“cross-border Electricity Trading In Europe’s Internal Energy Market” – In this section we will consider Tajikistan’s opportunities for electricity trade with neighboring countries. The main characteristics assessed are demand patterns, prevailing production cost and infrastructure requirements.
The degree of potential integration that could be possible between Tajikistan and its various neighbors in the next ten years is evaluated. Ultimately, of course, these are choices that will be made by the relevant stakeholders and their perception of trade opportunities and risks relative to their resources.
“cross-border Electricity Trading In Europe’s Internal Energy Market”
The figure below shows a hierarchy of power system integration models. These vary from very limited ones, e.g. The simplest model is a one-way power trade, for those that can be considered complementary. The fully integrated model is represented by the PJM system in the United States, which organizes markets, supports transmission planning and manages the deployment of generators across a broad geographic area that includes multiple jurisdictions. Different models require varying levels of cross-border cooperation and resource sharing, from low levels in bilateral trade models to high levels in more unified models.
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Higher degrees of integration generally enable more optimal use of shared resources such as transmission networks, thereby shortening payback periods and maximizing the economic outcome for participants.
Multilateral transactions can exist alongside other differentiated arrangements (market or non-market) such as long-term power purchase agreements (PPAs) or non-financial power exchanges, where participants are not restricted from such choices. A common feature among these models is third-party access to the local grid, so that each generator can directly supply demand in a different jurisdiction for a specified trading period. The assessment of the reasonable degree of integration depends on the common economic and political interest between the countries.
Historically, Tajikistan was connected to the other Central Asian countries2 as part of the Central Asian Power System (CAPS) which was built during the Soviet era. The system was slowly abandoned in the 2000s when Turkmenistan seceded in 2003 for more favorable trade arrangements with Iran, and in 2009 when Kazakhstan and Uzbekistan withdrew, and Tajikistan seceded due to transition disputes and disagreements over the use of the system. There have been several initiatives to settle these disputes. Tajikistan rejoined CAPS in 2018 and began trading electricity with Uzbekistan. Initiatives stemming from the Asian Development Bank’s (ADB) Central Asia Regional Economic Cooperation (CAREC) program and the USAID Central Asia Regional Electricity Market (CAREM) aim to re-create cooperation by addressing shared concerns such as energy security, water rights and financial viability and technical ability of the electricity companies.
This map does not affect the status or sovereignty over any territory, the boundary of international borders and boundaries and the name of any territory, city or region.
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There is a high level of complementarity of resources for the electricity sector among Central Asian countries. During the summer, excess Tajik and Kyrgyz energy from hydropower could be exported to the rest of the region, while during the winter, thermal electricity from coal and gas could be exported from Kazakhstan, Uzbekistan and Turkmenistan. The peak demand for electricity in winter in gas producing countries is not as significant as in Tajikistan because these countries have systems and devices to use gas for heating.
The average cost of production in Kazakhstan, Uzbekistan and Turkmenistan is generally higher than the average cost of hydropower in Tajikistan. Widespread retail electricity subsidies are still common, but there is a clear opportunity for Tajikistan to trade electricity, especially as the region adopts more market-oriented and cost-recovery approaches. Given that the transmission infrastructure is in place, the cost of reconnection will be lower than new construction and the region can focus on grid strengthening to improve system security.
Additionally, if Central Asian countries move to increase the share of variable renewables in their generation mix, then more integrated market development will expand Tajikistan and Kyrgyzstan’s trade opportunities to provide ancillary services. Kazakhstan, Uzbekistan and Turkmenistan have high potential for solar PV and wind energy. The exploitation of the potential of these renewable resources may serve as another motive for deepening the integration of the regional electricity market.
A recent study assessed the benefits of regional power system cooperation in Central Asia (RTE and ADB, 2020). He emphasized that based on their abundant hydropower resources, Tajikistan and Kyrgyzstan can provide important secondary regulation. In particular, Tajikistan can increase the volume of activated frequency recovery reserves (FRR) from 4 TWh in the case of no regional cooperation to 17.6 TWh with full cross-border procurement of FRR by 2030. This can provide a significant revenue stream for Tajikistan in addition to exports Its existing seasonal bilateral. The existing and planned developments for the network were assessed as sufficient for this level of FRR trade. Although there will be an increase in production costs for Tajikistan from the large amounts of FRR raised, the study found that as long as these high costs are reflected in the price of the service, participating in this trade will be a net benefit to the country.
