Harnessing Nepal's Hydropower Potential: A Pathway to Export 10,000 MW

Harnessing Nepal's Hydropower Potential: A Pathway to Export 10,000 MW
Credit goes to Kathmandu Post

Nepal, a country blessed with abundant hydropower potential, is on the cusp of a significant breakthrough in its energy sector. A recent agreement with India has opened up the possibility of exporting 10,000 megawatts (MW) of electricity over the next decade. This development could transform Nepal's energy landscape, boost investment, and stimulate economic growth. However, the journey to achieving this ambitious goal is fraught with challenges and requires strategic planning, robust infrastructure, and a conducive policy environment.

A Landmark Agreement

During a recent visit of Nepal's Prime Minister Pushpa Kamal Dahal to India, a long-term power trade agreement was announced. Indian Prime Minister Narendra Modi expressed India's intention to import 10,000 MW of electricity from Nepal over the next ten years. Although the agreement is yet to be officially signed, Nepali officials have confirmed that the specifics are agreed upon and the signing is a mere formality.

The agreement is expected to be a 25-year deal, with automatic renewals every ten years. It paves the way for medium- and long-term power purchase agreements (PPAs) between entities of the two countries. This agreement is seen as a breakthrough for Nepal, as it guarantees a market for its surplus power, potentially attracting domestic and foreign investments.

The Indian Market and Beyond

India's commitment to purchasing 10,000 MW from Nepal could stimulate Indian investment in Nepal's hydropower sector. The Indian government has indicated that the long-term power deal would foster mutually beneficial investments. This could encourage India's private sector to invest in Nepal's power sector, although the private sector has been slow to commit so far.

The agreement also opens up possibilities for projects with investments from other countries. However, India's current regulations on electricity import-export pose challenges for projects involving Chinese contractors. Despite this, Nepali officials are optimistic that these issues will be resolved, allowing projects developed with Chinese investments to access the market.

Overcoming Infrastructure Challenges

While the agreement with India is a significant step forward, delivering the promised power will be a challenge due to Nepal's current transmission infrastructure. The country lacks high-capacity domestic transmission lines, which are crucial for delivering power to the cross-border line for export.

Several high-capacity cross-border transmission projects are in the pipeline, which will significantly enhance Nepal's power transmission capacity. However, the development of hydropower projects and transmission lines needs to proceed simultaneously to ensure timely export of power to India.

The Road to 10,000 MW

The goal of producing 10,000 MW in a decade is ambitious but achievable, according to government and private sector officials. The Nepal Electricity Authority (NEA) has already signed PPAs for projects with a combined capacity of 7,300 MW, and more projects are awaiting PPA signing.

However, to export 10,000 MW to India within the next ten years, Nepal needs to aim higher. Considering growing domestic consumption and potential export to other countries like Bangladesh, Nepal needs to produce at least 15,000 MW in a decade. This requires initiating projects for 20,000–25,000 MW immediately, as not all projects will be completed on time.

The long-term power trade agreement with India marks a significant milestone in Nepal's journey to harness its hydropower potential. It opens up a vast market for Nepal's power, attracting investments and stimulating economic growth. However, achieving the ambitious goal of exporting 10,000 MW in a decade requires strategic planning, robust infrastructure, and a conducive policy environment. With the right approach, Nepal can transform its energy landscape and make significant strides towards sustainable development.