International trade of electricity or Cross-Border Electricity Trade is a unique exchange of a unique commodity, particularly because it cannot be stored. Technologically we haven’t progressed enough to a stage to come up with large-scale storage solutions which would also be economically viable. Due to this distinctive feature, trading of electricity does not fit many of the traditional business models that fit other commodities. Electricity has to be supplied through transmission lines as soon as it is generated. Furthermore, with increasing distance the efficiency of trading in electricity decreases and this becomes an important reason as to why trade in electricity almost always takes place between two closely located jurisdictions. Such trades can be handled via long-term contracts or even intraday contracts. Focusing on Asia, more particularly on South Asian countries such as Bangladesh, India, Pakistan, Bhutan, Maldives, Sri Lanka and Afghanistan, members of South Asian Association for regional Cooperation or otherwise known as SAARC, don’t boast a respectable record when it comes to clean, affordable and dependable electricity. Countries of the region either struggle with electricity shortages or cleanliness of electricity.

The SAARC countries are always in dire need of electricity imports. Despite being rich with resources, the countries are still struggling with cross border trade of electricity. This makes it necessary to review regulatory policies for cross border trade of electricity which are in place and if they cause any impediments. All the SAARC member countries have laws and regulations in place which manage the power sector operations within their jurisdictions. Even though these countries have these laws and regulations, they have little or non-existent presence of cross border trade. The only two countries in the region which have included legislations related to cross border trade of electricity are Nepal and Bhutan. All other SAARC members do not have legislation specific to cross border trade of electricity. This doesn’t mean that these countries don’t trade in  electricity. They do so through bilateral agreements which are unique to each transaction. As soon as the imported electricity units enter the importer country’s jurisdiction, domestic laws and regulations start governing them. The present tariff rates affect this trade and at the end of the day governs it.

It is worth noting that there are no electricity regulators present in Afghanistan and Nepal. There are no sincere regulatory attempts to execute ‘Open Access’ apart from India. There are impediments and it becomes difficult to obtain licenses in Sri Lanka as a result of which, eliminates the idea of respectable investments. Traveling east of India, Bangladesh’s laws and guidelines take a neutral stance when it comes to cross border trade of electricity. India itself has been importing significant volumes of electricity units from Bhutan but again, under bilateral agreements. The absence of a market mechanism which is transparent and positive in its outlook towards increased regional power exchanges is felt and it needs to be put in place.