Climate change and China draw South Asia together

Climate change and China draw South Asia together

A Breakthrough in Energy Cooperation: Bangladesh, India, and Nepal

Image Source: The Economist

The scorching heat of June in Dhaka, the capital of Bangladesh, left its 23 million residents suffering in temperatures of up to 38°C. Power cuts were a regular occurrence, with 114 out of the first 150 days of the year experiencing outages. Meanwhile, in neighboring Nepal, the situation was quite the opposite. The country had surplus electricity, mainly generated from hydropower, exceeding its demand. But due to a lack of transmission infrastructure, Nepal’s excess power remained untapped.

However, a trilateral deal between Bangladesh, India, and Nepal is set to change the energy landscape in the region. The deal, expected to be finalized in the coming weeks, will facilitate the flow of Nepal’s surplus electricity to power-starved Bangladesh, with India acting as the conduit. While some skeptics dismiss this initial exchange of 50MW as insignificant in the face of Bangladesh’s massive power deficit, the significance lies in the breakthrough it represents in the relationship between these traditionally suspicious neighbors.

Factors Driving the Deal

Several factors have converged to create the momentum necessary for this trilateral energy agreement. Firstly, the rising cost of energy has made it imperative for South Asian countries to seek alternative sources of power. Global energy markets have been disrupted, partially due to the war in Ukraine, making it challenging for the region to meet its energy needs.

Secondly, South Asia is grappling with the harsh realities of climate change. Heatwaves and floods have become more frequent and intense, necessitating a shift towards sustainable and resilient energy systems.

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Lastly, there is a growing wariness of China’s influence in the region. China’s assertiveness in the Himalayas has prompted India to pay closer attention to its smaller neighbors, seeking deeper cooperation to counterbalance China’s influence.

While South Asia remains one of the least economically integrated regions in the world, increasing trade and energy cooperation could bring significant benefits. However, political tensions, particularly between India and Pakistan, have historically hindered progress. In Nepal and Bangladesh, internal upheavals and geopolitical concerns have also prevented closer energy cooperation. In recent years, Nepal has even turned to China as an alternative energy partner. Such complexities have made this trilateral deal all the more remarkable.

Addressing Energy Security and Sustainability

Bangladesh finds itself at a critical juncture in terms of energy security and sustainability. The country’s natural gas reserves, which currently account for two-thirds of its energy consumption, are rapidly dwindling and may be depleted within the decade. This dependence on natural gas has left Bangladesh vulnerable to price fluctuations and limited its options for long-term energy deals.

Additionally, Bangladesh has pledged to reduce its carbon emissions by over 20% by 2030, requiring a significant reduction in fossil fuel consumption. The switch to more expensive oil and petrol plants due to limited gas availability has strained the country’s currency reserves and made it difficult to afford sufficient fuel imports.

On the other hand, Nepal has strategized its economic development around the export of hydropower. The country has already started exporting 400MW of power to India, with an additional 600MW deal secured for this year. However, a further 5GW of capacity is under construction, and the success of these ventures is critical for Nepal’s growth. Failure to make these power deals work would leave the government and private power producers burdened with debt and unfinished projects.

Embracing Renewable Energy and Green Transition

Integration of the energy markets in South Asia is crucial for the region’s transition towards renewable energy. Nepal and Bhutan possess an estimated potential of nearly 70GW of hydropower, of which only a small fraction has been developed. Bangladesh, on the other hand, lacks renewable capacity and adequate space for wind and solar installations. India’s ambitious plan to install 500GW of renewable capacity by 2030 requires a stable supply of renewable energy.

Harnessing hydropower from neighboring countries would provide India with a reliable baseline of renewable energy. This would not only support its transition to cleaner electricity but also have immediate benefits in terms of air quality improvements in some of the most polluted cities in the region.

The Role of India and Overcoming Hurdles

India, historically preferring bilateral energy agreements, has shown a newfound interest in multilateral energy cooperation to counterbalance China’s influence. Indian Prime Minister Narendra Modi has prioritized strengthening relations with neighboring countries. During a summit in May, he promised to buy 10GW of power from Nepal in the coming years. The small-scale trilateral deal in progress is seen as a stepping stone towards greater energy integration in the region.

Although hurdles remain, such as the lack of transmission infrastructure and grid capacity, progress is being made. Existing high-voltage lines are already strained, and new ones face challenges of land acquisition and financing. Bangladesh and Nepal are lobbying India to allow the construction of a dedicated transmission line for power trade between the two countries. However, India’s stance on this issue remains uncertain. Additionally, climate change poses a risk to Nepal’s hydropower potential due to melting glaciers, changing river flows, and increased landslides.

To achieve their ambitious energy goals, South Asian countries must connect their grids, liberalize power markets, and harmonize regulatory regimes. This small trilateral deal serves as a foundation for a more integrated and interconnected energy market in the region.

In conclusion, the trilateral energy deal between Bangladesh, India, and Nepal represents a significant breakthrough in the region’s energy cooperation. While the initial exchange of electricity is modest, the agreement sets the stage for greater integration and collaboration. By addressing energy security, embracing renewable energy, and overcoming political and infrastructural hurdles, South Asian countries can pave the way for a more sustainable and interconnected energy future.

Image Source: The Economist