South Asia reached a new milestone in regional energy cooperation. Bangladesh signed a tripartite agreement to import 40 megawatts (MW) of hydropower from Nepal via Indian territory. This marks the first time landlocked nations like Nepal and Bhutan will export electricity beyond India, breaking decades of exclusive bilateral trade.

Cross-border energy trade refers to the transfer of energy resources—such as electricity, gas, and oil—between neighboring countries through pipelines or interconnected grids. This collaborative approach allows nations to tap into their unique energy strengths, like India’s solar potential or Nepal and Bhutan’s abundant hydropower, to meet regional demands efficiently. By pooling resources, countries can lower energy costs, improve grid stability, and diversify their energy supplies.
This form of energy exchange also enhances energy security, enabling nations to better manage seasonal demand fluctuations and respond to emergencies. In regions like South Asia, cross-border energy trade holds immense promise—not only for driving economic growth and expanding access to renewable energy but also for fostering stronger geopolitical ties and regional cooperation.
This deal is part of a broader push to harness the untapped hydropower potential of Nepal and Bhutan, estimated at over 100 gigawatts (GW). For countries like Bangladesh, heavily reliant on fossil fuels 68% of its energy comes from natural gas, and another 31% from coal and oil importing renewable energy offers a pathway to diversify and decarbonize.

Expanding the Energy Market Beyond India

For years, India has been the sole electricity trading partner for Nepal and Bhutan, often purchasing surplus hydropower generated during monsoon seasons. Bhutan’s energy industry, long tethered to India, welcomes the diversification. Dasho Chhewang Rinzin, managing director of Bhutan’s Druk Green Power Corporation, remarked in 2022, “Many times, we are questioned about keeping all our eggs in one basket. An agreement for regional electricity trade would help Bhutan diversify its basket.”
India, meanwhile, benefits significantly from this arrangement, particularly during peak demand periods. For instance, during the 15-year record heatwave on June 17, northern India met 25-30% of its 89GW power demand through imports from neighboring countries.
Bangladesh, however, has struggled with power deficits. In April, as the country recorded its highest temperature in five decades, it faced a power shortfall of 3,196MW. Access to imported hydropower could alleviate such shortages and help manage escalating energy costs. Shafiqul Alam of the Institute for Energy Economics and Financial Analysis notes that importing power via the Indian Energy Exchange is often cheaper than Bangladesh’s average generation costs.
Climate Change and Hydropower: A Double-Edged Sword

Despite its promise, the hydropower boom faces significant challenges from climate change. The Himalayan region’s hydropower capacity is projected to decline by 3.9-5.2% between 2020 and 2059 due to increasing variability in streamflow’s, extreme weather events, and shifting seasonal patterns, according to the International Energy Agency.
Nepal has already experienced these impacts. Floods and landslides during the 2023 monsoon season caused losses of $18 million and halted 1,100MW of hydroelectricity production. Meanwhile, melting glaciers may temporarily boost water flow, increasing power generation in the short term. However, this also raises the risk of glacial lake outburst floods (GLOFs) and flash floods, which threaten infrastructure and operations.
Building Resilient Hydropower Infrastructure

Experts stress the need for climate-resilient infrastructure to mitigate these risks. Arun Bhakta Shrestha, a senior climate change specialist, emphasizes incorporating advanced dam designs, flood control mechanisms, and nature-based solutions into new projects. Yet, many ongoing developments in Nepal and Bhutan show limited evidence of climate adaptation measures.
Adding to the complexity is a limited pool of investors. Developed countries and China have shown little interest in financing hydropower projects in Nepal or Bhutan. Western nations, for instance, are dismantling ageing hydropower infrastructure due to environmental and social concerns. At the same time, geopolitical dynamics play a role, with India aiming to outmaneuver China in Nepal's energy market.
The Way Forward for South Asia

Regional energy cooperation offers a transformative opportunity for South Asia to transition to cleaner energy sources. However, this requires integrating climate-resilient practices, securing diverse investments, and balancing geopolitical interests. The success of agreements like the Bangladesh-Nepal-India tripartite deal could set the stage for a more sustainable and interconnected energy future in the region.

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Obaidur Chowdhury      

BOB Post