Following its severe economic crisis in 2022, Sri Lanka has been grappling with various ongoing challenges in its foreign policy; the most pressing being the crippling energy crisis. The situation was further exacerbated by the fact that Sri Lanka has no significant fossil fuel reserves and relies heavily on imports to meet its energy needs. This dependence on imported fuels has resulted in a substantial drain on Sri Lanka’s import income, aggravated by price fluctuations in the global energy market, leaving the island country with insufficient reserves to meet its essential service requirements, such as powering buses, trains, and medical vehicles. Sri Lanka also faced power cuts lasting up to 4 to 5 hours due to a lack of foreign currency to import more fuel. Sri Lanka has been diversifying its energy sources and increasing the share of renewables in its energy mix. While the infrastructural loans from foreign agencies have led the country to debt, the government is now striving to recover from the multiple economic, political, and social insecurities resulting from the crisis.[1]

Sri Lanka aims to decrease its reliance on imported fuels and generate 70% of its electricity from renewable sources by 2030. To achieve this target, the country is encouraging investments in renewable energy despite the ongoing financial crisis. China and India are willing to provide significant capital outlays, and Sri Lanka must balance the geopolitical interests of these nations, as well as the IMF-imposed liberalization of various sectors.

However, India and Sri Lanka face many challenges in their energy transition framework. India is the world’s third-largest energy consumer and has a rapidly growing renewable energy sector (solar, wind, hydro). By 2030, India aims to derive 50% of its total energy consumption from renewable sources and to achieve a 500 GW non-fossil fuel-based power capacity; however, the growing energy demand is causing energy insecurity in the country.

On the other hand, Sri Lanka is heavily reliant on imported fossil fuels, leading to frequent energy price fluctuations. The island nation needs to diversify its energy sources, as there is growing interest in renewable energy development. By 2030, Sri Lanka plans to derive 70% of its electricity from renewable sources and to add 7 GW of renewable energy. [2]

While energy cooperation between India and Sri Lanka is limited, there have been some positive developments, such as discussions on underwater power transmission lines, collaboration on renewable energy projects, and knowledge sharing in the energy sector. During a month-long residency in Colombo, I explored the possibility of establishing an energy cooperation framework between India and Sri Lanka. This involved engaging with business leaders, policymakers, scholars, journalists, and environmental activists. It became evident that India is increasingly pivotal in Sri Lanka’s shift toward renewable energy. This is exemplified by the establishment of an energy hub featuring a 130 MW solar power plant and 350 MW wind farms in Mannar.

The ASEAN Power Grid: A Model for Regional Energy Cooperation

Launched in 1997, the ASEAN Power Grid (APG) initiative aimed to build an integrated regional power grid system, serving as a model for potential energy cooperation in South Asia. It is an excellent example of regional energy cooperation in Southeast Asia. The project’s goal was to connect the power systems of the ten ASEAN member states, facilitating cross-border electricity trade and improving energy security across Southeast Asia. Key features of the APG include a phased implementation approach, bilateral and multilateral power trading arrangements, harmonization of technical standards and regulatory frameworks, and a focus on integrating renewable energy sources.[3]

By 2024, the APG has made progress, including the successful establishment of bilateral power exchanges (such as those between Thailand, Malaysia, and Laos), progress in multilateral power trading (for example, involving Laos, Thailand, and Malaysia), and an increase in investment in cross-border transmission infrastructure. Nevertheless, the initiative has encountered obstacles such as differing levels of power system development among member states, regulatory and policy disparities, technical intricacies in grid synchronization, geopolitical considerations, and national energy security concerns.

The APG experience provides valuable insights for potential energy collaboration between India and Sri Lanka, emphasizing the importance of political determination and sustained commitment and the necessity of a gradual and phased approach to implementation. It demonstrates how advantageous it is to commence with bilateral agreements before progressing to multilateral collaboration and highlights the importance of aligning technical standards and regulatory frameworks. APG underscores the enormous potential for integrating renewable energy into regional power systems in the South Asian markets.

