One Sun, One World, One Grid Brings Opportunities and Challenges: IEEFA

Indian Prime Minister Narendra Modi floated the idea of cross-border solar connectivity in October 2019. It was taken up by the Ministry of New and Renewable Energy (MNRE) and India is now pursuing a new vision of ‘One Sun One World One Grid’ (OSOWOG). It looks ambitious, but if structured well could change the way electricity is traded between countries like any other commodity.

[Updated July 21, 2020]

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India has one of the world’s largest operating synchronous grid with about 370 gigawatts of installed power generation capacity. The Indian grid was formerly divided into five regional grids, but in 2014 India connected its southern network to form one large synchronous grid. This provided a supply of electricity in deficit areas and helped to reduce electricity costs which had been driven up by transmission constraints. The grid can now be expanded to other countries by building a system of interconnected renewable energy sources that can be easily shared.

India is already trading power and has interconnected transmission lines with Nepal, Bhutan and Bangladesh. High-capacity transmission lines are being built to facilitate the trade of more power with these countries. Different countries are endowed with different natural resources and trading electricity has helped to bring down the cost of power and lightened the burden of importing fossil fuels.

India is heavily dependent on imported fossil fuels, with an import bill of USD 180 billion in 2019/20. Import costs have fallen of late because of a steep decline in global prices. But as the world economy recovers, global oil prices will pick up and increase the burden for India and other countries that rely on imports to meet their energy needs.

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Solar tariffs on India and globally have fallen continuously in recent years. Since 2019, most newly auctioned solar projects saw tariffs in the range of Rs 2.50-2.87/kilowatt hour (kWh). A new interstate transmission system (ISTS) bid concluded by Solar Energy Corporation of India saw a historic low winning tariff of Rs 2.36/kWh. Solar tariffs are now around 20-30 percent below the cost of existing thermal power in India and nearly half the price of new coal-fired power.

OSOWOG can help countries make the best use of their divergent natural resources and take advantage of time differences to best use intermittent but low-cost solar and wind power generation. This cooperation needs market mechanisms sending price signals that justify the cost of establishing transmission infrastructure and renewable energy capacity. It would also help to provide grid stability and encourage the uptake of clean technologies.

The International Solar Alliance (ISA), co-founded by India, has 67member countries that can play a pivotal role in helping other nations to deploy solar capacity and become import and export hubs at different times.

By promoting grid synchronisation and power markets that encourage infrastructure and capacity expansion, the OSOWOG initiative could help countries to achieve their emission reduction targets by tapering the use fossil fuels and paving the way for more deflationary renewable energy, notwithstanding some initial geopolitical hiccups.

This article was written by Vibhuti Garg, an Energy Economist with IEEFA.