Share this story!            

Lack of energy supply restrains South Asian growth: WB

* The region has no gas pipelines and cross-border energy trade is uncommon

Staff Report

ISLAMABAD: Lack of adequate and reliable energy in South Asia is emerging as a key constraint to sustaining recent strong economic growth, warns a new World Bank report.

The study titled “Potential and Prospects for Regional Energy Trade in the South Asia Region” points out that India, Pakistan, Bangladesh, Sri Lanka and Afghanistan have energy-demand growth far outstripping their domestic supply. At the same time, a number of the countries in the region (i.e. Bhutan and Nepal) have energy resources far in excess of their domestic needs. Yet, the level of cross-border energy trade is very low and the national gas and electricity networks are largely isolated from each other. Significant electricity trade exists only between India and Bhutan; there are no gas pipelines crossing the national borders of any South Asian country.

“South Asia’s strong economic growth has translated into rapidly increasing energy demand and this growth is becoming constrained by significant shortages in energy supply,” said Alastair McKechnie, World Bank’s Director for Regional Programmes in South Asia. “While there is undoubtedly potential for savings from improving energy efficiency, fostering of cross border energy investments and promotion of regional energy trade in order to take full advantage of the energy resources available within the region and its neighbourhood are critical to tackle this problem. Importing clean fuels such as hydropower and natural gas, together with using energy more efficiently, are viable options for reducing the local and global environmental impacts of the energy sector in South Asia. Bhutan’s success in exporting hydropower to India demonstrates the substantial benefits of energy trade to both the exporter and importer.”

The report says that widespread cross border electricity and gas trade could provide significant contribution to meeting demand, which is expected to grow annually in the range of 6.6 to 11.5 percent during the next 15 to 20 years.

Major barriers to stronger energy trade in the past included the lack of cross-border transmission links; the presence of bottlenecks in the domestic energy infrastructure; poor operational efficiency, financial performance and creditworthiness of the utilities; and long standing political disputes. These barriers have overshadowed favourable factors such as complementary primary energy endowments, complementarities in seasonality of demand; improved energy security; and economic efficiencies associated with larger integrated markets.

More favourable conditions for increased cross-border energy investment and trade have started to emerge: strong economic growth fuelled by increased integration in global economy; increasing commercialisation and structural reforms of national energy markets; and stronger role of private sector in energy supply.

“In recent years we have witnessed greater interest and enthusiasm in cross border electricity and gas trade among South Asian political leaders and the private sector,” said Vladislav Vucetic, World Bank Lead Energy Specialist. “A number of such regional projects are on the drawing boards and some of them, such as the Central Asia-South Asia electricity transmission link, are already moving toward implementation.”

Energy exports could make dramatically significant contribution to the GDP growth of economies like Bhutan and Nepal, who have energy resources far in excess of their domestic needs.

For example, Bhutan ’s electricity export in 2007 is expected to constitute nearly 25 percent of its GDP and 60 percent of its state revenues. The report says there are important environmental benefits from increasing regional energy trade. This is especially relevant for India, which relies very heavily on domestic coal. Imported hydropower and natural gas would help in moderating the environmental impact of new generating plants, which India needs to build. Energy trade would enable the management of regional water resources and the use of other primary energy sources should be optimised for the benefit of the region as a whole, and trade enables such optimisation for the benefit of all.

Finally, more energy trade could also reduce system development costs and enable lower cost supply, the report says. Nepal, for example, could dramatically reduce its cost of power supply by optimising its power system with sale of hydropower to, and import of thermal power from, India.

Home | Business

Share this story!