Regional Bonds, Real Risks: What It Will Take to Electrify South Asia’s Future

From grid interconnections and green hydrogen certification to climate finance taxonomies and reskilling coal workers, the emerging picture is less about grand declarations and more about clearing specific bottlenecks that stand between ideas and investable projects.

India may be one of the world’s most attractive clean energy markets, but investment appetite continues to be shaped by regulatory clarity and project scale. Denmark’s experience offers a timely lesson. Rasmus Alex Wendt, Counsellor (Energy), Royal Danish Embassy in India, drew a clear connection between Denmark’s high renewable penetration and its decision to build a transparent, price-based electricity market decades ago. Allowing prices to reflect true system costs, he noted, created the flexibility required for wind and solar to thrive.

Yet even with strong policy design, global capital gravitates towards large, well-structured projects. Wend pointed out that investors “are looking for scale”, whether in offshore wind, biogas or multi-gigawatt solar. Fragmented projects, uncertain tariffs or opaque permitting procedures quickly erode bankability.

That is where India’s draft climate finance taxonomy becomes pivotal. Gurpreet Chug, MD, ICF, argued that unless the taxonomy is embedded across regulators and lenders from the Reserve Bank of India to the Securities and Exchange Board of India clean projects will struggle to secure the lower-cost capital they need. Alignment with international taxonomies is just as important, given India’s dependence on global debt markets.

Technology transition cannot accelerate if countries disagree on what qualifies as “green”. Green hydrogen is the most visible example. Stephan Hesselmann, Economic Minister Counsellor, Embassy of Germany in India, emphasised the urgency of aligning India’s emerging rules with global certification frameworks for renewable fuels of non-biological origin. Without mutual recognition of carbon intensity and guarantees of origin, long-term export markets will remain out of reach.

Quality standards in photovoltaics and storage carry similar weight. Weak modules or batteries risk performance failures that can undermine confidence, financing and future exports. A coordinated approach to certification, testing and safety will be essential if India’s manufacturing base is to scale while remaining globally competitive.

Cross-border electricity links are often spoken of as long-term ambitions, but Sri Lanka’s planned interconnection with India demonstrates how quickly economics can push cooperation forward. Lakshmendra Geshan Dissanayake, Minister Counsellor (Commercial), High Commission of Sri Lanka in India, noted that Sri Lanka’s power costs are nearly “three times” higher than India’s. A short undersea link, therefore, offers immediate relief and a foundation for future renewable exports.

Sri Lanka’s vast solar and wind potential could one day feed the wider South Asian grid, but Dissanayake warned that grid stability is already a constraint. Recent solar additions have exposed weaknesses in transmission and system flexibility, making investments in pumped hydro, batteries and digital grid management unavoidable. India faces similar challenges as it works towards the International Solar Alliance vision of ‘One Sun, One World, One Grid’.

Technologies may define the pathway to net zero, but people will determine whether it succeeds. Dr Vibha Dhawan, DG, The Energy and Resources Institute (TERI), highlighted the overlooked role of micro, small and medium enterprises (MSME), which make up over 65 per cent of India’s economic ecosystem. Without affordable clean power tailored to their needs, India’s transition will remain partial.

Dr Dhawan called for a shift from passive technology transfer to active co-development, through joint research programmes, dual-supervised PhDs and specialised centres such as TERI’s Institute on Energy Transition in Hyderabad. She also stressed that India must prepare its workforce for hydrogen, battery manufacturing and advanced renewables, arguing that the country could become a global skills hub rather than just a technology market.

This theme aligns closely with Australia’s priorities. Nathan Davis, Trade and Investment Commissioner, Austrade, pointed to collaborative skilling efforts such as a solar academy in Gujarat and deeper engagement on critical minerals. With Australia holding significant reserves of lithium and other essential materials, the partnership could strengthen India’s ambitions in battery, Electric Vehicle (EV), aerospace and defence manufacturing.

The next wave of technologies from new electrolyser designs to long-duration storage – will not reach commercial maturity without capital willing to take early risk. Today, most financing flows into proven assets, leaving technologies below a Technology Readiness Level (TRL) of five struggling to advance.

Chug noted that multilateral development banks (MDB) can play a catalytic role through challenge funds, blended finance and small but timely R&D grant. He cited early-stage initiatives under the International Solar Alliance (ISA) as examples where modest awards have sparked innovation in hydrogen applications for heavy industry.

As these technologies are scaled, more sophisticated blended structures will be required, especially for distributed assets such as rooftop solar and EV charging. Aggregation models, viability gap funding and layered capital stacks may be necessary to attract institutional investors.

Currency risk remains one of the biggest barriers. “My biggest cost is hedging,” Chug observed, reflecting a common concern among Indian infrastructure CFOs. Dedicated hedging facilities or partial guarantee pools supported by MDBs could make foreign borrowing materially more competitive.

What emerges across these themes is an energy transition that depends as much on coordination as on capacity. Markets that send clear signals, standards that enable cross-border trust, taxonomies that direct capital, grids that cross national boundaries, and skills that prepare workers for new industries – none of these can be built in isolation.

India and its neighbours have no shortage of ambition. The question now is whether regional and international cooperation can keep pace with technological change and convert that ambition into a steady pipeline of investable, future-oriented energy projects.

This article is adapted from a panel discussion on ‘Steering India’s Energy Future: Regional Bonds, Global Goals – Collaborations for Electrifying the Future’ at Bharat Electricity 2025.