Energy Policies in the SAARC Region: Cooperation and Renewable Energy Development

South Asia is home to nearly a quarter of the world’s population, yet energy poverty remains a persistent challenge across the region. The South Asian Association for Regional Cooperation (SAARC) has recognized this reality and over the past two decades has steadily elevated energy from a peripheral concern to a central pillar of its regional agenda. With member states possessing diverse energy resources-from Nepal’s vast hydropower reserves to India’s growing renewable energy expertise-the potential for transformative regional cooperation is immense.

How SAARC elevated energy on its regional agenda 🔗

SAARC’s journey toward meaningful energy cooperation began in January 2000 with the establishment of a Technical Committee on Energy. However, the real turning point came during the Twelfth SAARC Summit in Islamabad (January 4-6, 2004), when heads of state emphasized that accelerated economic growth required strengthening transportation, transit, and communication links across the region. Recognizing that energy demanded focused attention, the Council of Ministers approved the creation of a specialized Working Group on Energy in January 2004.

This institutional upgrade signaled a shift in thinking-energy was no longer merely a technical matter but a strategic priority for regional integration. The Working Group has since met eight times, and SAARC Energy Ministers have convened five meetings between 2005 and 2014 in cities including Islamabad, New Delhi, Colombo, and Dhaka.

A landmark achievement came during the Eighteenth SAARC Summit in Kathmandu (November 2014), when all member states signed the SAARC Framework Agreement for Energy Cooperation (Electricity). This agreement recognizes the importance of electricity in promoting economic growth and improving quality of life, while emphasizing the benefits of cross-border electricity exchanges leading to optimal utilization of regional electricity generating resources and enhanced grid security.

The rich diversity of energy resources across SAARC nations 🔗

The SAARC region presents a unique landscape of complementary energy resources that makes regional cooperation not just beneficial but essential for addressing energy security challenges.

Hydropower giants: Nepal and Bhutan 🔗

Nepal possesses an estimated theoretical hydropower potential of 83,000 MW, with approximately 43,000 MW considered commercially and technically viable. Currently, Nepal produces around 2,800 MW, meeting domestic demand while exporting surplus electricity to India. The country’s 6,000 rivers, fed by Himalayan glaciers and monsoon rains, represent a largely untapped resource-only 1-2% of Nepal’s water resources are currently utilized for power generation.

Similarly, Bhutan has an estimated hydropower development potential of around 30,000 MW. The country has built a strong energy partnership with India, demonstrated by projects like the 1,020 MW Punatsangchhu-II Hydroelectric Project, which achieved full operational capacity in August 2025 when its sixth unit was synchronized with Bhutan’s national grid.

India’s renewable energy leadership 🔗

India, as the largest economy and energy consumer in the SAARC region, brings substantial expertise in renewable energy development, technology transfer, and grid management. The country has set ambitious targets of achieving 500 GW of non-fossil fuel capacity by 2030. India’s position at the geographic center of South Asia also makes it crucial for facilitating cross-border electricity transmission-a reality already demonstrated through its role in enabling Nepal’s first electricity exports to Bangladesh via India’s transmission grid in November 2024.

Institutional framework: the SAARC Energy Centre and Expert Groups 🔗

Following the vision articulated at the 2004 Islamabad Summit, SAARC leaders established the SAARC Energy Centre (SEC) through the Dhaka Declaration in 2005. Headquartered in Islamabad, Pakistan, the Centre began operations in March 2006 as the special purpose vehicle to realize the vision of an Energy Ring connecting South Asian nations.

The SEC serves as a platform involving officials, experts, academia, environmentalists, and NGOs to tap the potential for cooperation in hydropower development, renewable and alternative energy, technology transfer, energy trade, and energy conservation. It provides technical support to the Working Group on Energy and promotes the synthesis of energy policies across the region.

Four specialized Expert Groups 🔗

The Energy Ministers Meeting in Colombo (January 2009) established four Expert Groups to address specific commodities and services:

Oil and Gas (led by Bangladesh and Sri Lanka) has met to finalize its terms of reference and work plan for coordinating petroleum-related cooperation. Electricity (led by India) has convened multiple times and was mandated to prepare the SAARC Inter-Governmental Framework Agreement on Energy Cooperation. Renewable Energy (led by Pakistan) has met four times between 2011 and 2017, focusing on strategies for deploying clean energy technologies across member states. Technology/Knowledge Sharing (led by India) addresses energy efficiency, coal technologies, and capacity building across the region.

Key policy recommendations 🔗

Through its studies and meetings, the SAARC energy working groups have recommended several priority initiatives: establishing robust mechanisms for regional energy trade, conducting comprehensive studies on cross-border electricity pricing, regular information exchange among member states, joint renewable energy strategies, pricing reforms to attract investment, and developing transnational transmission infrastructure to achieve regional energy self-sufficiency.

In January 2025, SAARC took another significant step by signing a Memorandum of Understanding with the International Renewable Energy Agency (IRENA) to facilitate knowledge exchange, capacity development, and joint projects promoting renewable energy deployment across South Asia.

