Nepal has come a long way from being a power-starved nation to a power surplus country exporting hydroelectricity. Gone are the days when Nepalis had to endure continuous power outages of up to 18 hours a day, with more than half of the country’s electricity had to be imported from India. “ Following the completion of the Upper Tamakoshi Hydropower Project”, Nepal has now entered into the era of energy surplus throughout the wet season.
Rise of new hopes
In terms of hydroelectricity generation, the NEA has accomplished several commendable achievements. The total available energy in FY 2021/22 stood at11,064GWh (Gigawatt Hours), which include 3,259 GWh coming from the NEA projects, 1,976 GWh from NEA’s subsidiary projects, and 4,286 GWh from the Independent Power Producers (IPPs) or the private sector. This is expected to increase further in the coming years as more ongoing projects are added to the system. Assuming that the national demand does not suddenly surge, this means that Nepal will have more surplus that it can export to other countries because hydroelectric power cannot be stored.
Following the India-Nepal Power Trade Agreement signed in 2014, Nepal began exporting 39 MW of electricity to India in the first phase via the Indian Energy Exchange (IEX). Currently, 364 MW of electricity generated by six projects with Indian export approval is being sold to India. Recently, Minister of Energy, Water Resources, and Irrigation Pampha Bhusal also stated that a production partnership agreement had been signed and 50 megawatts of power would be supplied to Bangladesh beginning this year. This gives rise to major hopes for Nepal that this green source of energy can make the country self-reliant on energy and earn foreign currency by exporting it. But the power transmission infrastructure is emerging as a major bottleneck.
But transmission is a major constraint.
The cross-border transmission line has emerged as the primary constraint as existing infrastructure does not support large-scale power trade. For example, Bangladesh has already decided to buy 500MW of electricity from the 900MW Upper Karnali Hydropower trade but it is supposed to be delayed. One of the reasons for this is the transmission connectivity between the project and Bangladesh. There is currently no high-capacity transmission line close to the site of the proposed Upper Karnali Hydropower Project. Additionally, there are capacity constraints in the domestic and cross-border transmission systems to evacuate power generated by hydropower projects in various river basins. Insufficient transmission infrastructures lead to power evacuation risks for hydropower projects under construction.
Another issue is that even on existing transmission and distribution lines, there is a huge transmission loss. A few years back, the system faced over 30 percent loss in the transmission and distribution system. Although NEA has been continuously working to reduce it and has been successful in reducing the systemic loss from17.18 percent in FY 2020/21 to 15.38 percent in FY 2021/22, the transmission loss has to be further reduced for efficient trade.
A power grid for electricity is an interconnected network for electricity delivery from producers to consumers and varies in size and can cover whole countries or continents. Internationally, there is a growing focus on enhancing power grid connectivity to address multiple objectives including power system reliability, cost-effectiveness, security, and de-carbonization as well as sustainability. There are notable examples around the globe of the booming energy trade accompanied by the establishment of a regional grid and powerful institutional arrangements. One of the most suitable examples is the Southern African Power Pool (SAPP) which interconnects 12 countries.
Cross-border transmission interconnections with freedom of access are critical instruments for the integration of the national electricity markets.
Being a part of the power grid can majorly solve Nepal’s electricity distribution and transmission-related problems. This can also help to manage surplus and deficit electricity in a mutually beneficial way. To achieve this, Nepal should make every possible effort on its grounds. Like adopting the policies that support regional cooperation, developing its own effective national and economic plan for cross-border electricity trade, implementing cross-border transmission lines with China as soon as possible, and taking steps to enable the implementation of the SAARC Framework Agreement and the Power Trade Agreement.
Likewise, regional energy cooperation is vital. Because the electricity sector is highly regulated, the process of integrating national power grids necessitates more regional energy cooperation across countries. As a result, the establishment of regional institutional governance is critical for guiding the advancement of energy interconnection and integration. This necessitates transformative cooperation among countries, supported by regional and sub-regional institutions. One of the examples is a trilateral agreement between Nepal, Bangladesh and India to export electricity from Nepal to Bangladesh through dedicated transmission lines connected to the Indian grid. This type of multilateral cooperation should be further promoted.
At the same time, a harmonized licensing framework also helps. Because each country has its own licensing rules and procedures, a harmonized licensing framework ensures that licensing does not restrict entry. It provides regulatory instruments that assist regulators in maintaining market oversight.
Finally, non-discriminatory access to transmission network is a key. Cross-border transmission interconnections with freedom of access are critical instruments for the integration of the national electricity markets. Non-discriminatory access to transmission networks is one of the keys to a free and fair electricity market and facilitates better electricity trade between countries as it ensures that all the countries involved are getting fair benefits from the power trade.
In a nutshell, Nepal’s long-held dream of achieving economic prosperity through the export of electricity is finally coming true now as the country has turned the tables from being an energy-starved nation to one with a surplus. Having said that, there are still a lot of issues in Nepal’s energy sector that have to be mitigated in time to achieve this dream. Among them, transmission-related infrastructures are the major matter of concern.
Sanjila Shrestha is a researcher at Samriddhi Foundation, an economic policy think tank based in Kathmandu. The views expressed in this article are the author’s own and do not represent the views of the organization.