Cross-Border Electricity Cooperation in Southern Asia: Consequences and Benefits

Abstract

This study analyzes the potential of cross-border electricity cooperation as an effective way to reduce the costs of renewable energy deployment in the South Asian region using a novel cooperation mechanism among countries. This paper studies the case of India, Bhutan, and Nepal. From the analysis, Bhutan and Nepal have a large under-exploited hydropower potential that presents a great opportunity for India’s energy supply by developing cross-border electricity trading infrastructure and associated markets. For this, developing the infrastructure for power transmission and hydropower plants in each country is necessary to reduce investment in flexibility solutions, power system costs, and CO2 emissions. According to a previous analysis, in Nepal’s case, the Cross-Border Electricity Market (CBEM) development would increase Nepal’s Gross Domestic Product (GDP) by up to 39%. India would also benefit from this mechanism. Using this energy trade mechanism, India’s power generation needs would be reduced by 2% and CO2 emissions would be reduced by 5.60% by 2045. The most important conclusions to highlight are that (i) there is an important opportunity to simultaneously enhance the economy sector in some undeveloped countries in the region when, at the same time, reducing carbon intensity in India; (ii) at the same time, there is a large barrier, as the analysis shows that despite these associated benefits there is a major risk in the lack of policy harmonization among all countries involved; and (iii) that one of the most important key aspects for success is the development of a coordinated regulation strategy. These results show the potential of CBEM systems in the region but also encourage researchers and policymakers worldwide to explore this mechanism as an effective way to enhance the decarbonization of power systems.