By Dr Jyoti Parikh, Vice-Chair, IRADe; and Dr Navpreet Saini, Senior Research Analyst, IRADe
Background
The recent geopolitical developments, particularly tensions associated with the US–Iran conflict and instability in global energy markets with oil prices hovering over $110 per barrel, high uncertainty, shipping costs and weaker currencies have alerted all nations about strategic risks of relying on imported fossil fuels. Along with India, our neighbours in the South Asia, are also experiencing unprecedented energy challenges, whether landlocked Nepal and Bhutan or island nations like Maldives and Sri Lanka or Bangladesh, a populated country with a few resources of its own. All these countries are even more vulnerable than India, as they are highly dependent on imported fossil fuels for, electricity generation, transportation or cooking, etc. The transition was inevitable since long, but now it is imperative and urgent for all.
The Maldives, our Southern neighbour, known globally for its magnificent and unique marine diversity, together with luxury tourism industry is the richest economy in South Asia with per capita GDP of $ 13,000 per capita and a population of 515,000. The Maldives is a nation of 1,192 islands out of which around 200 are inhabited. The tourism industry contributes around 25 per cent of GDP.
Nearly, 100 per cent of fuel is imported, accounting for over 10–13.5 per cent of GDP. This exposes the country to energy insecurity not only to global fuel price volatility but currency fluctuations and fuel availability for daily life. The total final energy demand in 2022 in Maldives was 22,470 TJ, out of which 29 per cent is met by electricity and 71 per cent is met by petroleum products. In 2024, the Maldives had around 600 MW of installed electricity capacity, of which only 68.5 MW came from solar PV, supplying about 6 per cent of national electricity demand.
Nature of the energy problem
The islands of Maldives are spread across a vast area of the Indian Ocean. Most inhabited islands have costly and isolated mini-grid systems, each with relatively low electricity demand. This is technically challenging and needs considerable investments. Their dispersed geography also limits integration with the South Asian power grid, forcing most islands to rely on diesel-based mini-grids of their own.
The tourism sector further intensifies electricity demand. Resorts require uninterrupted power for air conditioning, desalination, lighting, transport, and digital services. Since tourism contributes around 25 per cent to GDP and represents the country’s primary source of foreign exchange earnings, that pay for oil, maintaining reliable electricity supply is economically critical. The transport sector also contributes heavily to fossil fuel dependence.
The Maldives has prioritised renewable energy and transport electrification of boats and vehicles, as part of its climate and development strategy. Under its updated 2020 Nationally Determined Contributions (NDCs), the country aims to reduce emissions by 26 per cent by 2030 and pursue net-zero emissions subsequently, with international support. The renewable electricity generation capacity doubled from 53 MW in 2023 to 110 MW by 2025, with plans for an additional 164 MW by 2030.
Increase in fuel prices and disruptions in oil shipping routes threaten tourism and marine transport. They also disrupt daily local travel and the delivery of water, food, and medicine. Together, these problems threaten overall economic stability. This leads us to an analysis of the strategic options available for powering high-end tourism and meeting the daily needs of the local population. It also covers long-term plans to achieve strategic independence in the power sector.
Recently, the Maldives has accelerated investments in renewable energy, especially solar power and battery storage. However, domestic renewable energy alone may not fully solve the country’s limited availability of contiguous landmass. This has led to growing discussions about grid connectivity with South Asia. Specifically, experts are exploring the possibility of connecting the Maldives to the Indian power grid through a submarine high-voltage cable. While such a proposal could improve energy security and support decarbonisation, questions remain regarding its economic feasibility given the Maldives’ small and fragmented electricity demand.
Strategic options for the energy sector
Currently, every inhabited island requires its own fuel transport, storage facilities, maintenance systems, and backup generation capacity. Smaller islands with lower populations often face the highest electricity costs because infrastructure expenses are distributed across fewer consumers.
Many islands have already been equipped with solar photovoltaic systems combined with battery storage. These installations are helping reduce diesel consumption and lower fuel import costs. One of the country’s most ambitious initiatives is the proposed floating solar projects which can provide a way to expand renewable energy generation without competing for scarce land resources. However, floating solar projects in the Maldives face challenges such as high installation and maintenance costs, as well as exposure to harsh marine conditions like saltwater corrosion, strong waves, marine life, and storms.
Battery storage systems are also being expanded to support solar energy generation. These systems allow excess daytime electricity to be stored and used during evening hours when solar production declines. Together, solar and storage projects are reducing fuel consumption and helping the Maldives move towards its renewable energy targets.
