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Energy Trade in South Asia: Opportunities and Challenges

Energy Trade in South Asia: Opportunities and Challenges

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The South Asia Regional Energy Study provides interventions to improve regional energy cooperation in different timescales, including specific infrastructure projects which can be implemented during these periods.
The South Asia Regional Energy Study provides interventions to improve regional energy cooperation in different timescales, including specific infrastructure projects which can be implemented during these periods.

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Published by: Asian Development Bank on Apr 04, 2012
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02/11/2013

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The Central Asia Republics (CAR), including Kazakhstan, the Kyrgyz Republic,
Tajikistan, Turkmenistan, and Uzbekistan, is well endowed with energy
resources, including hydropower and natural gas, and formed a strong

20

Shwe Gas Movement (2010).

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Current Regional Energy Trade and Its Prospects 49

electricity trading group in the past via interconnection through a common
500 kV power transmission ring. With the demise of the Soviet Union, much
of this trade disappeared due to decreased electricity demand and drive for
self-sufficiency in the CAR, but a significant interdependence still existed
among them. For example, Tajikistan depended on Uzbekistan as a source of
electricity supply during the winter months but exported hydroelectricity to
Uzbekistan in the summer months, and also released water for agriculture
in the Fergana Valley in Uzbekistan during that time. However, Tajikistan
has now sought to further develop its hydropower (both run-of-river and
storage type plants) for export to third parties. This Tajikistan initiative is
viewed with serious concern by Uzbekistan due to the possible impact on
water releases for its agriculture. The Kyrgyz Republic also has hydropower
generating capacity to supply exports.

At a regional conference on electricity trade, organized by the Government
of Pakistan in Islamabad in May 2006, Afghanistan, the Kyrgyz Republic,
Pakistan, and Tajikistan created a joint Multi-Country Working Group
to pursue a project for constructing a transmission line to export about
1,000 MW of electricity from the Kyrgyz Republic and Tajikistan to
Pakistan via Afghanistan (with a possibility to off-load some electricity in
Afghanistan). Subsequently, at the second regional conference in Dushanbe
in October 2006, these countries signed a memorandum of understanding
for the development of the Central Asia–South Asia (CASA-1000) Project,
and created a ministerial committee to oversee the effort. They also formally
requested the World Bank and ADB to assist in conducting the necessary
analytical work for project preparation.

The CASA-1000 Project, primarily involves (i) construction of a 500 kV
power transmission line from Tajikistan to Pakistan via Afghanistan, and
strengthening of transmission infrastructure with the Kyrgyz Republic;
and (ii) development of the associated electricity trading arrangements.
The analytical work in support of the CASA-1000 Project consisted of a
Technical and Economic Assessment and a Commercial Assessment of the
project. The Technical and Economic Assessment examined the technical
and economic merits of the project and its environmental, social, and
other safeguard implications, while the Commercial Assessment examined
options for implementing the project through public–private partnership
arrangements and the institutional, financial, risk, and legal structures of
the project.

The country delegations and their advisors, the international financial
institutions and the consulting teams, and representatives of the Government
of the United States (US) met in 31 July–2 August, 2008 to discuss the CASA-
1000 project and recommended that the concession company to be selected
would develop, construct, and operate the Tajikistan–Afghanistan–Pakistan

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50 Energy Trade in South Asia

transmission system and also construct the Kyrgyz Republic–Tajikistan
link. It was also recommended in principle that Barki Tajik (the Tajikistan
power utility) should be the consolidator of power with the Kyrgyz Republic
generating plants selling power to Barki Tajik through the Kyrgyz Republic–
Tajikistan link, and Barki Tajik signing a single PPA with the power purchasers.
The Kyrgyz Republic and Tajikistan are together expected to commit firm
power flows. Meantime, Uzbekistan has raised objections to the further
control that would be imposed on water releases to the Amudarya river
supplying water to the Fergana Valley as a result of further hydropower
developments in Tajikistan, particularly the 3,600 MW Rogun hydropower
project on the Vakhsh river, which is a major tributary of the Amudarya. In
fact, in December 2009, Uzbekistan isolated itself from the aforementioned
500 kV power transmission ring, imposing winter power supply constraints
on Tajikistan. This development has added further complexities to the CASA-
1000 Project.

This project highlights the need for consensus in international cooperation—
potential benefits and costs must be apportioned so that all participants
view the results as fair. Regional public goods, regional infrastructure
projects thus have an additional element of complexity that purely national
projects do not have. This is one reason why there is often the need for
support for these projects by international finance institutions that can help
provide technical studies supporting the necessary negotiations among
participating countries.

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