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:
- Based on the current policy environment and trends of private sector participation in renewable energy, the highest potential for private sector engagement is in Bangladesh. This is mainly because, given their energy deficit and the need to decarbonize energy sources, the government of Bangladesh has taken a proactive role in inviting private sector engagement in enhancing solar capacities.
- The floating solar initiative in Maldives also offers a reasonable potential but owing to the lower domestic demand and the absence of a connected grid to the larger sub-continent, their potential is limited.
- While Bhutan is perfectly poised for hydropower capacity expansions based on resource endowments, the policy and regulatory environment is not conducive for large scale deployments.
- The need for JVs with DGPC where DGPC needs to own at least 51% stake will in the long run be the biggest barrier as stakes in projects need to be matched with equity injection.
- The current system of invitation-based investment also restricts the private sector in Bhutan to mobilizing FDIs in the hydropower sector.
- Opportunities for regional supply chains exist, however, the raw material base as well as technologies for such products are still not well developed and at best, production in the sub-continent is mostly confined to assembling parts imported from China.
- With the right policy environment and fiscal incentives in place, goods and services in the supply chain can be developed.
- A very reserved approach by countries in South Asia dominated by political interests.
- While the hydro electricity in Bhutan, Nepal and the Northern Indian states can be developed to meet the regional energy demand, there is insufficient political will to transition into a regional and sub-regional energy grid.
- The biggest barrier for investment by the private sector is the policy uncertainty and the fact that even the existing policies are restrictive and highly conditional.
- Given this policy environment, getting investments from the developed world is highly unlikely.
- An investment friendly policy environment with pro-private sector regulatory frameworks and certain tariff structures can facilitate flow of capital into the region.
- As an example, while we were talking to multiple potential investors for developing mini hydro and solar power projects in Bhutan, the uncertainty of the tariff structure and the highly bureaucratic approval mechanisms have turned potential investors into potential supply driven agents.
- While in the long term, we would need regional and sub-regional R&D and innovation hubs
- The short-term approach should be to capitalize on existing technologies globally and invite investments which can also bring in the required technology and technical knowledge transfer.
- Private sector has been ready, particularly in Bhutan for more than a decade now! The fact that private sector participation in the energy sector was never encouraged by the government was the key deterrent.
- Even in the latest edition of the Energy Policy, while the claim is to invite investments in the renewable energy area, the policy clauses are restrictive and pro-state enterprises instead of being pro-private sector engagement.
- In India and Bangladesh, the policy environment is rapidly advancing and moving towards a market oriented one with the state inviting the private sector to develop projects.
- In Bhutan, this would move very slowly unless the state sees the private sector as partners in growth and not as competitors.
- Forget the ideological and petty nationalistic reservations and develop a regional electric grid where all energy producers buy and sell energy in the larger economic and climate benefits.
PS: Clarifications and explanations for the above may be sought from Sangay Dorji, Druk Consult International Pvt. Ltd, Thimphu Bhutan at sangay.dorji@drukconsult.com.