Similar to APG, the “One Sun One World One Grid” (OSOWOG) initiative, introduced by Prime Minister Narendra Modi in 2018 during the International Solar Alliance (ISA) assembly, sought to establish a globally interconnected power grid connecting Southeast Asia’s power grids and extending to Europe via the Middle East. Its objective is to facilitate the seamless transmission of renewable energy between regions and continents, promoting a worldwide transition to sustainable energy.[4] This also presents an opportunity to enhance the energy cooperation between India and Sri Lanka, where efforts have been made toward high-voltage direct current (HVDC) grid interconnection. The concept for this project dates back to the 1970s and aims to connect India and Sri Lanka’s national grids. The plan involves creating an HVDC link between Chennai in southern India and Anuradhapura in central Sri Lanka, passing through the Palk Strait. The Power Grid Corporation of India Limited and the Ceylon Electricity Board would oversee the implementation. India’s grid is linked to Bangladesh, Bhutan, and Nepal, and this project will integrate Sri Lanka into the broader South Asian grid.

Energy Island

Building on HVDC interconnection efforts, establishing an ‘energy island’ or a special energy zone in the shared waters between India and Sri Lanka could significantly enhance the region’s energy security, economic integration, and sustainable development. However, resolving long-standing territorial disputes, such as the Katchatheevu island issue, and fostering mutual trust and cooperation between the two nations remain critical challenges, recently exacerbated through China’s disinformation campaigns against India in the region. Potential energy cooperation can help mitigate these challenges by leveraging the diverse renewable energy resources and electricity demand across South Asia.

The two countries can also explore their shared resources, separated by Palk Bay and the Gulf of Mannar, as well as their overlapping Exclusive Economic Zones (EEZs), by developing an energy Island. An ‘energy island’ or ‘special energy zone’ concept envisions a dedicated area in shared waters for energy production and transmission that focuses on renewable energy sources (solar, wind, tidal) and has advanced energy storage systems and HVDC transmission infrastructure. The potential economic benefits are substantial, including reduced energy costs through economies of scale, job creation in the renewable energy sector, enhanced energy security for both nations, and energy trade with other South Asian countries. This will play a crucial role in helping both nations achieve their climate goals by significantly reducing greenhouse gas emissions and promoting clean energy technologies. From a geopolitical perspective, this initiative strengthens bilateral relations through shared energy infrastructure, increasing regional cooperation and stability while reducing dependence on external energy sources.[5]

This region possesses abundant resources, such as fisheries, pearl beds, and the potential for wind energy. Through careful marine spatial planning and implementation, a collaborative project for offshore renewable energy in a shared EEZ can help safeguard these marine ecosystems and facilitate their regeneration. This initiative would be mutually advantageous for both nations and producing green hydrogen from this endeavor could play a pivotal role in the energy landscape. Green hydrogen, known for its versatility, can be transported via pipelines, trucks, and ships to serve various energy needs, including power generation and transportation. Such renewable energy projects not only aim to reduce reliance on fossil fuels but also enhance the region’s energy security in the long run. Several regional and extra-regional powers are eager to facilitate the restoration of stability in the island nation. The newly liberalized Sri Lankan retail fuel market reveals an intense competition among China, the US, Australia, and India, each striving to secure a foothold in the country’s energy sector.

