Most South Asian countries depend on imported fossil fuels for power generation, and their dependence ranges from as high as 98% for Bangladesh to as low as 16% for Afghanistan. In contrast, Bhutan and Nepal depend almost entirely on hydropower. Intra-regional energy trade is non-existent as the region’s domestic reserves of fossil fuels are limited. As part of national decarbonisation strategies, countries have begun to move towards renewable energy (RE). However, the lack of access to alternative energy sources makes
Most South Asian countries depend on imported fossil fuels for power generation, and their dependence ranges from as high as 98% for Bangladesh to as low as 16% for Afghanistan. In contrast, Bhutan and Nepal depend almost entirely on hydropower. Intra-regional energy trade is non-existent as the region’s domestic reserves of fossil fuels are limited. As part of national decarbonisation strategies, countries have begun to move towards renewable energy (RE). However, the lack of access to alternative energy sources makes the task challenging.
A domestic strategy for RE encounters the usual challenge of import dependency for solar panels and cells, grid stability, and operational cost reduction. Moreover, inadequate energy storage makes the generation cost significantly high, leading to other financing and transition-related socio-economic issues.
A recent study by The Energy and Resources Institute, the Economic Research Institute for East Asia, and the Energy Research Institutes Network explores the advantages of potential trade in electricity generated by renewable sources within the South Asian region. Such intra-region electricity trade can solve many challenges faced by the RE sector in these countries while avoiding undesirable social and environmental costs.
The study found that bilateral RE trade leads to Gross Domestic Product and welfare gains for partners. Still, the gain is relatively higher for the RE-exporting country, the scale being higher when RE trade is backed by technology improvement in the exporting country. However, multilateral or regional trade was found to be more beneficial compared to bilateral trade.
The success of the regional RE trade initiative, observed in the study, is dependent on strengthening the grid infrastructure within and across these countries. RE generation on a relatively larger scale within the smaller countries of the region can ensure a lower cost of production but encounters the issue of proper utilisation of supply in the absence of adequate demand. On the other hand, the export of RE to a neighbouring country with a grid network can address the challenge of expensive energy storage and marketability of supply. Moreover, a country that imports RE for domestic use reduces the domestic use of fossil fuels and saves on the import of RE equipment.
The One Sun One World One Grid initiative, which India launched in 2021, provides an opportunity to connect neighbouring countries of South Asia in a common grid and exchange power. Such a mechanism can be extended to the far east through Myanmar and the far west through Oman.
Further, the region’s complementarity in RE resource and demand patterns enhances the RE trade potential in South Asia. For example, Bhutan and Nepal have huge hydro potential, and India for solar and wind. In terms of demand complementarity, the power demand is relatively low in India during winter, while it is relatively high in Nepal and Bhutan. On the other hand, the summer demand for power in India is high, which complements the lower summer demand in Bhutan and Nepal.
Nepal and Bhutan import electricity in winter as hydropower production falls as water resources freeze, while the demand rises on the back of heating requirements. The reverse happens in summer when the domestic demand is lower.
Connecting different types of RE (solar and wind with hydro) in the grid will address the issue of stability of the grid to a large extent. India has grid connectivity and power exchange mechanisms with Bhutan, Bangladesh, Nepal (BBIN network) and Myanmar on a bilateral basis. While Bhutan, India and Nepal export and import electricity as per the demand-supply scenario, Bangladesh and Myanmar only import electricity. Bangladesh has recently entered into an agreement with Nepal for power exchange through India. However, as the experience of energy trade within the European Union and the Association of Southeast Asian Nations regions indicates, RE trade is more effective and efficient in a multilateral format.
The challenges to such an initiative are apparent. It rests on political trust built on the commonality of interest. Nevertheless, a beginning can be made by the interested countries entering into a plurilateral agreement based on a common protocol that addresses the tariff and investment barriers. The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation can be considered for this kind of regional cooperation.
The cost-effectiveness of grid networks is another major challenge. Most South Asian countries have relatively high transmission and distribution loss compared to the global standard. For proper connectivity, networks (undersea and through dense forests) need to be established, which will have implications in terms of cost as well as ecological impacts. Private investment is likely a more effective option to finance such an initiative, compared with the conventional public-private partnership or international/multilateral funding.
A common regional protocol will be critical in addressing sovereignty issues and possible impacts on natural resources (especially water).
An intra-regional protocol for RE generation and trade within the South Asian region can help create a new decarbonisation paradigm and potentially lower energy transition costs. Anchored in mutual complementarity, it may enable countries to move towards full-scale energy independence.
RR Rashmi is distinguished fellow, Saswata Chaudhury and Raktimava Bose are senior fellow and associate fellow respectively at The Energy and Resources Institute (TERI)
The views expressed are personal
One Subscription.
Get 360° coverage—from daily headlines
to 100 year archives.
Archives
HT App & Website