A techno-economic and financial analysis of a Gulf-India undersea electricity interconnector
Background, challenges, and context
India is emerging as a global leader in renewables deployment – ranked 3rd and 4th globally in solar photovoltaics (PV) and wind power capacity additions in 2019. In the coming decades, the country’s power sector will have to cope with increasingly electrified energy systems, as well as higher levels of intermittency associated with weather-dependent renewable generation (the sun will produce electricity only in daylight hours, and the wind doesn’t always blow).
One promising solution to this challenge is cross-border electricity interconnectors. Linking areas with high energy demand to places with high renewable energy generation potential can help to overcome intermittence issues by balancing supply and demand.
Championing this concept, India’s Prime Minister recently announced the ambitious ‘One Sun One World One Grid’ initiative, which envisions a globally interconnected electricity grid to complement the plans of the International Solar Alliance for round-the-clock solar power generation.
The objective in the first of three phases of the initiative is to assess the technical and financial viability of an interconnector between the six Gulf Cooperation Council (GCC) countries (Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman), India, and South-East Asia.
Research overview and objectives
This study aimed to identify whether a combined techno-economic and financial case exists for an electricity interconnector between GCC countries and India across a broad range of scenarios. It aimed to answer four key questions:
Is an electricity interconnector between GCC countries and India considered techno-economically and financially favourable across a range of scenarios?
If built, what are the daily and seasonal patterns of trade flows across the interconnector?
What are the key factors that influence the choice to build and profile of electricity flows across the interconnector?
How can a GCC-India interconnector contribute towards India’s transition to a low or zero emissions power system?
A techno-economic model of a combined India-GCC power system was developed using OSeMOSYS, a widely used open-source energy system modelling tool, combined with a financial model.
OSeMOSYS was used to identify the least-cost ‘optimal’ system over a given time horizon under user-specified constraints. The financial model was used to determine whether the interconnector would be investible, beyond being techno-economically desirable. The models were applied across 75 scenarios, covering a range of cost variables and solar PV locations in the GCC.
Research results, key messages, and recommendations
The techno-economic case for a GCC-India interconnector is clear:
An interconnector is part of the least-cost ‘optimal’ power system in 64 of the 75 scenarios studied.
Bi-directional trade between the two regions can contribute towards reducing costs and emissions across a range of scenarios.
The trend of electricity flows gradually shifts from the India->GCC direction in 2030 to the other way around by 2050. The overall trade volumes are influenced by the location of solar PV farms; locations further to the west contribute towards higher trade volumes in the GCC->India direction.
Of the cost variables considered in the study the overall (social) discount rate is most strongly correlated with the interconnector trade volumes. As the discount rate increases, renewable power generation technologies are considered less techno-economically favourable. This in turn leads to higher electricity flows in the GCC->India direction.
Finally, the role of storage was found to complement rather than substitute the Gulf undersea interconnector.
The financial case for the CCG-India interconnector is less clear:
Of the projections developed for the scenarios from the techno-economic model, only a small number are immediately investible. However, the non-investible scenarios show a shortfall in investment attractiveness consistent with the difference between the techno-economic and financial models.
Better harmonisation of the techno-economic and financial models will clarify the conditions for investibility of the interconnector.
It is also expected that a smaller interconnector will be a more attractive investment opportunity, for a trade-off in total system cost reductions.