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There are several entities that can support a stronger integration of the market. Established in 1993 in Uzbekistan with investments from the five countries, the Energy Central Dispatch Center (CDC) (originally the United Dispatch Office) is a central institution enabling the optimization of power resources and systems in Central Asia. The CDC is responsible for calculating transfers between the countries. If a pool of power model is adopted, the CDC may increase its ability to act as a market operator.
In terms of operations, there is the Central Asian Power Coordinating Council (CPC), which is the governing body of the CDC. The members of the CPC are the power system operators KEGOC (Kazakhstan), UzbekEnergo (Uzbekistan), Kyrgyzstan NPG (Kyrgyzstan) and Barki Tojik (Tajikistan). Turkmenistan has not been involved in the CPC or CDC since it broke away from CAPS in 2003 to operate synchronously with Iran.
The CPC and CDC are increasing institutional readiness to establish a Central Asian electricity system capable of designing and operating a multi-directional market-based regional system that can support optimal resource allocation and utilization. Stakeholders can aspire to multilateral, multi-directional trade between their distinctive markets similar to the South African Power Pool (SAPP) model. The SAPP operates as a multilateral platform for near-real-time surplus electricity trading alongside other arrangements, preserving participants’ local price-setting approach as well as remaining fairly independent from neighboring countries for electricity security. For Central Asia, as confidence builds in the regional market and renewable sizes change in the production mix, the depth of integration can strengthen. Under these conditions, Tajikistan’s hydro resources will be significant contributors.
Tajikistan’s abundant hydro resources during the summer are an excellent opportunity to export electricity to its southern neighbor Pakistan, where shortages are common in the summer due to high demand for cooling. In fact, electricity trading initiatives are planned as part of the new electricity transmission system, called CASA-1000, to connect Tajikistan and Kyrgyzstan, both with abundant hydropower resources, with neighboring Pakistan, which suffers from chronic electricity shortages. It includes 500 kilovolt (kV) alternating current (AC) lines in Tajikistan and Kyrgyzstan and 1,300 megawatt direct current (HVDC) lines to Pakistan, passing through Afghanistan. Currently, there is a power purchase agreement, through a 15-year bilateral contract between Tajikistan and Pakistan (Government of Pakistan, 2015). The conditions include:
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Feasibility studies show that Tajik electricity exports can be further increased to 2.7 TWh in coordinated action with Kyrgyzstan (SNC Lavalin, 2011). Flexible short-term trading may pave the way for higher utilization of the CASA-1000 transmission line. Tajikistan, Kyrgyzstan and Pakistan, the three main countries involved in electricity trade through the CASA-1000 transmission network may consider flexible trading in the near term. Trade contracts for flexibility can be in addition to the PPA for a term of 15 years. Short-term arrangements for flexible services can allow Tajikistan to adjust the price and quantity offer according to its surplus volume. Short-term arrangements could also allow Tajikistan to export electricity in the winter if domestic demand is met and there is sufficient demand in Pakistan. Moreover, short-term arrangements can provide opportunities in winter for Pakistan to export surplus electricity to upstream countries in reverse flow.
There are no current import arrangements. A barrier is the high cost of electricity in Pakistan at around $77 per MWh (CPPA, 2019). However, if short-term trading is established, it could open up options as it would not require Tajikistan to commit long-term resources while maintaining the option of importing electricity in winter when domestic thermal plants or cheaper imports from Central Asia are not available.
This map does not affect the status or sovereignty over any territory, the boundary of international borders and boundaries and the name of any territory, city or region. Previous plans for CASA-1000 included a converter substation to allocate 300 MW of capacity to Afghanistan, with the remaining 1,000 MW allocated to Pakistan. The current plan will allocate all 1300MW to Pakistan,
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