World Bank urges shift to renewables to cut South Asia’s energy vulnerability

By Shannine Daniel

A shift toward more decentralised renewable energy production would improve South Asia’s energy security, make access to electricity more reliable and reduce air pollution, the World Bank’s most recent South Asia Development Update revealed. 

The said shift would be hastened by low tariffs on intermediate imports including solar panels, regulatory streamlining, modernisation of the electric grid, reduced fossil fuel subsidies and pricing terms that derisk private green energy investments, the report stated. 

“The economic rationale for shifting toward renewable energy sources is becoming more compelling. The cost of solar power generation has fallen precipitously in recent years, such that solar energy is now cheaper than coal-fuelled energy by some metrics,” the report added.

According to the report, global investments in clean energy have exceeded investments in fossil fuels, from 2016 onwards. Last year, investments in renewable energy were twice that of investments in fossil fuels.

However, at present, South Asia has large and growing energy needs and the region relies heavily on imported non-renewable energy. 

South Asian countries depend on imported energy more than other emerging markets and developing economies, the report stated. These countries are also especially vulnerable to rising energy cost spillovers from conflicts in other parts of the world. 

Moreover, according to the data from the International Energy Association, India is expected to become the world’s fastest-growing source of energy demand in the medium term. It is projected to surpass China to become the single largest source of energy demand by 2050. 

Aside from Nepal and Bhutan, South Asia’s domestic energy production is low and heavily dependent on non-renewables such as fossil fuels. 

Net energy imports are equivalent to about one- fifth of the region’s imports and 4 percent of its GDP, the report said.  

“Heavy reliance on imported fossil fuels makes the region vulnerable to global energy price shocks. The region can protect against this risk through greater energy efficiency and investments in renewable energy, the price of which has fallen rapidly as global capital expenditures have surged,” the report noted. 

South Asia’s vulnerability to global energy market disruptions is also amplified by major leaks in electricity transmission and frequent power outages, the report added. It also noted that these issues “can be partially overcome by energy storage technologies such as batteries, the price of which has declined by 97 percent in the past three decades”. 

Furthermore, the World Bank report also stressed that updating power grids and investing in renewable energy sources are already critical priorities for South Asia to safeguard energy security, meet the needs of its growing economy, expand access and eliminate shortages. 

Effective energy sector reforms will also help South Asian nations to provide the reliable, cheap electricity needed by artificial intelligence.