Energy security is a growing concern as more frequent heat waves and winter storms, ballooning populations, electrification, new data centers and manufacturing put additional demand on power systems.
While some countries are emphasizing ‘energy independence’ as a solution — often with a focus on fossil fuels — others are addressing energy security concerns more affordably and sustainably: by sharing electricity with their neighbors.
Sharing electricity through regional grids can help cost-effectively manage rising demand and improve energy security. Larger interconnected grids also add variety to the electricity resources available to grid operators. A geographically diverse suite of resources can help balance electricity supply and demand across different temperature ranges, weather patterns and time zones. In addition, adding fuel-free power and accessing electricity from a variety of sources can protect against fossil fuel market fluctuations and help hedge against fuel delivery failures.
But building interconnected grids across borders will require more political, financial and technical support.
Shared Grids in the EU and US Have Shown Resilience to Conflict and Storms
Europe’s interlinked power system, which is managed through centralized institutions, has enabled countries to cooperate in overcoming energy challenges. For example, France was a top electricity exporter for over 40 years. But when many of its nuclear power facilities (which provide roughly 64% of the nation’s electricity) needed repairs and maintenance in 2022, it was able to import power from Spain and the U.K.
The EU’s shared grid has helped manage energy needs in times of conflict, too. In 2022, Ukraine disconnected from the Russian power grid for what was meant to be a 72-hour test of its own energy self-sufficiency — a precondition to join the European grid. Hours later, Russia invaded, and Ukraine was able to expedite its connection to the EU. This has helped mitigate the extent of power outages during the war. Several other Baltic states have recently followed suit and joined the EU network for greater security.
In North America, several regional grids operated by centralized authorities span multiple states or provinces. These interconnected systems have proven more resilient than those relying on individual utilities with less robust sharing arrangements. During Winter Storms Uri and Elliot, for example, power was lost or took longer to restore where utilities had weaker connections or were less coordinated with the broader grid. The consequences of these power cuts can be grave, with loss of life and billions of dollars in economic damages.
Recognition for the Role of Regional Grids Is Building
Countries, states and provinces are increasingly looking to their neighbors as partners in power supply. There are a number of promising examples:
- China has been working towards a national unified electricity market system for more efficient and coordinated operation within both its provincial and interprovincial markets. Currently, different exchange centers trade power over provincial and interprovincial systems, such as State Grid and China Southern Power Grid. Over 60% of China’s electricity is traded through these markets, and interprovincial trading accounted for about 20% of total power trading in 2023. Under its current 5-Year Energy Plan, the central government is promoting interprovincial transmission for large-scale renewable energy and requiring that at least 50% of new line capacity be allocated to renewable energy.
- In Southeast Asia — a major manufacturing hub with growing power demand — grid interconnectivity is regularly emphasized as a key enabler of clean, affordable and reliable electricity. ASEAN members states are currently working to renew a framework agreement and implementing protocols that would strengthen the ASEAN regional power grid. Cambodia, Laos, Myanmar, Thailand, Vietnam and two regions of China are also striving to set up regional power trade as part of the Greater Mekong Subregion.
- The African Union (AU) launched the Africa Single Electricity Market to integrate Africa’s five regional power pools into a unified electricity market. This initiative aims to boost energy security, optimize resource utilization, reduce energy costs and improve access to electricity to all 55 AU Member States, serving over 1.3 billion people.
- Even in regions where conflicts between countries have closed physical borders, electricity continues to flow, and projects are jointly planned. For instance, Burundi, the Democratic Republic of Congo and Rwanda have been operating a joint hydropower plant on the Ruzizi River since 1989 and have signed an agreement to add another.
- Mexico’s national power system is part of the Western Electricity Coordinating Council that spans parts of the U.S. and Canada. Mexico is also connected to Guatemala, which participates in Central America’s electricity markets (SIEPAC). However, unlike transmission lines between the U.S. and Canada, most cross-border connections between Mexico and its neighbors serve emergencies only. Mexico’s current national energy plan would boost generation and grid investments by $23.4 billion. Building a stronger foundation for its power system could help enable stronger regional grid integration in the future.
