Turkmenistan : Afghanistan and Turkmenistan: Regional Power Interconnection Project

Energy / Conventional energy generation - Electricity transmission and distribution - Energy sector development and institutional reform

The Regional Power Interconnection Project will address electric supply needs in Afghanistan (AFG) and electric infrastructure development and export plans in Turkmenistan (TKM). The Project will meet AFG needs as (i) development partners have advised plans for investment in transmission and distribution which will increase the low electrification rate thereby increasing demand (ii) development of new domestic generation is not expected to meet forecast demand, (iii) existing interconnections cannot fill the supply gap, and (iv) electric imports from TKM can meet new demand in a cost effective manner while increasing security by diversifying import sources. The Project will allow TKM utilize its gas reserves for electric exports by adding additional gas fired generating plant.

The project's impact will be increased regional cooperation and optimized use of regional energy resources. In TKM, the outcome will be increased overall generation efficiency through the addition of modern high efficiency power plant and improved access to export markets.In AFG, the outcome will be least-cost increase in electric supply, enhanced security of supply through diversification of import sources, and secure year-round electric supply to all customers. In both AFG and TKM, the outcome will be increased utility commercialization through the application of a long-term power purchase and sales agreement (PPSA).

The Project will increase generation capacity in TKM and interconnect the electric grid systems of TKM and the AFG thereby allowing TKM to export electric energy to AFG. In TKM, the Project includes a new gas-fired 300MW combined cycle power plant. In AFG, the project includes new transmission lines and substations in its western region including a connection from the TKM/AFG border to the existing 220kV grid. The specific components of the Project will be confirmed by a Project Preparatory Technical Assistance (PPTA).

TKM enjoys, considerable gas reserves being ranked 4th in the world with 8 trillion cubic meters (m3) of proven reserves . With a small domestic market whose energy needs are met, TKM policy is to expand its gas and electric sectors and export energy to international markets. Gas production in 2008 was 70 billion m3 of which 75% was exported. However access to export markets is constrained by the limited availability of gas pipelines and electric interconnections. TKM is addressing this constraint by (i) developing additional export pipelines, and (ii) diversifying its energy export potential by increasing electric interconnections with neighboring countries.

TKM electric production in 2008 was 14 terawatt hours (TWh) which met domestic demand while supplying 2TWh to export markets in Iran and beyond. New generation capacity is required due to increasing domestic demand, retiring obsolete power plants, and growing demand in the power export market. The power sector operates at low efficiency with approximately 50% of its 4,000 megawatt (MW) installed capacity using gas fired open cycle gas turbine power plant with the balance using gas fired conventional thermal plants built during the Soviet era. In addition, TKM transmission system, also built during the Soviet era, is largely obsolete and is in urgent need of rehabilitation. With its own funds, TKM awarded a $340 million contract in 2011 to strengthen the transmission system in its eastern region. A component of this contract covers a 500kV connection to the AFG border. TKM now wishes to build a new 300MW combined cycle gas turbine power plant grid under the Project.

Meanwhile, the Project rationale in AFG is to increase energy supply by importing electric energy from TKM in a timely and cost-effective. It will also diversify AFG import sources and increase its capacity for future energy transit services. As a net energy and power importer, AFG's power system is interconnected with the Uzbekistan's (UZB) system and is due to be interconnected with Tajikistan's (TAJ) system in 2011. Iran, TAJ, TKM and UZB supply border areas of AFG, on the other hand, has limited capacity tail-fed non-interconnected electric supply. To meet domestic power demand, AFG is yet to develop a combination of domestic fossil fuel and renewable energy generation projects complimented by diversified import solutions. To increase revenue from power transit, it is yet to strengthen its network in serving the energy-rich Central Asia and the energy-deficient South Asia.

Less than 20% of the AFG population is supplied with electricity. This low electrification rate is expected to increase once the transmission and distribution networks are expanded following ongoing ADB and other donor interventions. Meanwhile, new domestic generation projects are progressing slowly and are not forecast to meet expected load growth. Capacity of existing interconnections is also insufficient to fill the supply gap.

The Project rationale in AFG is for AFG to meet its increased energy supply needs by importing electric energy from TKM in a timely and cost-effective manner while diversifying import sources and increasing its capacity for future energy transit services.

Central Asian countries are energy rich and have surplus energy available for export. TAJ, TKM and UZB have confirmed their wish to export electricity to energy deficient PAK. Such exports have not occurred to date due to the absence of a Central Asia to South Asia transmission interconnections. The existing UZB 220kV interconnection connects to the AFG 220 kV North East Power System (NEPS) as will the new TAJ 220 kV interconnection. The proposed TKM interconnection will also connect to NEPS, making NEPS a major import consolidation point. Such consolidation point could allow for re-export to PAK of imports from Central Asia should an AFG-PAK interconnection be built at a future date.

TA 7853 was coordinated with AFG Power Sector Master Plan being conducted under separate technical assistance (TA 7637). TA 7853 Project Inception Report was presented to and commented by the AFG and TKM energy officials in April 2012. Negotiations for Power Purchase and Sale Agreement (PPSA) between AFG and TKM was held in June 2012, February 2013 and February 2014.

A feasibility study has been prepared detailing the technical specifications for the proposed TKM power plant project and interconnection between AFG and TKM, in close consultation and coordination with the energy officials from both countries. The study identified the interconnection project was justified on technical, financial and economic grounds while complying with ADB safeguard requirements.

ADB financing for the AFG component of the interconnection was approved by ADB Board in Dec 2012 with Financing Agreement signed in March 2013. The project became effective in June2013. Financing for the TKM component of the interconnection is under preparation.

Under the project, a consulting firm was recruited following ADB Guidelines on the Use of Consultants to conduct the technical, economic, financial, poverty and social, and safeguard assessment of the Project. Such study will be executed in two phases. The first phase, the Pre-Feasibility stage, will confirm the basic technical parameters of the Project, refine the cost estimates, and calculate indicative financial returns. A Pre-Feasibility Report will cover the findings of Phase 1 and will recommend if the PPTA study should proceed to the second phase, the Due Diligence stage. AFG and TKM will approve the Pre-Feasibility Report before proceeding to the Due Diligence stage.

Contract between ADB and PPTA Consultant was signed on 16 Dec 2011 and consulting services commenced on 16 Jan 2012. The Consultant presented an Inception Report in April 2012 detailing preliminary results of the pre-feasibility study. A Draft Final Report is submitted in Nov 2012 with a conclusion that the proposed combined cycle gas turbine (CCGT) project is financially and economically viable and brings strong regional benefits. In Dec 2012, TKM advised that it had revised its requirements and therefore requested that open cycle gas turbine (OCGT) technology be utilized. As such, the feasibility report was revised in Mar 2013.

A Power Purchase Pricing Expert was likewise engaged by the consulting firm to provide advise on the power tariff design for PPSA. In addition, an Individual Consultant (Legal Advisor) was recruited in April 2012 to facilitate negotiations and provide legal counsel in the preparation of a power purchase and sale agreement (PPSA) between the two countries.

All consulting services have been completed.