical electrical outage (hours)

If there were outages,

average losses due to electrical

outages (% of annual sales)

% of firms owning or sharing a generator

If a generator is used, average proportion of

electricity from a generator (%)

Days to obtain an electrical

connection (upon

application)

% of firms identifying

electricity as a major

constraint

South Asia 66.2 25.4 5.3 10.9 45.4 24.4 55.1 46.1

Afghanistan 70.4 11.5 3.8 9.6 48 38.3 111.3 65.8

Bangladesh 73.4 64.5 1.2 5.5 62.8 26.1 84.7 52

Bhutan 44.2 0.4 8.1 3.7 9.5 10.2 21.3 14.1

India 55.4 13.8 2 3.7 46.5 8.8 21.9 21.3

Nepal 62.8 8.7 3.6 17 50.5 41.3 21.3 68.8

Pakistan 81.1 75.2 16.9 33.8 65.4 41.4 82.8 75.3

Varies among South Asian Countries

Quality is a Concern, reliability and availability of Electricity infrastructure

20


Cost of power sector distortions in South Asia: Bangladesh-11.1 Billion US$ , India-86.1 Billion US$, Pakistan-17.7 Billion US$

Cost of power sector distortions in South Asia

11.2billion US$

86.1billion US$

17.7billion US$

Bangladesh5% GDP

India4.13 % GDP

Pakistan6.5% GDP

0

1

2

3

4

5

6

7

0

10

20

30

40

50

60

70

80

90

100

Bangladesh (2016) India (2016) Pakistan (2015)

Cost of power sector distortions in South Asia

total economic cost In billion USD

Cost of power sector distortions in India at a glancepercent of GDP

0 1 2 3 4 5 6 7

Fiscal (% GDP)

Institutional (% GDP)

Regulatory (% GDP)

Social (% GDP)

Cost of power sector distortions in South Asian Countries (% of GDP)

Pakistan (2015) India (2016) Bangladesh (2016)

Source : World Bank Report on “ In the Dark How Much Do Power Sector Distortions Cost South Asia? FAN ZHANG

https://openknowledge.worldbank.org/bitstream/handle/10986/30923/9781464811548.pdf?sequence=5&isAllowed=y

21

South Asia Energy/Power Sector: Emerging Trends and

Future Scenario


22

1.3 (0%)

2.2(1%)

22 (5%)

364 (84%)

1.2 (0%)

4 (1%)

36 (9%)

.5 (0%)

Current South Asia-Power Installed Capacity (GW)

Afghanistan (2017) Bhutan(2019) Bangladesh(2019) India (Nov-2019)

Nepal (2019) Sri Lanka (2018) Pakistan (2018) Maldivies (2017)

7(1%)

14.8(2%)

67.8(6%)

783(73%)

9.3 (1%)

11.7 (1%)

173(16%)

1(0%)

South Asia Power Installed Capacity (GW)-2040*

Afghanistan Bhutan Bangladesh India Nepal Sri Lanka Pakistan Maldivies

* Projection as per the World Bank Report on “How Much Could South Asia Benefit from Regional Electricity Cooperation and Trade? “ For Maldives 1000 MW of capacity is Assumed by 2040.

432 GW 1068 GW

Source: Compiled from Various Sources

South Asia Power Sector: 1068 GW by 2040


http://documents.worldbank.org/curated/en/846141468001468272/pdf/WPS7341.pdf

23

SAARC -Significant Environment/Climate Change Challenge

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Afghanistan Bangladesh Bhutan India Maldivies Nepal Pakistan Sri Lanka

3.439.8

0.3

1212.9

0.3

0.0

44.4

8.2

0.9

13.6

0.0

194.8

0.1

2.0

20.2

1.3

5.1 11.9

0.1

289.3

0.5

4.137.6

9.9

0.7

17.2

0.3

671.9

0.1

3.165.3

1.7

0.310.4

0.9

253.10.0

1.2 28.7 2.6

SAARC Countries-fossil_CO2_by_sector_ in Mt CO2/yr (2018)

