Sustainability, Supply Chains, and Geopolitics: Key to Building Resilience

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It is a pleasure to see that the Observers Research Foundation and the Government of India are making a big effort in the Renewable or Green Energy Sector. In Energy, the world has shifted from Biogas to Coal to oil and renewable and now to Green. But we should not try to put Hydro Power Energy anywhere else than Green.

I could see that ORF’s Strategic Summit on Resilience Building – Sustainability, Supply Chain and Geopolitical Situation will talk about Nepal’s hydropower. Nepal’s water resources means not only electricity supply but India’s consumption of drinking water for future generation and rivers flowing through Nepal and India should be serious about flood disasters. In this adversity It is said that Mumbai blackout happened when Chinese army destroyed grid of Ladakh during 2021 during Galwan war. So we are very much aware of eg who to deal integrated transmission line with! We would rather work with Indians and afraid to sign power agreement with any other neighboring states cause we do not want to offend our market.

Studies conducted in the past show that Nepal has the combined potential to produce over 42,000 MW of hydropower. However, the country had to face load shedding for 18 hours a day in not too distant past. But now the scenario has changed. The country has not only become self-sufficient in power production to a certain extent but it has also turned from an energy importing country to an energy exporting country. Yet, the country has to go a long way in hydropower production as it could tap only 7 percent of its potential or so.

Until a decade ago in 2012, Nepal produced only 1,050 MW of hydropower which increased to 2,800 MW in 2023. Last year the country supplied 452.6 MW of power to India and it has been allowed to sell an additional power to the tune of nearly 650 MW.In 2022, the country exported power worth over INR. 687.5 billion to India. In the first two months of the current Nepali fiscal year, Nepal Electricity Authority exported power worth over Rs 5.43 billion to India.

The country has not only become self-sufficient in power production to a certain extent but it has also turned from an energy importing country to an energy exporting country.
Indian investment in the hydropower sector and export of power to India is a game changer for Nepal as it can reduce its dependence on fossil fuels and help balance its trade deficit.

Encouragingly, more and more Indian investment is pouring in Nepal’s hydropower sector. The SJVN Limited, one of India’s largest power companies, which had the credit of developing the 900MW Arun-3 Hydropower project at the cost of US$1.04 billion is going to undertake new projects like the 669 MW Lower Arun Hydropower Project along with the 490 MW Arun-4 project. Additionally, India’s NHPC Limited is now set to invest in 750 MW West Seti and the 450 MW Seti River-6 project. Furthermore, NHPC Limited and Vidyut Utpadan Company Limited of India are likely to develop the 480 MW Phukot Karnali Project. Besides, Nepal and India have now agreed to take forward the Sapta Koshi High Dam Multipurpose Project which could generate 3,000 MW of hydropower.

Therefore, in its upbeat mood Nepal is planning to develop 30,000 MW of electricity by 2035. Till that time, the country’s domestic requirement for power is also likely to peak up to 15,000 MW. The Nepal Electricity Authority (NEA) is also preparing a base to purchase all the power produced by different hydropower projects in the country. Plans are also afoot to optimize the power production in the existing hydropower plants.

Nepal, however, is struggling to develop domestic and cross-border transmission lines to facilitate power trade with India. To fill this void, the country has taken massive support from India in developing different transmission corridors between the two countries. Some projects under American MCC will also help construction of transmission lines.

India has recently agreed to buy 10,000 MW of power from this country in the coming 10 years under a long-term inter-government power trade agreement. Along with this, India has also given a green signal to Nepal to export power to Bangladesh through its transmission line. As such, Nepal is gearing up to export up to 50 MW of power to Bangladesh.

At this development, Shankar Sharma, Nepal’s ambassador to India remarked that this decision on the part of the government of India would pave the way for developing a new road map for power production in Nepal. He also added that this would not only create an environment for larger investment in the power sector in Nepal, but this would also play a major role in accelerating the pace of economic development of the country.

Nepal has made a national commitment to become net zero greenhouse gas emission by 2045.(On November 1, 2021, speaking at the World Leaders Summit of the 26th Conference of Parties to the United Nations Framework Convention on Climate Change (COP26) in Glasgow, Scotland, the then Prime Minister Sher Bahadur Deuba proclaimed that Nepal aimed to reach net zero emission by 2045.)

At COP26 in Glasgow in 2021, India pledged to achieve net-zero emissions by 2070. For India to achieve its goal, green and clean energy from Nepal can contribute immensely.

As per the Alternative Energy Promotion Centre, the share of electricity in energy consumption in Nepal is only 4 percent. While the traditional biomass covers almost 68 percent of the consumption, the share of imported petroleum products stands at around 25 percent. Nepal needs to replace the traditional biomass usage and reduce consumption of petroleum products. Despite the increase in electricity consumption, Nepal Electricity needs to work to provide reliable electricity.

Geopolitics: China seems to be perturbed by the way Nepal-India cooperation has been growing in the hydropower sector. Addressing a discussion on ‘China in the global economy and its impact on Nepal,’ the Chinese Ambassador to Nepal Chen Song said “Unfortunately, you have a neighbour like India…while India is a huge market, huge potential you can tap into, at the same time, India’s policy towards Nepal and other neighbours is not so friendly and not so beneficial to Nepal. We call that policy constraints.” He slammed India’s Nepal policy calling it less than ideal which created a huge imbalance in Nepal’s power trade with India. The Nepalese experts cornered the Chinese Ambassador for his remark as they treated it as interference in Nepal’s internal affairs. Several members of the Nepalese parliament, cutting across the party lines criticized him for his undiplomatic remarks.

Due to the growing cooperation in the hydropower sector between Nepal and India, Indian investment in Nepal’s hydropower sector is likely to quadruple in the years to come. Nepal is now well aware that Indian investment in the hydropower sector is a game changer as the development and export of power to India are likely to help Nepal in:

(i) reducing its dependence on fossil fuels,
(ii) increasing its foreign exchange reserve,
(iii) minimizing the trade deficit with India.

India, too, is benefiting from investment in the hydropower sector and power trade as it is giving due economic returns along with green energy.

Source: HimalayanTimes (Rajendra Bajgain)