Solar growth in South Asia has cut fuel imports for power but deeper reductions need electrification and regional grids

Electricity supply in several South Asian countries is gradually becoming less exposed to global fossil fuel shocks, partly because of the growth of solar power across the region. The importance of this shift became clear during the global energy crisis triggered by Russia’s full-scale invasion of Ukraine in early 2022. As global gas prices surged, South Asian power systems that relied heavily on imported LNG and other imported fossil fuels suddenly found themselves exposed. Record LNG prices forced governments to ration gas and search for alternative fuels, while Europe’s scramble to replace Russian supplies pushed global prices sharply higher.

In response, many countries began shifting toward cheaper and more secure sources of electricity. Across the region, gas has not expanded its role in the power mix, oil-based generation has declined sharply, and solar has moved increasingly toward the mainstream. However, the pace of this shift and the generation sources countries turned to has partly depended on how the crisis unfolded domestically and how governments responded.

In India, renewable growth was not primarily driven by the crisis itself. India had already installed 50GW by the end of 2021. This reflects long-standing policy support, decarbonisation goals, a relatively mature regulatory framework, and the improving cost competitiveness of renewable energy—particularly solar. While the growth of renewables has been significant, solar expansion in India has occurred alongside slower growth in hydropower and significant growth in demand. As a result, it has not significantly displaced the share of coal-based generation, which remains dominant in the country’s power mix. One reason for this is that most of India’s coal demand is met through domestic production.

Coal has not been viewed as a major energy security risk.

Pakistan and Bangladesh have actually shown responses to the LNG price shock in 2022.

In Pakistan, response has been a rapid adoption of rooftop solar, against the backdrop of deeper power sector and financial challenges since 2020. Earlier investments in coal and LNG plants through the China–Pakistan Economic Corridor (CPEC) created significant capacity payment obligations. At the same time, persistent issues such as transmission losses, consumer subsidies and weak bill recovery contributed to rising circular debt. As electricity demand slowed during COVID-19, Pakistan ended up with excess generation capacity but very high fixed costs. All this contributes to an increase in the utility’s cost of supply which further increased when global fuel prices surged in 2022.

When IMF-linked reforms pushed electricity tariffs higher, many consumers turned to rooftop solar. Net metering regulations and the availability of low-cost Chinese solar panels accelerated rooftop installations. Solar generation increased dramatically, with Ember estimates rising from 7.7 TWh in 2022 to 36.6 TWh in 2025, equivalent to an average annual growth rate of about 68%. Solar generation is now comparable with that from hydropower and gas, the largest sources of generation in the country.

As a result, gas generation fell by roughly 9% over the same period, with coal stable. Other fossil demand fell by at least 37%, and in reality, could have fallen further; behind the meter diesel generation is not measured, but is likely to have fallen. Had fossil fuels instead met the solar increase, gas could have risen by 15%, meaning that solar deployment saved an estimated USD 12 billion in LNG imports.

This shift has reduced imported fuels dependence at a time when global gas and oil prices remain volatile. However, declining grid demand could also push grid tariffs higher, as fixed system costs are spread across fewer consumers. Maintaining a financially healthy grid will be essential to sustain further rooftop solar growth, particularly in the absence of battery storage.

From 2022 to 2025, the country reduced dependence on gas, Heavy Fuel Oil (HFO) and High-Speed Diesel (HSD) while increasing coal’s role in the power mix. Coal generation rose from 7.87 TWh to 30.06 TWh, increasing its share from 9.8% to 33.8%. Over the same period, gas generation was broadly unchanged in absolute terms, at 45.31 TWh and 45.10 TWh, but its share fell from 56.2% to 50.7%, while HSD and HFP declined from 26.32 TWh to 11.56 TWh, reducing their share from 32.6% to 13.0%. Solar increased from 0.5% to 1.6%. Unlike Pakistan, Bangladesh has cushioned the impact of higher fuel import costs through subsidies to the Bangladesh Power Development Board (BPDB). As a result, electricity tariffs have risen more gradually since 2022, reducing the incentive for consumers to adopt rooftop solar, while increasing fiscal pressure on the government.