Power Industry Buildings Transport Other industrial combustion Other sectors

source: Climate Emergency CoP 25: India is the only major economy to be ‘2 degree compatible’ , Fossil CO2 and GHG emissions of all world countries 2019 Report-JRC SCIENCE FOR POLICY REPORT https://edgar.jrc.ec.europa.eu/booklet2019/Fossil_CO2andGHG_emissions_of_all_world_countries_booklet_2019report.pdf

Regional Investment Framework for Mobilizing Investment in Energy Infrastructure projects in South Asia “: by Rajiv Ratna Panda, Technical-Head /SARI/EI/IRADE::Conference on “Regional Energy Integration and Cross Border Energy Trade: A New Renaissance for Growth and Development of South Asia Region”19thFebruary 2020, Hotel Imperial, New Delhi, India

https://www.downtoearth.org.in/news/climate-change/climate-emergency-cop-25-india-is-the-only-major-economy-to-be-2-degree-compatible--68007

https://edgar.jrc.ec.europa.eu/booklet2019/Fossil_CO2andGHG_emissions_of_all_world_countries_booklet_2019report.pdf

24

SAARC -Significant Environment/Climate Change Challenge

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Afghanistan Bangladesh Bhutan India Maldivies Nepal Pakistan Sri Lanka

3.439.8

0.3

1212.9

0.3

0.0

44.4

8.2

0.9

13.6

0.0

194.8

0.1

2.0

20.2

1.3

5.1 11.9

0.1

289.3

0.5

4.137.6

9.9

0.7

17.2

0.3

671.9

0.1

3.165.3

1.7

0.310.4

0.9

253.10.0

1.2 28.7 2.6

SAARC Countries-fossil_CO2_by_sector_ in Mt CO2/yr (2018)

Power Industry Buildings Transport Other industrial combustion Other sectors

0.9

1.9

2.9

8.021.0 16.1

8.5

6.8

4.2

5.0

0.0

5.0

10.0

15.0

20.0

25.0

0

500

1000

1500

2000

2500

3000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Fossil CO2 Emission by Sector-India (Mt CO2/yr ) & Per Capita (t CO2/cap/yr)

Power Industry Buildings TransportOther industrial combustion Other sectors India t CO2/cap/yrChina t CO2/cap/yr United States t CO2/cap/yr EU28 t CO2/cap/yrGLOBAL-t CO2/cap/yr

China 11256 (30%)

India-2622 (7%)

US-5275 (14%)

EU-3457 (9%)

Rest of World 15277 (40%)

Fossil CO2 Emission in Mt CO2/yr (% Share)4 Nations -60% Global Emission

China India

United States EU28

Rest of the Worldsource: Climate Emergency CoP 25: India is the only major economy to be ‘2 degree compatible’ , Fossil CO2 and GHG emissions of all world countries 2019 Report-JRC SCIENCE FOR POLICY REPORT https://edgar.jrc.ec.europa.eu/booklet2019/Fossil_CO2andGHG_emissions_of_all_world_countries_booklet_2019report.pdf


https://www.downtoearth.org.in/news/climate-change/climate-emergency-cop-25-india-is-the-only-major-economy-to-be-2-degree-compatible--68007

https://edgar.jrc.ec.europa.eu/booklet2019/Fossil_CO2andGHG_emissions_of_all_world_countries_booklet_2019report.pdf

25

14%

56%

7%2%

8%

10% 3%

INDIA POWER INSTALLED CAPACITY (MW) IN OCT. 2019

Hydro * Coal + Lignite Gas NuclearSolar Wind Biomass

9%

32%

3%2%

36%

17%1%

INDIA POWER INSTALLED CAPACITY (MW) IN 2030 **

Hydro * Coal + Lignite Gas NuclearSolar Wind Biomass

364 GW 831 GW

* including small hydro

* including small hydro of 5000 MW and hydro imports of 4356 MW

** As per CEA-DRAFT REPORT ON OPTIMAL GENERATION CAPACITY MIX -2029-30, FEB 2019

RES (Hydro+ Solar+ Wind)= 118 GW(32%) RES (Solar+ Wind)=68 GW (18%) RES (Hydro+ Solar+ Wind)= 513 GW (62%) RES (Solar+ Wind)=440 GW (53%)

http://cea.nic.in/reports/others/planning/irp/Optimal_generation_mix_report.pdf

26

Expansion in Cross Border Power Trade (MW) & Future Transmission Capacity- 2036/2040