The proposed India-Sri Lanka HVDC interconnection presents an exciting opportunity for both countries to join forces and create a cutting-edge undersea transmission line that paves the way for extensive collaboration in renewable energy. This innovative initiative has the potential to unlock Sri Lanka’s abundant wind and solar energy resources, estimated at a staggering 200 GW. By establishing a link between Anuradhapura in Sri Lanka and Chennai in India, this project could revolutionize energy exchange between the two nations, fostering a more reliable and efficient power supply for both. Moreover, the capability to transfer surplus renewable energy across borders holds the promise of stabilizing supply and demand, thereby diminishing dependence on fossil fuels and bolstering the transition towards cleaner energy sources in both countries.[6]

The energy island could potentially expand on the recently approved project that has already received the green light from Parliament. This collaboration has the potential to become a blueprint for regional energy cooperation in South Asia. The joint venture structure reflects a mutual dedication to the project’s success. It could facilitate knowledge exchange and technology transfer in developing renewable energy. Securing finances for the project through the venture could attract international investment and expertise in large-scale renewable energy infrastructure. The project could set the stage for future energy partnerships, expanding to neighboring countries and contributing to a more interconnected and sustainable energy landscape in South Asia, similar to APG.[7]

Sri Lanka’s recent approval of the Electricity Bill marks a significant step in reforming its power sector, aligning with commitments made under the IMF program. The new legislation aims to restructure the Ceylon Electricity Board (CEB) by unbundling its services into separate entities for transmission, generation, and other functions. This reform is expected to enhance the profitability of the state-run power monopoly and attract much-needed investment in the renewable energy sector. With a target of generating 70% of its power from renewables by 2030, Sri Lanka is opening up its electricity market to achieve this ambitious goal. The legislation also paves the way for establishing wholesale power markets, open access, and cross-border power trading in South Asia, transforming Sri Lanka’s energy landscape.

Sri Lanka’s electricity sector reforms present significant opportunities for India to foster renewable energy cooperation between the two countries. The recent power purchase agreement with India’s Adani Green Energy Ltd for wind power stations is just the beginning. Sri Lanka’s Sustainable Energy Authority and the Indian company U-Solar Clean Energy Solutions have signed a contract to build “Hybrid Renewable Energy Systems” on four islands off the Jaffna peninsula. The project is supported by a grant of USD 11 million from the government of India. As Sri Lanka opens its power sector to foreign investment, Indian companies could play a crucial role in developing renewable energy projects in the island nation.

Moreover, the proposed grid connectivity between the two countries could enable India to tap into Sri Lanka’s renewable energy potential, particularly its wind and solar resources. This cooperation could lead to a more integrated and sustainable energy ecosystem in the region, with the possibility of Sri Lanka eventually exporting excess renewable power to India, which is grid-connected to other neighboring countries.[8] Such collaboration would support India’s renewable energy goals and strengthen economic and diplomatic ties between the two nations.

The idea of an energy island offers promising opportunities, including using renewable energy sources to meet electricity demands more sustainably. It also balances electricity supply and demand between interconnected countries, improving grid stability and reliability. Reducing dependence on imported fossil fuels can enhance energy independence and security. Additionally, the concept promotes economic integration through cross-border energy trade, providing mutual benefits to participating nations.

India is increasingly alarmed by China’s expanding economic and strategic influence in South Asia, particularly in Sri Lanka. This unease is driven by China’s substantial investments in Sri Lanka through the Belt and Road Initiative (BRI) and its growing presence in the Indian Ocean. The escalating debt owed by Sri Lanka to China has raised concerns about the level of economic control wielded by China and its potential impact on Sri Lanka’s foreign policy decisions. China’s alleged propagation of disinformation aimed at India and its attempts to foster distrust between India and its neighboring countries have the potential to undermine regional cooperation.[9] These developments are reshaping the power dynamics in the region, and the proposed energy island can be used as a counter-strategy to Chinese influence in the area. By implementing this project, India can cement its dedication to regional development, provide concrete economic advantages to Sri Lanka, enhance bilateral relationships through joint infrastructure, and capitalize on various renewable energy sources for sustainable development.

India possesses a wide array of renewable energy resources, with significant solar potential in its western and southern regions and noteworthy onshore and offshore wind energy resources. Sri Lanka also shows promise in wind energy, particularly in its coastal areas, and has a growing solar e