Sri Lanka has taken a different approach. Growing solar—and to a lesser extent wind—has reduced reliance on expensive oil-based generation and slowed the need for new coal capacity. Coal generation remains centred around the 900 MW Lakvijaya Power Plant, but the power system is gradually diversifying away from oil-based fuels that historically played an important role during periods of power shortages.

Nepal and Bhutan present a different case altogether. Their electricity systems are almost entirely based on hydropower, meaning they are less exposed to fossil fuel price volatility in the power sector. Cross-border electricity trade with India also plays an important role in balancing their systems and managing seasonal variations in supply.

Across the region, the expansion of solar power is beginning to reduce the power sector’s exposure to global fossil fuel price shocks. However, the pathways through which this transition is unfolding vary significantly across countries, shaped by domestic policies, energy system structures and economic constraints.

South Asian economies still import a large share of their fossil fuel energy

While solar growth is reducing fossil fuel exposure in the power sector, this shift addresses only a portion of South Asia’s overall fossil fuel dependence. A larger share of fossil fuel imports in the region is used outside the power sector, particularly in transport, industry and other end uses that still rely heavily on oil and gas.

South Asia remains highly dependent on imported fossil fuels, particularly oil, although the level of dependence varies across countries and fuel types. Oil import dependence is extremely high across the region. Most South Asian countries produce little or no oil domestically. Even in the two countries with domestic production — India and Pakistan — it meets only a small share of demand, around 10% in India and 15% in Pakistan. As a result, the vast majority of oil consumed in the region is imported.

Natural gas imports are also significant. India imports nearly half of its natural gas, while Pakistan and Bangladesh import around 20–30% of their gas supply.

A large share of these fuel imports passes through the Strait of Hormuz, making both the availability and price of energy important concerns for South Asian economies. Any disruption to this route, as already seen in recent shipping flows, can have major implications for the region.

Electrification and regional integration can further reduce fossil fuel dependence

Electrification can further reduce import dependency in the

Much of South Asia’s fossil fuel use remains concentrated in transport, industry and other end uses that still rely heavily on oil and gas. Shifting these sectors to electricity would allow a larger share of demand to be met by cheap and secure renewable power. However, electricity still accounts for a limited share of final energy use: about a quarter in Bangladesh, just under one-fifth in India, and around one-eighth in Pakistan.

Electrification of other end uses is necessary to reduce fossil fuel imports across South Asia. A large share of energy demand in transport, industry and buildings still relies on imported oil and gas. Shifting these sectors to electricity—especially when powered by renewables—could significantly cut import dependence. Electrifying road transport alone could reduce oil import costs by tens of billions of dollars annually across the region, improving energy security while supporting the clean power transition.

Regional interconnection can help seasonal balancing of renewables

Beyond electrification, greater regional electricity interconnection offers another important opportunity to reduce fossil fuel dependence. Several South Asian countries already utilise cross-border electricity trade with India. Nepal and Bhutan export hydropower to India and import and trade on India’s power exchanges, while Bangladesh imports electricity from India to meet part of its demand. India’s power system (2,034 TWh) is significantly larger than other countries in the region—Bangladesh (112 TWh), Pakistan (175 TWh), Sri Lanka (17 TWh), Bhutan (11.6 TWh) and Nepal (11 TWh)—making it the natural hub for regional electricity trade. Net cross-border flows through India are already substantial. India is a consistent net importer from Bhutan, with imports ranging from ~4–9 TWh annually—equivalent to roughly 35–80% of Bhutan’s total generation. Nepal is transitioning from a net importer to a net exporter, with recent net exports to India (~0.5 TWh in 2024–25) reflecting growing surplus generation.

India exports significant electricity to Bangladesh, with net flows of ~8–9 TWh annually in recent years—meeting around 7–8% of Bangladesh’s total electricity demand. Overall, cross-border electricity trade via India already represents a meaningful share of demand in smaller South Asian systems.

Despite plans to expand interconnections to Sri Lanka and Pakistan, progress has been limited due to a combination of political, economic and technical barriers. Cross-border electricity trade requires strong bilateral trust and stable diplomatic relations, which remain a challenge—particularly in the case of India–Pakistan. For Sri Lanka, high upfront costs and financing challenges for subsea transmission infrastructure have slowed progress.

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Acknowledgements

Richard Black, Duttatreya Das, Tito Das, Jivan Zhen Thiru, Ardhi Arsala Rahmani,