How to Unlock the Benefits of Interconnection
Despite trends moving in a positive direction, regional electricity sharing remains limited: In 2018, just 728 terawatt hours of energy was traded across borders, accounting for about 2.8% of total electricity supplied. Many regions continue to depend on imported fossil fuels while renewable production is curtailed.
Setting up cross-border electricity sharing and grid infrastructure is challenging, and solutions vary by region. But tools and technical assistance are available. Roadmaps and principles to enable regional trade generally include setting targets, strengthening institutions, and harmonizing regulatory and technical requirements across borders. Next steps for regions seeking to improve and further expand regional trade include planning electricity infrastructure to anticipate the needs of future supply and demand and establishing cross-border renewable electricity tracking frameworks.
1) Effective planning and benefits sharing
Transmission planning processes need to recognize the value of projects spanning multiple utility footprints. And they need to anticipate future needs. A recent federal rule in the U.S., for example, requires that regional transmission planning include scenarios 20 years into the future, quantify a set of economic benefits from grid infrastructure, and account for the transmission needs of state public policies.
It’s also important to recognize that while trading electricity and building infrastructure can create overall net benefits, there may also be undesirable impacts for some. For example, power producers in regions with lower prices can benefit from connections to higher-price regions, and electricity consumers in these higher-price regions benefit from an influx of lower-cost electricity. But the convergence of the electricity prices in both regions, even if lower overall, means that consumers in lower-priced regions will see costs rise. Meanwhile, landowners may be asked or required to site infrastructure on their property for compensation, while the broader public can benefit from lower emissions.
Analyzing these impacts — some of which aren’t readily monetizable — can be complex and have important equity considerations. Fairly allocating the costs for transmission investments based on their benefits to different stakeholders, and providing communities with benefits or joint ownership in infrastructure sited on their property, can help. To aid this effort, governments and developers can support local education, businesses and other development projects in communities affected by transmission projects.
2) Political will and coordination
Even though sharing electricity typically has net benefits, high upfront capital costs and coordination between planners unaccustomed to working together can present barriers. However, public commitments to clean energy procurement, and good interstate working relationships, can create the investment certainty and coordination needed for transmission buildout.
Utility-financed long-distance transmission projects in the U.S. were made possible in part by states’ clean energy goals and their willingness to collaborate. The Midcontinent Independent System Operator worked with states and stakeholders to plan 17 regional lines in 2010, recognizing that wind power was growing in the region due to economics and state renewable energy targets.
3) Expanding and enabling efficient electricity markets
Construction of infrastructure alone will not produce efficient cross-border electricity sharing; this infrastructure must be put to good use. India’s grid, for example, has few constraints on interstate transmission capacity. Its national government has been developing electricity markets since 2008 and added another market for grid stabilization services in 2023. But Indian states are not yet participating fully: The share of the total electricity traded in these markets averages in the single digits.
Governments and grid regulators can help remove market barriers and optimize across the “seams” between market regions. As of 2022, 25 European countries have participated in the Single Intraday Coupling (SIDC) market, allowing countries as far apart as Portugal and Norway to trade energy in hourly to 15-minute intervals. Central and Western Europe save roughly €116 million (US$122 million) per year from cross-country exchanges. These and other efforts highlighted above to revise market rules and enable robust participation will help make the most of the grid.
Working Together for a Clean, Reliable Energy Future
Regional electricity trade can offer significant benefits. Countries are increasingly looking across borders to build resilience, mitigate fuel delivery risks, reduce price volatility and meet ambitious clean energy targets. While progress in modernizing how we share electricity has been gradual, the world is quickly changing and presenting new risks to energy security. To mitigate these risks timely and affordably, regions can learn from each other to accelerate infrastructure investments and market implementation needed to scale electricity reliably and sustainably.