South

WestSouth Asia

Current Power Installed

Capacity 432 GW

North

East

North East

Bangladesh

Bhutan

All Fig are in MW

Nepal

Sri Lanka

Complied from CEA-Perspective Transmission Master Plan, Bangladesh- PSMP-2016, Other Sources 1Bangladesh-India Bheramara –Baharampur-Existing 500 MW

2 From Nepal 1,000 by 2030 Power import by using Case 3 T/L (upgrade to 765kV AC)and From Nepal (Purnea -Barapukuria), 1,000 by 2025, Power import by using Case 3 T/L(initially 400kV AC) 3 Bhutan-Bangladesh via-_India 1000 MW-Bongaigaon/Rangia -Jamarpur1,000 by 2030-Power import from Bhutan4 400 MW by 2020 ( 100 MW existing) Construction of HVDC (500MW) in Comilla Construction of HVDC (500MW) in Comilla S/S. Some load (100 MW) in Comolia (N) S/S will bedisconnected from Indian System 5 1000 MW by2023 and 1000 MW by 2025 ( Power Import Using Case 2 T/L (± 800KV HVDC) 6 1000 MW by 2030 Bibiyana-Meghalaya (PSPP)

Additional 43.8 GW Cross Border Grid Interconnection by 2036

by 2036 MW

1 Nepal-India 15800

2 Bhutan-India 17100

3 India-Sri Lanka 1000

4India-Bangladesh 4900

5

Nepal to Bangladesh via India 2000

6

Bhutan to Bangladesh via India 1000

7 India-Pakistan 1000

8Afghanistan-Pakistan 1000

9 Total 43800

10 By 2036 MW

11India -Myanmar 1500

12Bangladesh -Myanmar 500

Total MW 45800

Source: CEA-Perspective Transmission Master Plan,

Bangladesh- PSMP-2016, Other Sources

Rapid Expansion is envisaged.

43.8 GW of cross border Grid Interconnection by 2036.

7 At the Proposal Stage , detailed planning to be done.

http://www.cea.nic.in/reports/others/ps/pspa2/ptp.pdf

27

South Asia Energy/Power Sector: Investment

Requirements


28


India : National Infrastructure Pipeline, Released on Dec,2019

India to Invest 1.4 Trillion USD (FY20-25)

29


India : National Infrastructure Pipeline : Energy Sector Vision 2025

24x7 clean &low cost power (households,

industry, commercial businesses, agriculture)

Per-Capita electricity

consumption 1,616 kWh

Total capacity: 619 GW

Thermal: 50%, renewable: 39%,

hydro: 9%, nuclear: 2%

Renewable energy’s share in consumption to

increase to ~19%

Low AT&C losses through

increased PPP in Discoms - open

access in distribution, regular tariff

revisions, extensive metering

Smart metering to be

implemented for all categories of

customers All related services

on digital platform

351

281

196

14 21

233

110 111

46

9

51 44

0

50

100

150

200

250

300

350

400 India -National Infrastructure Pipeline FY20-25 in Billion USD (1 USD=70 INR)

4

2221

24

31 31

0

5

10

15

20

25

30

35

FY20 FY21 FY22 FY23 FY24 FY25

India -National infrastructure Pipeline -Energy Sector in Billion USD (1 USD=70 INR)

Power Renewable energy Atomic energy Petroleum and natural gas

Renewable energy share in consumption stands at ~9% , High AT&C losses of discoms currently at 8-41% (except J&K), Smart metering: <5% of meters installed as on June 30, 2018 Source: http://164.100.117.97/WriteReadData/userfiles/DEA%20IPF%20NIP%20Report%20Vol%201.pdf

http://164.100.117.97/WriteReadData/userfiles/DEA IPF NIP Report Vol 1.pdf

30


South Asian Power Sector- Investment Requirement (2015‐2040 Period)

Investment Requirement for the 2015‐2040 Period (Billion

US$)Projected to require 1,390 billionUS$ for expanding electricitygeneration (to add 750 GW ofgeneration capacity).

