Regional Energy Cooperation – The Next Stage?

Five years ago I published a discussion paper on Energy Cooperation in South Asia. There, I identified regional power and energy trade as one remedy for a crunching energy deficit, as the region is unevenly endowed with natural resources and production capabilities.

If used collectively, the complementarities in natural resources could actually help avoid dramatic power cuts, such as those faced in India in the summer of 2012. Reliable energy supply is needed to alleviate poverty and achieve sustainable economic growth. How can regional electricity cooperation finally take off in South Asia?

Common electricity markets: Examples from other regions

There are several international good practices of energy cooperation, particularly in establishing regional power grids. While a single European energy market was planned for 2014, actual integration of electricity grids still faces obstacles, although electricity Prices fell by one third 2008-2010.

Meanwhile, the Southern African Power Pool (SAPP) serves as a role model for pragmatic policy making. The Association of Southeast Asian Nations (ASEAN) Power Grid and the Greater Mekong River Agreement have demonstrated the importance of having qualified technical personnel at all levels of decision making.

Besides that, there are powerful forces working against regional integration – electricity provision is often based on monopolies or oligopolies which fear market liberalization as it is associated with Integration.

India’s Prime Minister instills hope for regional integration

Since 2010 the South Asian landscape has changed dramatically after government changes in most of the region’s countries. A major breakthrough in terms of institutionalization was reached on November 27th 2014, when the SAARC Framework Agreement for Energy Cooperation (Electricity) was signed in Kathmandu at the SAARC headquarters.

Given the clear geopolitical importance of regional energy cooperation as well as the geographical setting, where India is the only South Asian country bordering all the others, India becomes the kingpin of regional integration.

Besides being an important step for energy, the agreement was also symbolic for the role energy policy can play for bringing parties together regardless of ongoing tensions. A photo opportunity showing the Indian and Pakistani prime ministers Modi and Sharif shaking hands over the concluded energy agreement gives hope that energy cooperation might become a vehicle for South Asian regional rapprochement.

Energy cooperation as vehicle for regional rapprochement?

Over the past few years things were put on the right track. While electricity scarcity has by no means been alleviated (Nepal for instance still has less than 800 MW installed capacity, even before the 2015 earthquake), it is now important to keep the momentum going, both bilaterally and regionally.

There is a slight chance to also tie regional integration to international agendas. An impetus could come from the global climate change progress towards the Paris Conference in December 2015. The Chinese government and companies are also increasingly involved in big infrastructure projects and especially the creation of the Asian Infrastructure Investment Bank will also include several South Asian countries. This might heighten the stakes for regional cooperation.

In the light of the devastating earthquake of 25 April 2015 and the continuing aftershocks in months and maybe even years to come, the Nepali relief effort will be all the more dependent on support by its neighbours India and China, but also on meaningful regional institutionalization.

The experience of regional frameworks in the EU, South Africa and the Mekong and their impact on development can offer valuable insights; however, a South Asian framework will need to reflect its unique culture, history, and endowment with energy resources. How the November Deal will achieve that, of course, remains to be seen.

An in-depth version of this article was published on The Sarcist in April 2015.

The opinions expressed in this blog contribution are entirely those of the author and do not represent the positions of the Dahrendorf Forum or any of its hosts Hertie School of Governance, London School of Economics and Political Science and Stiftung Mercator.

The opinions expressed in this blog contribution are entirely those of the author and do not represent the positions of the Dahrendorf Forum or its hosts Hertie School and London School of Economics or its funder Stiftung Mercator.