Electricity trade means obtaining a license from the government to engage in electricity generation, transmission, and distribution. Here, water should be understood as the raw material, and the electricity produced from water should be understood as an industrial product. The Electricity Act, 1993 and the Hydropower Development Policy, 2001 do not envisage any entities other than public bodies for electricity trade.
“The term ‘electricity trade’ is not mentioned anywhere in the Nepal Electricity Authority Act, 1984. It only states that electricity may be imported or exported with prior approval from the Government of Nepal. Accordingly, only the Nepal Electricity Authority and Butwal Power Company have been engaged in electricity trading. Moreover, cross-border electricity trade has been confined exclusively to the Nepal Electricity Authority. In domestic electricity trade, the Nepal Electricity Authority holds a 95 percent share, while Butwal Power Company holds a 5 percent share. Butwal Power Company sells electricity to consumers in four districts—Pyuthan, Syangja, Palpa, and Arghakhanchi.”
India, Bhutan, and Bangladesh have already allowed private sector participation in electricity generation, transmission, distribution, and trading. In India, the Electricity Act, 2003 has provided the private sector with non-discriminatory access to energy generation, transmission, distribution, and trading.
In Bangladesh, the Energy Regulatory Commission Act, 2003 has opened energy generation, transmission, distribution, marketing, supply, and storage to the private sector. Similarly, in Bhutan, the Electricity Act of 2001 has involved the private sector in electricity generation, transmission, distribution, and trading.”
As far as the prospects of cross-border electricity trade are concerned, India has announced a commitment to achieve net-zero carbon emissions by 2070, while Bangladesh has pledged to supply 40 percent of its total energy demand from clean sources by 2041. In India, 941 megawatts of electricity are exported during the monsoon season, whereas in Bangladesh, since November 15, 2024, the price of Nepal’s electricity has been lower than that of India and Bangladesh. At the same time, the demand for renewable energy in both Bangladesh and India is very high.
In Nepal, over the past 12–15 years, several hydropower projects have been successfully completed under the public–private partnership model, and the private sector is increasingly encouraged to invest in hydropower. Similarly, in recent times, projects are being developed to add an additional 800 to 1,000 megawatts of electricity generation annually.
Currently, during the winter season, the electricity shortfall is met by importing power from India, whereas in the monsoon season, the surplus electricity is exported to India. Essentially, electricity is imported for 6–7 months in winter and exported for 4–5 months during the monsoon.
In the winter of fiscal year 2022/23, the Nepal Electricity Authority imported electricity worth NPR 1.944 billion from India, while during the monsoon, electricity worth NPR 1.045 billion was exported. In fiscal year 2023/24, electricity imports amounted to NPR 1.693 billion, whereas exports reached NPR 1.707 billion. In other words, in FY 2080/81, Nepal exported electricity exceeding imports by NPR 13 million, making the country a net exporter of hydropower.
By December/ January 2024-25, the private sector has completed and put into operation hydropower projects totaling 2,049 megawatts. For example, the 10.3 MW Dordi Khola project is operated by Dordi Khola Hydropower Company Limited; the 12 MW Upper Khimti project by Himal Hydropower Limited; the 12 MW Namargun-Madi project by Himal Hydropower Limited; the 14.9 MW Mayakhola project by Mayakhola Hydropower Limited; and the 15.33 MW Kalanga Gadh project by Kalanga Hydropower, all of which are commercially operational.
Additionally, the 20 MW Lower Modi project is operated by Modi Energy Private Limited; the 22 MW Maikhola project by Sanimamai Hydropower Limited; the 24.2 MW Likhu ‘A’ Project No. 1 by Himalaya Hydropower Private Limited; and the 25 MW Upper Dordi project by Liberty Energy Company Limited, all of which have been put into operation.
Similarly, the 25 MW Upper Madi project is operated by Madi Power Private Limited; the 27 MW Dordi project by Himal Hydropower Limited; the 30 MW Nadi (Lamjung) project by Nadi Hydropower Limited; the 33.4 MW Likhu ‘B’ project by Global Hydropower Associates Limited; the 38.46 MW Upper Kalanga project by Private Limited; the 42 MW Mistry Khola project by Mountain Energy Nepal Limited; the 44 MW Super Madi project by Super Madi Hydropower Limited; and the 50 MW Upper Upper Marsyangdi ‘A’ project by Sino Sagarmatha Power Company Private Limited, all of which have been put into operation.
Similarly, the 52.4 MW Likhu ‘Four’ project is operated by Green Venture Limited; the 54 MW Super Dordi project by Peoples Hydropower Limited; the 73 MW Middle Tamor project by Sanima Middle Tamor Hydropower Limited; and the 86 MW Solu Dudhkoshi project by Sahas Energy Limited, all of which have been completed and are commercially operational. These projects serve as evidence of the private sector’s capability.
Globally, many countries have involved the private sector in electricity trading. For example, in neighboring India alone, more than three dozen government and private companies operate in electricity trading. India’s inclusion of private companies in electricity trade has made the sector more efficient.
The Government of Nepal has granted electricity trading permission to Nepal Power Trading Company Limited, a subsidiary of the Nepal Electricity Authority, established for the purpose of cross-border electricity trade. The Independent Power Producers’ Association Nepal (IPPAN) has set up Nepal Power Exchange Limited (NEPEX) and has been seeking government approval to participate in electricity trading. Similarly, a subsidiary of Nepal Infrastructure Development Bank has also applied for electricity trading permission.
Allowing the private sector to participate in electricity trading would make the market more competitive and reduce the burden on the Nepal Electricity Authority in seeking buyers. Since the private sector is more agile compared to public entities, market exploration would undoubtedly become more effective. Opening electricity trade could also encourage foreign investors to invest more readily in the hydropower sector.
In fact, the current Electricity Act, 1992-93 does not recognize or acknowledge the term ‘electricity trade.’ In other words, the Act does not envisage involving the private sector in electricity trading. While the Act provides for granting permission for project study, generation, transmission, and distribution, it limits the private sector’s role solely to electricity generation.
Similarly, the Act does not envisage participation in transmission line construction or hydrogen production. This stance of the state itself goes against an open economy. Currently, the private sector wishes to engage not only in electricity generation but also in electricity trading. India and Bangladesh have shown interest in purchasing electricity from Nepal’s private sector. Considering that the private sector holds a 49 percent share in India and 44 percent in Bangladesh, there is no doubt that the private sector can successfully carry out electricity trading through the competitive bidding (Bidding/BTU) method.
The proposed Electricity Bill, which has been registered in Parliament and discussed to some extent in the past, includes provisions to involve the private sector in electricity trading. This is, in itself, a positive initiative. Similarly, if the government can establish electricity trade agreements with countries such as Myanmar, Malaysia, Singapore, Pakistan, and China, there is no doubt that the private sector would be able to export electricity to those countries as well.
Given that Parliament has now been dissolved, the Parliament formed after the elections should not hesitate to pass the proposed Electricity Bill, which would grant permission for domestic and cross-border electricity trading, transmission line construction, and hydrogen production.
Nagariknews
