Regional Cooperation for a Cleaner, Greener Future
डॉ. अभिजीत चौहान
Regional cooperation provides a major opportunity for individual countries to address barriers to sustainable inclusive economic growth, especially in the energy sector. Examples of successful cooperation in pursuing sound energy policies can be found in different parts of the world, particularly in sharing electricity generated through cross border transmission interconnections.
Estimates suggest that in Europe, electricity system interconnection has resulted in a 7% to 10% reduction in generation capacity costs.
Similar cooperation within the United States has been estimated to bring benefits in the order of $20 billion.
A study of the Greater Mekong sub-region in Southeast Asia suggests that regional cooperation in energy could reduce energy costs by nearly 20%, for a saving of $200 billion during 2005-2025.
Regional cooperation refers to countries coming together in joint efforts to address common problems or to make use of the opportunities.
Regional cooperation produces results and incurs costs that are typically unevenly spread across the group of countries – thus considerable negotiation is required in any regional effort to ensure that all perceive that the effort merits the expense.
Examples of regional cooperation initiatives include:
- Cross border infrastructure such as trans-border bridges or roads, and transmission lines
- Free trade agreements that jointly set the policy environment governing trade in goods or services
iii. Cooperation to reduce the spread or impact of pandemics such as avian influenza
- Collective efforts to contain trans-border pollution such as acid rain.
Significance of South Asia
South Asia has more than one-fourth of the world’s population. Over the last two decades, it has been one of the fastest growing regions in the world, with an average annual GDP growth rate of six per cent.
The economic costs of electricity distortions are estimated at 4-7% of the region’s GDP.
Even as South Asia is improving access to electricity, demand for power is expected to double in this decade.
Cross border electricity trade between India-Nepal, India-Bhutan, and more recently India-Bangladesh highlight the growing cooperation in cross border electricity trade.
International experiences – particularly those in East Asia, Africa and Europe – have shown that there is much to benefit from regional cooperation in the power sector.
Optimum and efficient utilization of available energy resources, creating a level playing field, assuring returns to investors, and providing affordable electricity to consumers can make the South Asian region energy secure as well as self-sustainable.
South Asia has a variety of energy resources with major potential for hydro power. This potential offers a huge scope for tapping clean energy and meeting the region’s energy needs. Yet, despite the potential and macro-economic growth in this region, the power sector has not been able to keep pace with demand.
The systematic deployment of this potential, along with an investment in infrastructure build-up and a market-based trade system, can help harness untapped sources of clean energy.
This would benefit a vast population. Large untapped hydro power resources exist in Bhutan, India, Nepal, and Pakistan.
There are healthy reserves of wind power resources in India, Sri Lanka, and other parts of the region. There is a need to plug the increasing gap between demand and supply through the development of additional resources.
SAARC Energy Region
The SAARC region is home to 23% of the total world population, of which a large proportion is living below the poverty line. The energy demand in the region is expected to grow at an annual rate of 5%, with the household and industry sectors as main contributors.
Key challenges faced by the energy sector include increasing energy deficits, single fuel dominance in the energy mix, rising import dependence, and lack of requisite energy infrastructure. Augmenting the energy supply and diversifying the fuel basket requires inter- and intra-regional energy trade.
One of the key inputs needed to sustain and accelerate economic growth in the region is increasing access to energy, as there is a strong direct relationship between economic growth and energy demand.
Upward social mobility associated with faster economic growth further accentuates the demand for energy. This puts pressure on all SAARC member states (SMSs) to ensure a continuous and reliable supply of energy in its various forms.
Although the region as a whole is well endowed with diverse energy resources, including renewable energy, a large part of these resources remains to be tapped, for various reasons. Limited availability of indigenous energy supplies, coupled with the large population base,
makes the region significantly dependent on energy imports.
The diversity of energy resource endowment between South Asia and its neighbouring energy resource-rich regions provides opportunities for inter-regional energy trade to reap the optimum benefits from available resources.
The geopolitics involved and competition from alternative energy markets makes inter-regional energy trade a challenging proposition.
Benefits of Regional Energy Trade
The enormous potential economic benefits of regional cooperation realized by other regions can be used as a motivating factor for regional cooperation in energy. Developing nations require a wide range of energy goods and services.
As communities move away from traditional agriculture and develop industrial and service sectors, the demand for commercial energy increases.
Transport fuels and electricity become particularly important inputs.
Few countries have domestic energy resources that mirror their domestic demand. The international trade in energy allows countries to balance this important demand and supply, exploiting their own unique comparative advantage while meeting increasingly diverse energy requirements.
Cross border collaborative investments in energy infrastructure can lower supply costs and ease the financing constraints for these enormously expensive projects.
Cross border infrastructure development can also ease the huge burden of energy infrastructure investment required in South Asia. Gas and oil pipelines, electricity transmission lines, and hydropower facilities are enormously expensive.
If the costs and benefits of these projects can be shared, it can reduce immediate financing burdens, smooth cash flows, and lower project risks for individual countries.
Given the combination of big and small economies in the region and different income levels, some countries invest more on regional energy infrastructure, easing the burden on less developed, smaller countries.
Cross border electricity distribution can be the only cost-effective way to bring poor border areas within a reliable distribution grid. The cross border inter-connection of electricity grids can also help balance the needs of national markets, which may have different demand and supply patterns.
Climate Change Mitigation
An important issue to be examined in the context of regional cooperation in energy in South Asia is that of climate change – results of the build-up of greenhouse gases (GHGs) in the atmosphere. Associated with global warming, GHG-induced climate change can bring higher sea levels and flooding of coastal areas, increased frequency and intensity of storms, and changing patterns of rainfall, affecting agriculture.
