In what may be a major breakthrough in power trade, Nepal has entered the vast Indian energy exchange market as the country has been allowed to export an additional 325 megawatt of hydroelectricity to the southern neighbour. The Central Electricity Authority under the Ministry of Power in India has permitted Nepal Electricity Authority (NEA) to sell electricity up to this ceiling in the Indian market.

This development is in line with the Nepal-India Joint Vision Statement on Power Sector Cooperation that was signed during Prime Minister Sher Bahadur Deuba’s state visit to India last week. In October last year, NEA had received the permission to export only 39 MW of electricity to the Indian market. With the new permission, Nepal can now sell up to 364 MW of electricity at competitive rates. Under the second phase, NEA can export 140 MW power from 144 MW Kaligandaki ‘A’, 68 MW power from 70 MW Middle Marsyangdi, 67 MW power from 69 MW Marsyangdi, 51 MW power from 52.4 MW Likhu-IV to India where demand for energy has been increasing rapidly.

With numerous rivers, rivulets and lakes, Nepal holds an enormous potential for hydropower generation. Since several big and small hydropower plants are in the pipeline, the country may generate a lot of surplus clean energy in the near future. So it is necessary for the nation to promote power trade in the region in order to minimise the ever-widening trade imbalance. The existing demand for electricity in the country stands at about 1,700 MW while its power generation capacity in this dry season is only 1,200 MW.

To meet this shortfall, the nation imports from 200-400 MW electricity from India during the dry season as per the requirement. This accounts for about 25 per cent of the total domestic power demand. However, the nation’s power generation capacity in the rainy season is about 2,100 MW. With some small power plants coming into operation, NEA officials are hopeful that the production capacity could exceed 2,300 MW in the coming rainy season. To meet the dry season demand, Nepal will have to import power until the next two years.

As Nepal and India have accorded high priority to the implementation of the joint vision document on power cooperation, the power trade between these two immediate neighbours may increase considerably in the days ahead. The latest electricity export permission given to Nepal has instilled a lot of confidence among those involved in power production. With this market assurance, NEA is in the process of restarting to ink power purchase agreements (PPAs) with different private power producers. This may lead to a rise in the country’s prospects of electricity trade in the days ahead. During the Prime Minister’s visit to India, the two friendly nations had expressed their firm commitment towards strengthening bilateral cooperation in the energy sector, among others. Their joint commitment includes production, transmission and trade of electricity.

Meanwhile, Minister for Energy Pampha Bhusal has expressed her happiness that Nepal’s excess electricity would be sold in the Indian as well as other energy markets as per the Nepal-India vision document on power sector cooperation. Bangladesh has been keenly interesting in purchasing power from Nepal. The recent ratification of the US$ 50 million Millennium Challenge Corporation (MCC) Nepal Compact by Nepal’s federal parliament has also heightened the country’s power trade scope as the US aid project aims to develop cross-border transmission lines and renovate and expand some strategic roads and highways.