Already committed and plannedinter‐grid connection, especiallywithin India would requirearound 29 billion US$.

Source : https://openknowledge.worldbank.org/handle/10986/22224

Country Investment (Generation)

Investment (Interconnectio

n)

Afghanistan 16.36 0.18Bangladesh 105.12 0.63

Bhutan 32.08 0.54India 929.67 27.93Nepal 10.75 0.00

Pakistan 276.96 0.00Sri Lanka 18.67 0.00

Total 1,390 29Source: Projection as per the World Bank Report on “How Much Could South Asia Benefit from Regional Electricity Cooperation and Trade? “

http://documents.worldbank.org/curated/en/846141468001468272/pdf/WPS7341.pdf

31


De-carbonising Power Generation

Cleaner and Efficient Public Transport

Renewable Energy Electric Vehicle & Charging Infrastructure

Natural gas, LNG and Region Gas Grid

Modernising power grid , smart grid, smart utility

Cross Border Hydro Power Projects and Cross Border Power Transmission

South Asia: Future Energy Investment Opportunities

32

Regional Investment Framework and Guidelines for promoting investment in South Asian Power Sector & in Cross

Border Electricity Trade Projects in South Asian Region


33


Regional Guidelines for investment framework

+ Liberal FDI Policies in all South Asian countries

+ Well defined PPP framework for infrastructure in most SA countries like Bangladesh, India and Pakistan

+ Independent electricity regulators in all SA, except Maldives

- Time consuming process for dispute settlement and judicial processes

- Legal and dispute resolution mechanism is not very strong in most countries

- Issues, processes for land acquisition, environmental clearances and rehabilitation, leading to project delays

- Financial Viability of Infrastructure

- Lack of Deep energy markets

Op

po

rtu

nit

ies

Ch

allen

ges

34


South Asia : Ease of Doing Business

South Asia : India Ranks 63 (Highest),Afghanistan 173 (Lowest)India, Bhutan (89), Nepal (94) & Sri Lanka (99) are below 100 I Pakistan (108), Maldives(147), Bangladesh (168)

Note/Source -The ease of doing business ranking ranges from 1 to 190. Values are Regional Average Rank- https://www.doingbusiness.org/en/rankings

South Asia & Arab : Ranks (Regional Average) 7th among regions (10) of World

30

39

54

96

107

116

118

118

140

154

0 50 100 150 200

OECD High Income

European Union (EU)

Europe and Central Asia

East Asia and the Pacific

Middle East and North Africa

Latin America and Caribbean

Arab World

South Asia

Sub-Saharan Africa

Organization for the…

Ranks of Subregions : Ease of doing business rank (DB20)

Best Rank Poor Rank

Note/Source -Values are Regional Average Rank- https://www.doingbusiness.org/en/reports/regional-reports

118

98

62.6

142

97

132

109

145

104

0 50 100 150 200

Ease of doing business rank (DB20)

Dealing with construction permits

Getting electricity

Registering property

Getting credit

Paying taxes

Trading across borders

Enforcing contracts

Resolving insolvency

South Asia-Ease of Doing Business Ranking -2020

https://www.doingbusiness.org/content/dam/doingBusiness/media/Profiles/Regional/DB2020/SA.pdf

https://www.doingbusiness.org/en/rankings

https://www.doingbusiness.org/en/reports/regional-reports

https://www.doingbusiness.org/en/reports/regional-reports

35


Regional Guidelines for investment framework

Regional institutional coordination mechanism

Tariff rationalization for the

hydropower projects

Guarantees against Political and country risks

Access to innovative and

cheaper sources of funding

Policy and Regulatory harmonization

Develop region specific

financing instruments

Streamline project approval and clearance process

Support private participation

through innovative models

Standardize contractual

framework

Regional dispute resolution

and settlement mechanism

Regional Investment Framework

1

2

3

4

5

6

7

8

9

10

36


Points for Discussions

Focusing on De-risking the Regional Energy Infrastructure Projects : Instruments and modalities.