One set of efforts would be to mitigate climate change by reducing greenhouse gases emissions through improvements in energy efficiency and promotion of renewable energy. Raising energy efficiency, reducing the use of petroleum-based fuels for a given unit of economic activity, requires a wide range of efforts – from pricing policies to research initiatives.
In this regard, SAARC provides a unique platform in which countries can work together and jointly consult, to understand what efforts would be most relevant to regional conditions. Regional projects offer unique opportunities for climate change mitigation and receiving clean development mechanism benefits.
Bhutan-India hydropower trade, for example, reduces coal power generation in India and helps to mitigate climate change.
Against this backdrop, the US Agency for International Development (USAID) initiated the South Asia Regional Initiative for Energy (SARI/E) program covering eight countries of the region:
Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka. In the first three phases, the program focused on increasing awareness on regional energy markets, supporting transmission interconnections and building capacity.
Started in 2000, the program – aiming to promote energy security in South Asia – worked on three focus areas:
- Cross Border Electricity Trade (CBET)
- Energy Market Formation
- Regional Clean Energy Development
SARI/E played a key role in integrating and promoting the energy policy and technology linkages across the South Asian nations. The SARI/E program of USAID has entered its fourth and final phase.
The following are the highlights of the development in the last three phases:
- Phase I (2001-2004): Focused on capacity building and information exchange.
- Phase II (2004-2007): In this phase, SARI/E laid the foundation for increased clean energy and improved market structures to facilitate regional investment in energy trade.
* Phase III (2007-2012): This phase has enhanced regional energy security through mutual cooperation.
* The fourth and current phase of the program – called the South Asia Regional Initiative for Energy Integration (SARI/EI) – is aimed at advancing regional grid integration through cross border power trade.
Started in 2012, it is implemented by the Integrated Research and Action for Development (IRADe), the leading South Asian Think Tank.
According to the SARI/EI Phase IV Evaluation Final Report, published on 30 October, 2019, the SARI/EI program has been largely effective in achieving its goals, and partially impactful in the ecosystem.
SARI/EI’s activities were relevant in terms of the objectives they set out to meet, the third-party role they embodied, and the demand-driven approach they utilized.
SARI’s efforts were mostly effective, both in terms of on-boarding and capacitating a local partner and setting up three task forces to establish consensus and guidelines.
Evidence of SARI’s intended impact has been observed in the increased momentum in the ecosystem around CBET, with clear progress towards scaled-up trading that is at least partly due to SARI programming.
While progress for CBET in South Asia is clear, direct attribution of impact to SARI is difficult.
Nevertheless, most stakeholders noted SARI/EI’s historical positive contribution in advancing the regional CBET agenda.
Challenges in Regional Cooperation
Despite the efforts undertaken by (SARI/E) program the following challenges still persist in the area of cross-border electricity trade (Please insert references):
- Energy shortages in the South Asian region.
- South Asia lags as compared to other regions in terms of trade in electricity and gas.
- Energy endowments differ among the South Asian countries, but energy trade in the region is low. Only India, Bhutan and Nepal currently trade electricity.
- The national energy systems – gas and electricity networks – in the South Asian countries are largely isolated from each other.
- There are no gas pipelines crossing the national borders, whether within South Asia or between South Asia and its neighbours.
- Consequently, optimal development of the region’s internal energy resource is hampered. The region produces only 4% of the world’s electricity. However, access to the significant energy resources in the neighbouring countries is denied, which increases the cost of energy supply.
- The average annual electricity consumption per capita is only one sixth of the world average.
Opportunities in Regional Cooperation
Despite the above challenges various opportunities do exist for regional cooperation:
- Differing resource endowments, development needs, and demand patterns among the countries in the region and its neighbourhood create significant opportunities for cooperation and trade in the energy sector – eventually – creating one of the world’s largest integrated energy markets.
* Afghanistan is well placed geographically to play an important role as transit state for the rest of South Asia, as it provides the best route for access to Central Asia’s energy.
- Bhutan’s unexploited hydropower potential exceeds 23,000 MW and Nepal’s exceeds 43,000 MW.
* Bangladesh has substantial natural gas reserves; a reserves to production ratio of over 104 years.
- Iran-Pakistan-India Natural Gas Pipeline (IPI) could supply 150 million cubic meters/day of gas to India and 60 million of gas to Pakistan.
A Cleaner and Greener Future
With a growing energy demand and increasing emphasis on sustainable energy, enhanced regional cooperation is critical to boost energy security and overall climate-resilience in South Asia.
Cross border cooperation and inter-connected power grids can lower energy costs, improve reliability, and reduce carbon emissions at lower-cost, while increasing the share of and synergies among clean energy resources, particularly hydro, wind and solar.
“Since 2015, countries have substantially increased cross border power transmission – with the support of the World Bank –from 2.1 GW to 6.4 GW. They are mainly driven by projects connecting India with Nepal, Bhutan, and Bangladesh.
The World Bank is also supporting infrastructure for electricity transmission and trade between Central Asia-South Asia, to better utilize hydro and thermal generation in the region,” said Hartwig Schafer, Vice President, South Asia Regions, World Bank.
The South Asia Roadmap for the World Bank’s Climate Change Action Plan (2021-2025) emphasizes regional cooperation to de-carbonize energy production, and regional markets to optimize power resources and scale the role of renewable energy in cleaner energy trade.
These efforts dovetail with the recent Green Grids Initiative-One Sun One World One Grid launched on the sidelines of the COP26, to connect energy grids across borders and facilitate a faster transition to renewable energy use.
(The author is a recipient of ‘Media Fellowship’ from NTPC School of Business, under the ‘Think-Tank Project’ funded by USAID for the SARI/EI project, currently being implemented by IRADe).