Flowing Fortune: Harnessing Hydropower for Prosperity

100

Nepal Electricity Authority (NEA) expects to generate 20,000 MW of electricity by 2029.

If the plan materialises, the country will generate a surplus of 10,000 megawatts in the wet season and about 4,000 MW in the dry season, according to NEA Spokesperson Chandan Kumar Ghosh.

Eyeing cross-border power trade of the given scale, there has been some significant developments in the energy sector of late.

In January, Nepal and India signed a bilateral agreement to export 10,000 megawatts of electricity from Nepal to India in 10 years. Another South Asian country Bangladesh, which faces an electricity shortage during peak season in Nepal, has set a long-term goal of sourcing 9,000 MW of electricity from Nepal by 2040.

Fresh projections, in addition to diplomatic progress, have fuelled hopes for light at the end of the tunnel for Nepal.

Hydro projects MW No of projects
Installed capacity 2,840 184
Under construction 2,982 123
Ready for construction 3,470 129
Waiting for PPA 9,400 185
Under study 30,750 597
Dedicated export project 4,215 6
Total 53,657 1,224

Source: IPPAN Research, NEA Annual Report, doed.gov.np

Preparing for better

NEA Spokesperson Ghosh sees the authority’s role primarily in developing infrastructure to facilitate cross-border trade.

“To increase exports, transmission lines and substations within the country, as well as cross-border transmission lines, must be developed. And that’s our main focus right now,” said Ghosh.

Dhalkebar-Mujaffarpur (400 kV) is the only operational cross-border transmission line at present with a capacity of 1,200 megawatts.

Dozens of cross-border transmission lines exist, yet their capacities are consistently low.

Four additional high-capacity cross-border transmission lines are in development.

The Dhalkebar-Sitamarhi transmission line, dedicated to the 900MW Arun 3 Hydropower Project, was scheduled for completion in April. It has already been activated from the Indian side, but remains in the final stages as the Arun 3 project itself is not yet complete.

Likewise, NEA expects New Butwal-Gorakhpur (400kV), Inaruwa-Purnea New (400kV), and Dudodhara-Bareilly (400kV) transmission lines between Nepal and India to be operational by 2029. These transmission lines will have a combined capacity of 11,200 megawatts.

“NEA has aligned its activities, including expanding transmission capacity and signing power purchasing agreement (PPA)s with hydropower developers,” added Ghosh.

Hydroelectricity projects with a combined capacity of 3,252 megawatts are under construction. Other projects with a capacity of 3,597 megawatts are under different stages and have yet to sign PPAs.

NEA’s meeting with the Bangladesh Power Development Board (BPDB) in Dhaka in February to finalise the tariff rates for 40 megawatts ended with no deal. The authority, however, is optimistic about reaching some form of agreement with the potential second cross-border electricity trade partner.

Even if Nepal concludes an agreement with Bangladesh, the duo will have to resort to Indian transmission lines. Talks were held in May 2023 on constructing dedicated transmission lines between the countries via India, but no further progress has been made.

Operation India-Nepal cross-border high voltage interconnection Capacity (MW)
Existing Dhalkebar-Mujaffarpur (400kV) 1,200
April, 2024 Dhalkebar-Sitamarhi (400kV) 2,500
2025-26 New Butwal-Gorakhpur (400kV) 2,500
2027-28 Inaruwa-Purnea New (400kV) 2,500
2028-29 Dudodhara-Bareilly (400kV) 2,500
Total 11200

Source: NEA, 2024

Navigating international politics

India’s view on cross-border electricity trade is reflected in the Guidelines for Import/Export (Cross Border) of Electricity-2018.

The document, which permitted India’s neighbouring South Asian countries to take part in the power exchange in India, established a ‘designated authority facilitating the process of approval and laying down the procedure for import/export of electricity’.

The Member (Power System) of the Central Electricity Authority (CEA) of India was subsequently appointed as the designated authority.

Through the Guidelines, the government of India reserves the right to decide on cross-border power trade ‘for reason of larger policy interests [of India]’.

India’s Central Electricity Regulatory Commission (CERC) brought supporting Regulations in 2019, and the CEA devised a procedure for approval for cross-border electricity trade in 2021.

The procedure has given India exclusive rights to decide on cross-border energy trade ‘binding on the participating entity’. It further prohibits purchasing power generated by a company that is ‘owned, directly or indirectly by any natural/legal personality(ies) whose effective control or source of funds or residence of beneficial owner, is situated in/citizen of a third country with whom India shares land border and that third country does not have a bilateral agreement on power sector cooperation with India’.

On this basis, India has already denied purchasing electricity from Nepal generated with Chinese investment.

Former deputy managing director of the NEA Prabhal Adhikari opined that India’s policy stances profoundly guide the geopolitical dynamics of cross-border electricity trade. According to him, navigating these geopolitical complexities is solely a matter of diplomatic prudence.

“Communicating concerns with India is more important than worrying about them,” explained Adhikari. “In the past decade or so, diplomats used to be criticised when they discussed economic or business issues in international forums. Since we are in the age of economic diplomacy now, diplomats should not hesitate to raise concerns on energy trade.”

Finishing the homework

In Nepal’s power sector, domestic arrangements are complementary to diplomatic efforts for international trade.

“The discourse on exporting electricity has overshadowed the need for increasing domestic consumption. We can consume electricity that does not meet export criteria,” Adhikri proposed as a solution to India’s stance of not buying electricity from Nepal generated with Chinese involvement.

Electricity Bill-2023 was tabled in parliament last year, but the winter session ended without a discussion. The much-awaited bill, which has been in the making for over a decade, has received much criticism.

Chairman of the Independent Power Producers’ Association, Nepal (IPPAN), Ganesh Karki, has said that the Nepali private sector will collapse if the Electricity Bill-2023 is passed without making amendments.

“About 3,000 megawatts of electricity are currently being produced in the country. Of that, 1,160 megawatts are produced with the participation of the NEA, while the rest is by the private sector,” he explained.

The bill proposes a competitive process for acquiring a hydropower generation licence.

Adhikari said that this can be detrimental to the budding hydropower industry of the country.

“Hydropower plants are capital-intensive, Infrastructure will get costlier while adjusting to the sustainability standards in coming days,” he argued. “It’s the market that should be made competitive, not the production process. Competitive licensing will inhibit the anticipated increase in generation capacity.”

“Some companies have already registered to trade electricity across the border but have yet to get a licence. However, NEA has a monopoly over it,” he added.

 

Source: Himaayan Times