Developing Regional Power Market for a Sustainable & Climate Resilient Energy Future in South Asia Region

Abstract

South Asia (SA) can be reckoned as the world’s most dynamic and diversified region. Additionally, it also has the world’s one of the fastest expanding economies. There has been a very fast development in the power sector in this region, as the region as a whole is experiencing rapid industrialization, modernization, and urbanization, which is increasing energy demand. As compared to the global average per capita electricity consumption of 2674 KWh, the per capita electricity consumption in South Asia is of the order of 915 KWh. In South Asia, the emissions from Power Sector are one of the major causes of CO2 emissions and concern about climate change. SA power sector stands at the crossroad and decarbonizing power /energy is important for a sustainable & climate resilient energy future in the Region. SA countries have a long history of undertaking Cross Border Electricity Trade (CBET), within the region, and with countries outside the region, through multiple cross-border interconnections. While the economic, financial, strategic benefits and to some extent potential CO2 reduction of regional energy cooperation and grid integration in SA countries have often been highlighted, the comprehensive opportunities of climate and sustainability benefits and advancement in clean energy transition through the regional electricity trade have not received the due attention. There are many ways to tap into these benefits, and a market way such as South Asia Regional Electricity Market (SAREM) is worth trying for accruing these. SAREM can increase the overall profitability of investments in renewable energy in the region by developing innovative market products on a regional basis. Under USAID’s SARI/EI program the need for South Asia Regional Electricity Market has been emphasized and a small beginning has been made with the recent development, when as the first nation, Nepal has started trading energy on India’s IEX day-ahead market. This paper argues for the need to develop a comprehensive and competitive Regional Power market in SA which will foster the development and faster transition towards a Sustainable & Climate Resilient Energy Future in South Asia Region.