Hydrocarbon to hydropower

A high-level meeting between the energy secretaries of Nepal and India last month agreed to build six high-voltage cross-border transmission lines to facilitate the export of up to 18,000MW of electricity by 2035.

The government’s recently-approved Energy Development Roadmap and Action Plan envisages exporting 15,000MW to India and Bangladesh within the decade, and generating 28,500MW by 2035. At present Nepal has agreements to export 941MW to India and 40MW to Bangladesh.

Exports to India happen only during the monsoon when there is surplus energy, and Nepal imports power during the dry season. This month, Nepal is generating only one-third of its installed capacity of 3,400MW because of low river flows. 

Generation will exceed 4,000MW by year-end, and another 3,906MW of projects are under construction with more projects worth 3,899MW in the pipeline after power purchase agreements. 

That Nepal is now capable of generating and exporting surplus electricity has been seen as a significant development for a country that was plagued by power cuts for up to 18 hours daily until just eight years ago. 

In the past 20 years, many energy strategies were formed to power growth through exports. As regional countries look for clean energy to meet climate targets, Nepal’s hydropower could be in high demand. Electricity exports can also help offset the country’s huge trade deficit with India.

Investment, or the lack of it, stands as the biggest hurdle in achieving Nepal’s ambitious energy export targets. Generating 28,500MW of electricity would cost Nepal $46.5 billion — four times the annual budget.

Capital investment could come from overseas Nepalis, the Nepal Electricity Authority (NEA), the private sector or from ‘green bonds’. But even if investment is forthcoming, there is no guarantee that the energy will find a market at an acceptable price.

India has increased its quota every year to allow the NEA to sell 941MW of electricity produced by 28 projects under the competitive market and medium-term power sales agreements. It does not buy power from projects with Chinese involvement, and has a strategic monopsony status.

The country exported more electricity than it imported for the first time in 2023/24 fiscal year, selling electricity worth Rs17.06 billion to India. But this is a drop in the bucket in comparison to the country’s total trade deficit. Nepal imported goods worth Rs1.59 trillion, while exports were only Rs152 billion in the same fiscal year.

The amount earned from exporting electricity was just 1.2% of Nepal’s trade deficit. While this could increase in future, it will not go up by much. As it stands, Nepal buys electricity from India at almost the same rate as it sells.

Indian state-owned companies are developing hydropower projects with a combined capacity of 8,000MW, mostly on the Arun basin. The agreements give 21.9% of the electricity from these plants for free for 25 years before they revert to Nepal.

Hydropower experts have long argued that Nepal should increase domestic consumption for value added manufacturing rather than exporting raw power. This means making electricity affordable and accessible for household appliances, transport and industries.

To be sure, proactive government policies on tax rebates for electric vehicles have seen remarkable results. Until January of this fiscal year, Nepal imported 6,256 electric four-wheeled vehicles in comparison to 2,662 petroleum ones. Nearly 70% of all EVs sold were from China.

Read also: Blueprint for a net-zero Nepal, Sonia Awale 

Continuous increase of EV imports will eventually reduce Nepal’s dependence on India for fossil fuel, which currently makes up 18% of all imports and the largest item. Promoting electrical appliances and manufacturing them in the country would reduce the increasing dependency on LPG, which is heavily subsidised.

Only 0.5% of Nepali households use electric stoves, if 5.6 million households were to use induction stoves for three hours every day, the country would use 825MW of electricity, displacing LPG consumption entirely, also reducing Nepal’s carbon footprint.

But all this requires a better transmission and distribution system in the grid so that they reach the remotest areas to double electricity consumption. Scaling up fast charging stations for battery-powered transportation would meet the growing demand for EVs. Extending tax rebates to also include large electric buses would reduce diesel demand, which has also been growing.

Nepal also has to look beyond conventional hydropower to solar-powered pump storage to generate electricity, which would be cheaper and faster to build. Such schemes would also be less destructive to the ecology of the country’s rivers.

The climate crisis is a water crisis, and Nepal must plan for a future in which the Himalayan icecap will be further depleted. Rivers are not just a source of energy but ensure equitable water supply for irrigation, agriculture, and household use.  

Ramesh Kumar