Strategies to promote regional power grid connectivity and Cross-Border Electricity Trade (CBET) in South and South-West Asia

Countries of the South and South-West Asia subregion have mutual complementarities in terms of their energy resource endowments as well as their aggregate energy supply-demand patterns, providing ideal conditions for implementing CBET at the subregional level. The levels of energy integration through an interconnected power grid in the subregion has been suboptimal so far due to various constraints by way of capacity limitations and lack of political consensus. However, there have been several bilateral and plurilateral initiatives for grid connectivity and trade in electricity, which can potentially become building blocks for broader CBET in the subregion. 

This technical paper takes stock of various initiatives in the SSWA subregion for promoting power grid integration and trade in electricity with the aim of exploring framing a forward-looking agenda for CBET in the subregion. It reviews existing legal and institutional frameworks on energy cooperation under the subregional intuitions of SAARC, BIMSTEC and ECO as well as various bilateral and plurilateral power purchase agreements (PPAs) and transmission service agreements (TSAs). The paper finds that existing frameworks at the subregional level provides several valuable overarching provisions which can guide broader CBET, while bilateral PPAs and TSAs can be scaled-up for creating a transparent, mutually beneficial and market oriented regulatory environment for promoting it. However, concerted actions from all member countries are needed in adapting their respective domestic policies and practices with respect to the energy sector and in harmonizing regulations at the regional level to cater to the needs of free trade in electricity. They also need to work together to improve coordination with each other and to create a conducive institutional architecture for CBET.