South Asia’s energy reality check, this World Environment Day
This newsletter reaches you on World Environment Day, a moment that this year feels less like an occasion and more like a reckoning. Record heat is no longer a South Asian story: the UK recorded its hottest May on record, parts of Europe saw temperatures 8–10°C above seasonal norms, and across northern and central India, nighttime temperatures have remained more than 5°C above normal, offering little respite between days of extreme heat. The clean energy transition in South Asia is an imperative written in peak demand records, subsidy bills, and the quiet cost of load-shedding.
In India, peak power demand crossed 270GW on 21 May, an all-time high with nearly a third met by renewables. Yet the system’s structural gap was visible as 2.3TWh of solar was curtailed in the second half of 2025 because the grid lacked the flexibility to store or shift it. As we set out in the Economic Times, the real test is no longer how much renewable capacity India can build, but how effectively it can integrate and dispatch that capacity when demand peaks. Evening demand, driven by cooling loads that persist long after sunset, is now a structural feature of the grid, not a seasonal anomaly.
This makes the findings of our new report on standalone battery energy storage tariffs all the more consequential. India allocated 10.4GW of standalone Battery Energy Storage Systems (BESS) capacity in 2025, but tariffs have fallen 71% since 2022, far outpacing the 36% reduction in battery pack prices. Nearly 75% of the allocated 2-hour capacity now sits in the at-risk viability category. China’s removal of battery export rebates in April 2026 is adding further cost pressure. Without procurement framework reforms, including cost-reflective tariff floors and tighter eligibility criteria, execution failures risk undermining confidence in a sector India cannot afford to stall.
The minerals the transition depends on present their own financing challenge. Our briefing note on mobilising capital for India's critical minerals sector finds that India imports 100% of its lithium, cobalt, and nickel, and while the National Critical Mineral Mission creates the right intent, intent without capital is not a strategy. Long gestation periods and high upfront costs are limiting private investment across the value chain. Moving beyond policy frameworks to active de-risking of projects is the necessary next step.
In Bangladesh, the fiscal cost of fossil fuel dependence is now arriving in monthly instalments. The country faces an additional USD1.07 billion in Liquified Natural Gas (LNG) subsidies for the April–June quarter alone. Our report on fostering Bangladesh's energy transition shows the problem runs deeper than fuel prices. It includes idle peaking plants receiving capacity payments, a 61% reserve margin, and oil-based generation more than ten times higher than comparable economies. The solutions are largely domestic: scaling renewables, improving demand-side efficiency, and gradually reducing reliance on expensive peaking capacity. The policy foundations are in place; building on them is the next step.
As we mark World Environment Day, the pressures facing South Asia’s energy systems are a reminder of what is at stake. India’s grid is managing record demand while working to deploy the storage its renewable ambitions require. Bangladesh is navigating the real costs of an energy system built around imported fuels. In both countries, the case for transition is increasingly being made not by climate commitments, but by balance sheets and blackouts.
Best wishes,
Vibhuti Garg
Director, South Asia
Institute for Energy Economics and Financial Analysis
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