Cross-border power trade could be a major boost for clean energy in South Asia and Southern Africa. We look at what needs to be done to unlock this potential...
South Asia and Southern Africa have abundant clean, renewable energy resources, yet several countries in the two regions – such as India, Bangladesh, and South Africa – rely on domestic resources like coal or natural gas for most of their power generation. This risks lock-in to carbon-intensive technologies that are likely to become redundant – and increasingly expensive – as the world strives to meet climate goals
What’s more, the energy demand in many of these places is not being met. In Southern Africa, for example – a region with an abundance of renewable energy resources – only 43% of the 177 million inhabitants have access to electricity.
Cross-border energy trade can enable regions to integrate their power demands (and challenges) and access a broader mix and more stable supply of renewable energy resources over a wider geographic area. Such integration has the potential to meet regional electricity demand through supply of clean power. Sounds great in theory, but do the numbers stack up in practice?
Forecasting the future
We worked with the Delhi-based research Institute, IRADe, and the University of California Santa Barbara, to use modelling to look at power trade between Bangladesh, Bhutan, India and Nepal (BBIN) as well as across the 12 nations of the Southern Africa Power Pool (SAPP). Importantly, we looked at a number of different scenarios – including incorporating different cost declines for renewables and storage technologies, alternative early retirement for existing coal-powered generation, the introduction of clean energy or carbon targets and possible limitations to trade due to political sensitivities around energy security.
The results are startling – both in terms of cost savings and CO2 reduction. For example, if solar and wind technologies continue to fall in cost at a relatively high rate, the BBIN region of South Asia could save between 227 and 312 billion USD on total discounted systems costs between 2015 – 2050 (at 2015 prices).
In all modelling scenarios, except the one assuming static costs of renewables, increased regional transmission capacity reduces the annual CO2 emissions by making renewables more widely accessible. On the flip side, failure to trade regionally could mean fossil fuels (coal in particular) remain cost-effective for individual countries with little access to renewables – like Bangladesh. There is a significant danger here of countries' investments turning into stranded assets before the end of their life if global carbon regulations and prices tighten.
Realising the potential
So what does this all mean? It’s clear that regional power trade has the potential to drastically reduce costs and emissions – but will also require significant funding and political will.
Investment will be needed not just in generation but also in strengthening cross border connections. In South Asia, trade could potentially shift from 13TWh in 2019 to as high as 986TWh by 2050 (or 416 TWh even if countries put in place political economy restrictions to import no more that 20% of their power demand). In Southern Africa meanwhile, trade needs to increase by a factor of five to achieve cost-optimal and low-carbon power system operations in the region.
Context-specific regional planning will also become increasingly important. The above results hide some crucial nuances: not all renewables make economic sense, and planning at a regional level is essential if cost benefits are to be realised. For example, almost half of hydro planned in Southern Africa does not make economic sense under any scenario.
The potential of regional power trade is huge – it makes financial, climate and sustainability sense. Reaching this potential, however, depends on a number of factors, not least political willingness to engage regionally to seek energy security rather than attempt to achieve that using only resources available within one’s own national borders. There are risks involved – Europe’s over dependence on Russian oil is an example of how regional trade can go horribly wrong. But renewables offer the opportunity of more stable two-way trade interactions (the sun doesn’t always shine and the wind doesn’t always blow in the same place every day). Ignoring these opportunities will leave everyone with higher energy costs and some countries with stranded fossil fuel assets and very real long term energy security problems.
There is a crucial role for policy makers in encouraging the uptake of cross-border trade in renewable energy as a key part of national energy mixes as well as leveraging public and private funds to secure investment not just in national generation capacity but also regional transmission infrastructure. International finance institutions and donors need to help facilitate this transition while civil society and other non-governmental organisations need to hold national policymakers accountable – meaningful commitments now could unlock the energy potential in South Asia and Southern Africa before it’s too late.
Simon Trace is our Principal Consultant in Energy, Resources and Growth and has over 35 years’ experience working in international development.