However, despite this progress, important limitations remain.
The limits to expansion of domestic renewables
Since islands are dispersed, creating an integrated power grid requires expensive transmission interconnection (sea-cables), hence most islands operate isolated mini-grids that still depend heavily on diesel backup. While batteries help balance short-term fluctuations, they cannot support long periods of low renewable energy generation without backup power sources. Till then, diesel generators continue to function as the primary system. Therefore, while domestic renewables are reducing diesel dependence, they are not yet capable of fully solving the Maldives’ energy security challenges.
Regional energy integration in South Asia
Cross-border power trade has helped South Asian countries maintain stable energy supplies amid global tensions. Through the BBIN framework — Bangladesh, Bhutan, India, and Nepal — the region has developed a growing electricity market that enhances energy security and reliability. Similarly, the Maldives could gain comparable benefits through participation in cross-border power trade, improving energy security, and diversifying its energy sources. Bhutan and Nepal export hydropower to India, particularly during the monsoon season when hydropower production increases. They are generating substantial national revenue.
In such a situation, regional grid integration provides several advantages. Countries can balance seasonal variations in supply and demand, avoid curtailment of renewable energy generation, reduce electricity costs through larger markets, and improve energy security through shared infrastructure. Interconnected systems also help integrate renewable energy more effectively because electricity can be transferred across wider geographic areas.
This growing regional energy architecture has raised the question of whether island states such as the Maldives and Sri Lanka could eventually join the network.
The Maldives–India grid connectivity
The economic viability of a submarine electricity cable between India and the Maldives depends critically on the scale of electricity demand that the connection would serve. The Maldives currently consumes approximately 821 million kWh of electricity per year. From 2007 to 2017, the total electricity consumption grew at an average of 6.2 per cent annually, outpacing GDP growth — a trajectory driven by expanding tourism, urbanisation, and rising household energy use. By 2023, the total electricity generation had reached approximately 1,284 GWh, of which 93 per cent was sourced from non-renewable generation, almost entirely diesel. Forward-looking projections suggest this demand will continue to rise substantially. The total aggregated national peak demand stood at approximately 300 MW in 2024. The projected growth of 508 MW by 2030, is driven not only by population and economic expansion, but also by the anticipated electrification of transport. Thus, renewable power generation, energy storage, and electric mobility can be a principal pathway for achieving the country’s energy security. As electric ferries and vehicles are rolled out, electricity demand will rise further, potentially creating the volume of load needed to make large-scale transmission infrastructure economically viable.
The potential benefits could be significant. Access to India’s expanding renewable energy sector could provide the Maldives with cleaner and cheaper electricity than diesel generation. This would reduce fuel imports, lower emissions, and improve long-term energy security. It would also strengthen the environmental and economic benefits of transport electrification.
Economic and technical constraints
The most significant challenge for grid interconnection between India and the Maldives is economic viability. The Maldives has a relatively small population and low overall electricity demand. Demand is also geographically dispersed across separate islands rather than concentrated within a unified national grid. This creates serious infrastructure challenges. Even if electricity were imported from India through a submarine cable, distribution within the Maldives would still depend on inter-connections among isolated island-level systems. Although expensive and technically difficult to develop, additional inter-island transmission infrastructure is very much needed. The cost of constructing a 700-km submarine HVDC cable would likely be extremely high. For a small economy like the Maldives, financing such a project would require support from multilateral development banks, climate finance institutions, and bilateral partnerships. The commercial return on investment may appear uncertain due to limited electricity demand. Technical harmonisation would present additional complexity. Regulatory standards, transmission systems, and electricity market frameworks would need to be coordinated between India and the Maldives. Such arrangements are still largely undeveloped.
Conclusion
Recent geopolitical tensions, particularly instability involving Iran and broader uncertainty in global energy markets, warn against the risks of excessive dependence on imported fossil fuels. These challenges underscore the importance of strengthening energy security, ensuring reliable and affordable energy access, and enhancing the resilience of national energy systems against external shocks.
Imported diesel is the main lifeline for energy, tourism, residential and transport sectors in the Maldives. Although a Maldives–India grid connection may be in not-too-distant future, it may hold important strategic value.
In an era of growing climate risks and geopolitical uncertainty, combining local renewable energy systems with selective inter-regional connectivity may provide the Maldives with its most realistic path towards a more secure, resilient, and sustainable energy future.