Cross-border energy trade: from vision to reality 🔗

Perhaps the most tangible evidence of SAARC energy cooperation lies in the growing web of bilateral and trilateral electricity trade arrangements, with India serving as the hub connecting neighboring countries.

India-Nepal power partnership 🔗

In January 2024, India and Nepal signed a landmark 25-year power trade agreement, with India committing to purchase up to 10,000 MW of electricity from Nepal over the next decade. This deal, which auto-renews every 10 years, has provided the certainty needed to spur international investment in Nepal’s hydropower sector. Nepal has also gained access to India’s electricity exchange platform, enabling market-based trading of surplus power.

Trilateral Nepal-India-Bangladesh connection 🔗

A historic milestone occurred in November 2024 when Nepal began exporting 40 MW of electricity to Bangladesh via India’s transmission grid. This first-ever trilateral power transaction demonstrates the practical feasibility of regional energy integration. Given Bangladesh’s rapidly increasing electricity demand-expected to reach 40,000 MW by 2041-Nepal’s clean hydropower offers a steady, renewable, and cost-effective supply that reduces dependence on expensive LNG and coal imports.

Bhutan-India hydropower cooperation 🔗

Bhutan and India have the longest-standing bilateral energy relationship in the region. India’s agreements with Bhutan have historically accounted for three-fourths of Bhutan’s electricity generation. Joint hydropower projects continue to expand, with India providing funding and technical support for major initiatives like the Punatsangchhu-II project.

Bangladesh’s renewable energy model: lessons for the region 🔗

While cross-border electricity trade garners headlines, Bangladesh offers a compelling model for decentralized renewable energy deployment that other SAARC nations can replicate.

The country’s Solar Home Systems (SHS) program, launched in January 2003 through the Infrastructure Development Company Limited (IDCOL), has become one of the most successful off-grid renewable energy programs globally. As of 2017, over 4 million solar home systems had been installed, impacting more than 12% of Bangladesh’s population.

The program operates through a public-private partnership model. IDCOL sets technical standards, certifies products, and provides loans and grants funded by multilateral agencies, while 49 Partner Organizations (POs) identify customers, extend micro-credit, install systems, and provide after-sales services. Rural electricity cooperatives (Palli Biddyut Samities or PBSs) have also played a crucial role, currently serving 61 districts and connecting over 65,000 villages.

This model demonstrates how SAARC countries can address rural electrification challenges where grid extension remains difficult or costly-a lesson particularly relevant for Afghanistan, Nepal’s remote regions, and parts of Pakistan.

The path forward: challenges and opportunities 🔗

Despite significant progress, SAARC energy cooperation faces persistent obstacles. Political tensions, particularly between India and Pakistan, have stalled broader multilateral initiatives-the 19th SAARC Summit, scheduled for 2016 in Islamabad, was cancelled following the Uri terror attack and has not been rescheduled. This has shifted focus toward sub-regional frameworks like the Bangladesh-Bhutan-India-Nepal (BBIN) initiative.

Technical challenges also remain. Outdated transmission infrastructure restricts export capacity, while harmonizing regulatory frameworks across countries with different grid codes and pricing mechanisms requires sustained effort. Climate-related disasters, such as the 2024 floods that damaged 26 hydropower projects in Nepal resulting in a loss of 1,500 MW capacity, highlight the sector’s vulnerability to environmental risks.

Building momentum for a South Asian Energy Union 🔗

Yet the fundamentals for deeper cooperation remain compelling. Energy demand across South Asia is projected to grow at approximately 5% annually, with electricity demand increasing even faster at around 9%. No single country possesses sufficient resources to meet its future requirements independently. Collaboration offers the most cost-effective path to lowering energy costs, improving regional energy security, and contributing to climate change mitigation.

By leveraging individual strengths-Nepal and Bhutan’s hydropower, India’s renewable technology expertise, Bangladesh’s rural electrification models, and Pakistan’s natural gas resources-the region can move toward an integrated South Asian electricity market. The SAARC Framework Agreement provides the legal foundation; what remains is the political will to translate agreements into infrastructure and flowing electrons.

What do you think? Can sub-regional groupings like BBIN succeed where broader SAARC initiatives have stalled, or is comprehensive regional cooperation essential for South Asia to achieve energy security? How might climate change and the global energy transition reshape SAARC’s energy cooperation agenda in the coming decade?

References

1. https://www.saarc-sec.org/index.php/areas-of-cooperation/energy-transport-science-technology
2. https://policy.asiapacificenergy.org/node/377
3. https://niice.org.np/archives/10775
4. https://www.sasec.asia/index.php?page=knowledge-portal-energy-search-results&cat=news&country=reg&s=3
5. https://saarcchamber.org/nepals-energy-trade/
6. https://www.saarcenergy.org/about-us/
7. https://www.saarc-sec.org/index.php/press-release/400-saarc-and-irena-sign-mou-to-strengthen-regional-cooperation-in-sustainable-energy-development
8. https://sasec.asia/index.php?nid=1565&page=news&url=ind-nep-sign-long-term-energy-deal
9. https://centreforpublicimpact.org/public-impact-fundamentals/the-solar-home-systems-initiative-in-bangladesh/