Overview:
With diverse markets, abundant renewable resources, and growing energy demand, there is significant potential for cross-border investments, technology transfer, and regional collaboration in South Asia. This interview aims to gain a private sector perspective on market opportunities, challenges, and how private sector partnerships can support a faster and more inclusive energy transition in the region.
Interview:
- In Pakistan, solar energy offers the highest potential for private sector engagement. This is driven by a combination of enabling and compelling factors:
- Zero import duties and tax exemptions on solar panels and inverters
- A relatively stable net-metering policy, which has unlocked large-scale deployment in the commercial and industrial (C&I) sector
- A global decline in solar equipment prices, making capital costs more manageable
- High grid electricity tariffs, especially for industrial and upper-tier residential users, which makes solar financially attractive
- A growing ecosystem of local EPC contractors, fintech-enabled leasing models, and off-grid/agri-solar pilots
- Currently Pakistan is not engaged in any cross-border renewable energy projects or any such partnership.
- South Asia holds significant opportunities for developing regional supply chains in solar module manufacturing and wind turbine assembly. These opportunities are driven by the region’s growing energy demands, abundant renewable resources, and supportive government policies.
- Solar Module Manufacturing:
- South Asia can leverage its access to silicon and other key materials to reduce reliance on external suppliers.
- Expanding solar module manufacturing facilities within the region can cater to local and export markets.
- Developing capacity for midstream components like inverters, and mounting structures can strengthen the overall value chain.
- Wind Turbine Assembly:
- Establishing facilities for assembling wind turbines, including blades, towers, and nacelles, can create jobs and reduce import dependence.
- Collaborating with established wind turbine manufacturers to transfer technology and expertise can accelerate the development of local capabilities.
- Cross-Border Cooperation:
- Fostering cross-border energy trade, particularly in hydropower from countries like Nepal and Bhutan, can create regional energy security.
- Supporting Industries:
- Developing expertise in areas like project development, engineering, procurement, and construction (EPC) can support the growth of renewable energy projects.
- Government Policies:
- Supportive policies, such as feed-in tariffs, tax incentives, and streamlined permitting processes, can incentivize investment and development.
- From a South Asian regional perspective, we are see a steady growth in cross-border renewable energy trade, primarily centered around India. Countries like Nepal, Bhutan, and Bangladesh are actively engaged in renewable power trade with India, forming the core of subregional electricity cooperation.
- Bhutan and Nepal export hydropower to India through established bilateral agreements. India and Bangladesh are advancing transmission interconnections to facilitate renewable power sharing and balance seasonal demand. Sri Lanka and India have explored HVDC connectivity for future power exchange, especially from renewables. However, Pakistan is currently not part of any formal cross-border renewable energy trade framework.
- There are a lot of practical, legal and political frictions that make cross-border investments in South Asia harder than it looks.
- Geopolitical Risk — interstate tensions, domestic political instability, or security incidents can disrupt operations, trigger extra screening of foreign investors, or lead to abrupt restrictions. (Recent episodes have affected investor sentiment in parts of the region.)
- Complex tax regimes and compliance burden — differing tax rules across countries, uncertain regulations, pricing, and administrative complexity add cost and unpredictability.
- Fragmented markets & trade barriers — tariffs, non-tariff measures, and poor intra-regional connectivity increase the friction and cost of scaling a cross-border business.
- In South Asia’s power sector, differing regulatory frameworks and tariff structures have a very direct impact on regional investment flows, both in generation and cross-border power trade.
- Each country has its own licensing process, environmental standards, grid codes, and investment approval pathways. These differences make it harder for a private investor to design a project that can operate across multiple borders without major redesigns.
- Frequent changes in renewable energy incentives, PPAs (power purchase agreements), or foreign ownership limits can stall projects midway. Investors need long-term tariff clarity to justify high up-front costs in the power sector.
- Some countries such as India, Bangladesh, Nepal, Bhutan have bilateral agreements that allow electricity trade, but these are often negotiated case to case basis. There’s no unified South Asian electricity market like the EU’s, so scale of economies are lost.
- Some countries (e.g., India, Pakistan) use cost-plus models for certain generation projects, while others lean toward competitive bidding for renewables. This affects risk allocation: cost-plus offers predictable returns but limited upside; competitive bidding can drive prices down but raises price risk.
- Harmonizing regulatory standards through the South Asian Association for Regional Cooperation (SAARC) or BIMSTEC frameworks, particularly for renewable energy projects may help in cross border energy projects.
- South Asia holds considerable potential for regional R&D collaboration in the power sector, with opportunities for joint innovation hubs to advance energy storage pilots, green hydrogen research, and technology localization. Yet, progress has been hampered by fragmented funding, limited coordination, and a lack of aligned regional policies. Multilateral support and cross-border partnerships could help unlock this potential, but geopolitical tensions have slowed momentum, even with the SAARC Energy Centre in place.
- The private sector can collaborate with governments to design regional renewable energy corridors by contributing to joint strategic planning, including resource mapping and corridor prioritization, and by helping harmonized technical standards, streamline permitting, and develop bankable cross-border PPAs.
- Partnerships can establish blended finance platforms, political risk guarantees, and innovative tariff structures, while private firms can invest in transmission lines, smart grids, and hybrid renewable zones.
- The private sector will shift from being project developers to strategic partners.
- A strong recommendation for regional policymakers would be:
- Establish a harmonized, transparent, and predictable cross-border energy investment framework, including aligned technical standards, streamlined approval processes, bankable and enforceable cross-border PPAs, and fair formula-based tariff and political risk guarantees through multilateral partnerships. This would reduce regulatory fragmentation, lower investment risk, and create a stable environment that attracts sustained private sector participation in regional renewable energy projects.