How Much Could South Asia Benefit from Regional Electricity Cooperation and Trade?

The South Asia region is lagging behind many regions in the world in regional electricity cooperation and trading, despite the huge anticipated benefits. This study uses an electricity planning model that produces optimal expansion of electricity generation capacities and transmission interconnections in the long-term to quantify the benefits of unrestricted cross-border electricity trade in the South Asia during 2015–40. The study finds that the unrestricted electricity trade provision would save US$226 billion (US$9 billion per year) of electricity supply costs over the period. The ratio of the present value of benefits, in the form of reduction of fuel costs, to the present value of increased costs due to generation and interconnection would be 5.3. The provision would reduce regional power sector carbon dioxide emissions by 8 percent, mainly because of substitution of coal-based generation with hydro-based generation, although regional emissions would be well above current levels absent other policy interventions. To achieve these benefits, the region is estimated to add 95,000 megawatts of new cross-border transmission interconnection capacity.