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Nepal on course to become South Asia’s clean energy powerhouse

Nepal is gearing up as an exporter of clean energy to India

Kathmandu: Nepal is gearing up to become South Asia’s green energy powerhouse, leveraging its vast hydroelectric resources.

Realising its potential, Nepal’s Ministry of Industry, Commerce and Supply recently introduced the third Nepal Trade Integration Strategy (NTIS)-2023 which has nailed electricity as one of the key service products,  which has excellent export potential.

Nepal has been introducing NTIS, a document which identifies products with the highest export potential, since 2010.  The second strategy was launched in 2016.

Never before, electricity was categorised in the list of products with the highest export potential as Nepal was facing prolonged load shedding during this period. Since the early 2000s to 2018, Nepal faced load shedding upto 18 hours a day.

“Nepal is going to become a net exporter of electricity from net importer because export to India is becoming easier, capacity of cross border power line has increased and more hydropower is being produced than domestic demands,” says NTIS-2023 released recently. “In the next five years, there is the possibility of generating way more power than total domestic demand. So, there is a possibility of exporting hydropower equivalent to export value of information and technology service exports.”

Nepal has been exporting power in the Indian market since November 2021. So far, the southern neighbour has permitted Nepal to sell up to 452.6MW of electricity to its power exchange market.

The Himalayan country exported electricity worth over NPR 11 billion in 2022  starting from June 2022, according to Nepal Electricity Authority (NEA), state owned power utility body, which is solely responsible for trading power with India till now.

Former Energy Minister of Nepal Pampha Bhusal said last year in the House of Representative, the lower house that Nepal could export as much as NPR 70 billion  per year within five years.

Nepal’s total merchandise exports in the last fiscal year 2022-23 that ended in mid-July stood at NPR 157 billion  and Nepal’s ability to earn as much as Rs70 billion from electricity export could boost the small economy like Nepal.

Chandra Ghimire, former commerce secretary of Nepal, told India Narrative that hydropower  is set to become the biggest foreign currency earners in the near  future from among the export items.

“Nepal is already generating surplus energy in the wet season and  Nepal is forced to export power in the external market,” he said.

According to the NEA, its generation capacity has already reached 2800MW while peak demand for power in the country is in the range of 2000MW.

Nepal’s power generation is expected to reach 4,507 MW by mid-July 2024 and 5,251MW in mid-July 2025 while domestic demand is expected to grow to 2,280MW in mid-July 2024 and 2,568MW in mid-July 2025, according to the NEA. The NEA said that Nepal could be a net exporter of power by 2026. It means the country will have surplus power in both summer and winter season, liberated from current compulsion that Nepal has to import power in the winter.

“As India has promised to buy 10000MW and Bangladesh has also shown willingness to buy Nepal’s power on a large scale, the country needs to plan for generating 20,000MW of electricity  considering the rise in domestic demands as well,” NEA’s managing director Kul Man Ghising said in a recent press meet.

While Nepal has an ambitious plan to generate hydropower, new avenues are also opening for Nepal to expand the external market for its hydropower.

It is so particularly after Prime Minister Narendra Modi announced that India would  buy 10,000MW of power  in the next 10 years from Nepal during his meeting with Nepali Prime Minister Pushpa Kamal Daha  in New Delhi on June 1.

Likewise, the South Asian giant has also promised to facilitate Nepal to export 40MW of electricity to Bangladesh once the tripartite agreement on the matter is signed.

Nepal and India issued the Joint Vision Statement on Power Sector Cooperation  as per which two countries agreed to expand cooperation in the power sector and include partner countries under the BBIN  (Bangladesh, Bhutan, India and Nepal) framework.

There is a possibility that beside these four countries, the cooperation in the power sector can expand to Southeast Asia too with the member countries of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), initiating the study on feasibility of BIMSTEC grid connectivity.

Nepal, Bangladesh, Bhutan, India and Sri Lanka from South Asia and Thailand and Myanmar from the South-East Asian region are represented in the inter-regional grouping— BIMSTEC.

“Both Indian and Bangladeshi economics are growing rapidly and they need green, clean and reliable energy to fuel growth,” Anup Upadhyay, former energy secretary of Nepal government, told India Narrative. “Nepal is currently in the sweet spot to deliver clean energy to both the countries.”

He said that there was also scope of delivering Nepal’s clean energy to the wider BIMSTEC region amid efforts to connect the entire region with the electricity grid.

As the biggest power of both BBIN and BIMSTEC regions, New Delhi has been pushing the agenda of grid connectivity of these regions. These efforts coincide with de-carbonisation efforts by South Asian nations to tackle climate change.

India has set a target to achieve 50 percent cumulative electric power installed by 2030 from renewables, and achieve net-zero carbon emissions by 2070. India aims for 500 GW of renewable energy installed capacity by 2030. Nationwide fossil fuels generate more than 70 per cent of India’s electricity generation currently.

Bangladesh has set a target of covering 40 percent of its power generation with clean energy by 2041 and to import around 9000MW under regional and sub-regional cooperation.

Nepal has its own target as well. By 2030, the Himalayan country aims to expand clean energy generation to 15,000 MW, of which 5-10  will be generated from mini and micro-hydro power, solar, wind and bio-energy, according to the country’s Second Nationally Determined Contribution-2020 report submitted to United Nations Framework Convention on Climate Change secretariat.

Madhu Bhetuwal, joint secretary at the Ministry of Energy, Water Resources and Irrigation told India Narrative that  Nepal and Bhutan could be big sources of clean energy as the countries to meet their target of replacing fossil fuel- based energy consumption with clean energy.

Nepali officials and experts say that the country could contribute significantly to feed the growing appetite for clean energy of the South Asian and SouthEast Asian region if not fully.

A study carried out by the Water and Energy Commission of Nepal in 2019 showed that the Himalayan country has the hydropower potential of 72,544 MW from three major river basins: Koshi, Gandaki, and Karnali basin which covers 94 percent of the total gross potential of the country.  With Nepal generating around 3000MW, the country still has a lot of unharnessed hydropower potential.

“Nepal hydropower is essential for India and Bangladesh from the perspective of seasonal variation. Nepal can provide more electricity when the demand for electricity rises in these countries,” said Upadhyay.

As domestic resources in Nepal are not enough to develop hydropower on a large scale which can feed energy needs of South Asia, Indian companies are increasingly coming up to develop large power projects in Nepal lately. Indian companies like  SJVN Limited, NHPC Limited and GMR Energy are developing large hydropower projects in the country.

According to officials and experts, immediate concern for Nepal is still weak transmission infrastructure to sell electricity and procedural delay in getting approval for selling power from Nepal from the Indian side.

Currently, Nepal and India  don’t have several high capacity transmission lines. Dhalkebar-Muzaffarpur Cross Border Transmission Line is single transmission line with capacity of 400kV which can deliver upto 1000MW.

Four 400kV cross-border power lines are in the pipeline with one being constructed by the SJVN Arun-3 Power Development Company expected to be completed later this year.

There is also no dedicated power line between Nepal and Bangladesh as well. Nepal will be using spare capacity of existing transmission infrastructure of India to sell 40 MW of electricity to Bangladesh.

“Developing a high capacity transmission line across the border is necessary to ensure reliable power supply and there has been progress towards that end,” said Upadhyay.

Nepali officials also expect early approval from the Indian authorities enabling Nepal to export electricity to India.

The southern neighbour does not allow  delivery of power from projects developed with involvement of Chinese and Pakistani elements as India does not want to risk its energy security from projects developed with involvement of its adversaries.

Also Read: Nepal, India, and Bangladesh could reach first trilateral power agreement soon