REGIONAL ENERGY CO-OPERATION IN SOUTH ASIA

South Asia has a long history of regional energy cooperation and cross border energy trade. Energy commerce across borders and energy collaboration in South Asia stretch back to the 1950s and 1960. In 2014-2015, a first-of-its-kind regional agreement in the region, the SAARC Framework Agreement on Energy Collaboration, was signed in 2014–2015 and cleared the way for fostering cross-border energy trade and cooperation in the South Asian region. Since then, Guidelines for Import/Export (Cross Border) of Electricity, Central Electricity Regulatory Commission (Cross Border Trade of Electricity) Regulations, and Procedure for Approval and Facilitating Import/Export (Cross Border) of electricity have each been released by the Ministry of Power, Government of India, Central Electricity Regulatory Commission, and Central Electricity Authority, respectively, to facilitate cross border electricity trade. The draft legislation to amend Electricity Act of India also contains encouraging provisions on cross border electricity trade. Another regional framework agreement on grid interconnection amongst the BIMSTEC countries has been signed in 2018.

However, despite the many inherent benefits, the region has moved little beyond bilateral co-operation between India and Nepal and India and Bhutan in exploiting the hydro resources. In 2019, Bhutan exported 80% of its hydro energy to India and earned USD 87.58 million while India benefitted by ensuring that its citizen connected to the northern grid were ensured reliable power.Bangladesh currently imports power from India mostly through a 1,000-MW high voltage
DC interconnection.

Additional high-voltage interconnections are planned between India, Nepal and Bhutan. A trilateral power trade initiative involving Nepal, India and Bangladesh is under active stage of discussion and finalisation. This initiative will enable Bangladesh to import around 500 MW of hydropower from Nepal through India.

Cross-border electricity is traded primarily through non-market mechanisms in the region. In a significant development, cross-border electricity trade in the South Asia region through a market mechanism i.e., Power Exchange (PX) has started with Nepal (April 2021) followed by Bhutan’s (Jan 2022) participation in the Indian PX platforms. Electricity price discovery through PX platforms is transparent and highly competitive, thereby offering best value of procurement of electricity for consumers.

A number of detailed studies have established that the whole region of the South Asia will benefit in multiple dimensions by expanding the current bilateral agreements to multilateral collaborations. NREL, a leading research organization, and South Asia Regional Energy Initiative, a multi-year energy research program, have argued that an institutionally coordinated approach in the South Asian region can help the countries to achieve their renewable energy targets in a more cost-effective way and for long term sustainability of cross border energy trade and regional energy cooperation.