Strategy for Financing Cross Border Transmission Infrastructure: Business/Financing Models ?

What are the innovative market instruments/ financing mechanisms for financing future energy system ?

Role of Government for fast tracking development ?

Concerns of Lender, private power project developers ?

Role of Private sector, Public private partnerships, Joint Ventures etc. ?

Modernising power grid and decarbonising power sector.

Need of South Asia Regional Investment Facilitation Forum ?

How to accelerate the development of hydro power and mobilisation of investment?

37

Thank You

Regional Investment Framework and Policy Guidelines for promoting investment in South Asian Power Sector and in Cross-Border Electricity Trade in South Asia/Rajiv Panda/SARI/EI/IRADE –Confidential-©2017 Confidential©2017

Contact

[email protected]@gmail.com+91-9650598697


mailto:[email protected]



38


Investment Guidelines

1

2

3

4

Guarantees against Political and country risks

Streamline project approval and clearance process

Policy and Regulatory harmonization

• Member countries to have guidelines for mitigating political risks such as nationalization, expropriation etc. for domestic and CBET power projects

• Regional guidelines for leveraging available Instruments for political risks like MIGA

• Prepare inventory of processes to be followed in member countries for CBET project approvals, etc• Member countries’ government to provide single window clearance for necessary approvals and

licenses• Issues related to land, environment and R&R to be dealt with on priority basis

• Establish a Regional Regulatory body, Regional Electricity Regulatory Association to promote regional regulatory cooperation. This body will merely be an association of national regulatory institutions with no powers to intervene in regulatory matters in the region

• Develop guidelines for CBET projects for resolving disputes• Evolve regional consensus on conflict management and dispute resolution framework amongst

member countries - Dispute resolution procedures, alternate Dispute resolution practices, arbitration in neutral third-country, Inter - Government’s agreements

Regional dispute

resolution and

settlement

mechanism

39



Tariff rationalization

for the hydropower

projects

• Propose regulatory interventions for rationalization of tariffs for the hydropower projects to make them competitive in cross border transactions

• Long tenure loans with flexibility in repayments needs to be developed for the region

8

• Attract concessional financing, low cost financing from MFIs, etc.• Develop coordination mechanism for the domestic capital markets in the South Asian countries to

promote liquidity and easy access to equity by private players • Increased role of multi-lateral funding agencies in CBET projects

Access to innovative

and cheaper sources

of funding

Develop region

specific financing

instruments

• Allows broad mass of institutional investors to gain access to green growth projects • Establish a South Asian Regional Market Fund to offers long and medium term loans with fixed or

variable rates to projects in the region• Green Bonds to raise capital specifically for climate change and green growth related projects.

Allow such bonds to be issued as structured notes mechanisms or other underlying derivatives

5Standardize

contractual

framework for CBET

• Standardized contractual documents (PPAs, TSAs, etc) based on commonly agreed regulatory guidelines for the region

• Evolve consensus on providing appropriate payment security mechanisms for cross border projects• Member countries to have guidelines for foreign currency denominated PPAs to protect against

currency risks, allow back to back currency swaps etc

6

7

40


10

Regional institutional coordination mechanism

9

Support private

participation through

innovative models

• Establish a clear, predictable and legitimate institutional framework supported by competent and well-resourced authorities

• Use the budgetary process transparently to minimize fiscal risks and ensure the integrity of the procurement process

• Ground the selection of Public-Private Partnerships in Value for Money

• Setting up of coordinating mechanism for the investment promotion in the region under existing SA institutions

• Develop and Implement guidelines for investments, project identification and prioritization, coordinating investments in CBET


41


Project Risk assessment matrix

• Financial Condition

• Payment security mechanism

• Credit Rating

• Licenses and clearances

• Land acquisition

• Financial closure

• Currency fluctuation

• Political risk –expropriation, war

• Change in Law, taxation

• Currency devaluation, inconvertibility, or restrictions

• Breach of contract

• Transparency in policies of award, incentives & benefits

• Independent regulatory framework

• Conflict management

Policy and Regulatory

Risk

Political Risk

Utility/ Off-taker

Risk

Developer’s Risk

Allocation of risk and return

42


Evaluation framework to mobilize investments

Foreign Direct Investment (FDI)

framework

Investment models for CBET

Taxation Policies and Incentives

Domestic Capital Markets

Financing Instruments

Institutional Framework

Policy and regulatory

frameworks

Legal and Dispute

resolution

Project Development

Support - Land, Environment,

R&R

Risk Evaluation Matrix

1

4

7

2

5

8

3

6

9

Policy and Regulatory

RiskPolitical Risk

Utility/ Off-taker Risk

Developer’s Risk

Investment Promotion

Investment Protection

Investment Facilitation

43


Regional investment framework for CBET is still evolving

Foreign Direct Investment (FDI) framework

Investment models for CBET Taxation Policies and Incentives

Policy and regulatory frameworks Legal and Dispute resolutionProject Development Support -

Land, Environment, R&R

Investment Promotion

Investment Protection

Investment Facilitation

• FDI Policies are quite liberal across all countries

• Lacks regional framework for CBET

• PPP framework implemented in India, Bangladesh, Bhutan

• Regional investment model yet to evolve for cross border projects

• Regional initiatives under SAARC framework

• Domestic policies still to be harmonized

• Domestic regulatory frameworks at various levels of evolution (Nepal-Min, India-Max)

• Lacks harmonization at regional level

• Bilateral mechanism and contractual arrangements relied upon

• Lacks regional forum for resolving disputes

• Most project implementation delays caused due to local issues

• Regulatory frameworks are not very strong in many countries

Domestic Capital Markets Financing Instruments Institutional Framework

• Domestic capital markets in most countries except India lack depth for large investments

• ECB comes with stringent conditions

• Low cost financing instruments (Green bonds) have not been utilized

• Lacking in innovative debt instruments for cross border hydro projects

• Lack of harmonization of technical and commercial frameworks increases risk

• Power trading framework still to be institutionalized in most SAC

4444

183186

178 177176

189

53

1530 29

168

2722 25

52

144

0

20

40

60

80

100

120

140

160

180

200

Dealing withconstruction permits

Getting electricity Registering property Getting credit Paying taxes Trading across borders Enforcing contracts Resolving insolvency

Chart Title

Afghanistan Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka


Note/Source -The ease of doing business ranking ranges from 1 to 190. Values are Regional Average Rank- https://www.doingbusiness.org/en/rankings

South Asia : Country wise ranks varies among countries

Best R

an

k

Po

or

Ra

nk

Best Rank Poor Rank

South Asia : Ease of Doing Business Ranking 2020 (1-190 )

https://www.doingbusiness.org/content/dam/doingBusiness/media/Profiles/Regional/DB2020/SA.pdf

https://www.doingbusiness.org/en/rankings

45


• Key Issues and Mitigations

Project Risk Mitigation

Political and country Policy and Regulatory Project Development Off-taker

• Political insurances

• International investment agreements (BIT, FTA)

• BOO, and BOOT business models under PPP

• Guarantee against expropriation

• Standardize contract documents

• Alternative dispute resolution mechanisms

• Regional institution

• Capacity building

• Standard technology specific project development guidelines

• Single window clearance

• Regional skill development center

• Currency hedging (Currency swaps, options, forward contract)

• USD denominated PPA

• Stable tax regime

• Corporate governance

Issues

Mitig

ation

• Political instability• High transaction cost• Transparency &

predictability• Non-discrimination• Change of law• Public governance

• Contract enforcement • Alternate dispute

settlement• Administrative process• Legal stability and

predictability

• Site identification and resource assessment

• Land acquisition, environment, R&R

• Off-taker risk• Skilled manpower

• Currency risk (exchange rate, convertibility)

• Tax policies• Corporate governance• Liquidity issues, debt

financing

Confidential©2020

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