Nepal’s Green Energy and South Asian Market

Published On: February 21, 2023 07:35 AM NPT By: Republica  | @RepublicaNepal

Energy is a critical resource necessary for a country's economic development. Despite this, many nations struggle to generate enough energy to meet their economic goals. Nepal, on the other hand, faces a unique challenge: although it produces abundant green energy in the form of hydroelectricity, at least in the wet season, it struggles with its proper utilization. The country must increase its domestic consumption while simultaneously seeking to sell its excess hydroelectricity to neighboring South Asian countries, including India and Bangladesh. Nepal's ability to fully exhaust its hydroelectric potential will be essential to realizing its economic aspirations.

Building on its commitment to bolster its energy sector, Nepal has taken a significant step forward by conducting high-level bilateral talks with India. Following the 10th Energy Secretary (Joint Steering Committee – JSC) and Joint Secretary (Joint Working Group - JWG) level meetings, which concluded on Saturday, Nepal has secured several positive outcomes. India has demonstrated its willingness to support Nepal's energy ambitions by agreeing to increase the limit for Nepal to sell its energy in the Indian market, and by allowing its landlocked neighbor to export its energy to Bangladesh via the Indian territory. These outcomes mark a significant milestone in Nepal's efforts to harness its hydroelectric potential and drive its economic growth.

India's decision to construct two cross-border power lines, connecting Inaruwa (Nepal) to New Purnea (India), and Dodhara (Nepal) to Bareilly (India), in addition to allowing the Dhalkebar-Muzaffarpur transmission line to operate at full capacity, is a welcome move. This vital transmission line has the capacity to carry up to 1,000 MW of electricity, yet Nepal has been limited to selling only 600 MW of electricity to India using this corridor. Despite this recent development, Nepal still faces significant hurdles in exporting its electricity to foreign markets. While India has increased the export limit for Nepal to 1,200 MW in the Indian market, Nepal has been granted a meager limit of just 50 MW for selling energy to Bangladesh - a country that has expressed a keen interest in purchasing electricity from Nepal for an extended period. Nepal remains optimistic that India will recognize the potential of Nepal's abundant green energy and help its neighbor realize its economic aspirations by facilitating its access to foreign markets.

Nepal has set an ambitious target of producing 15,000 MW of electricity by 2030, with the country's installed production capacity currently standing at 2,430 MW as of last Wednesday (February 15). Meanwhile, construction of projects with a total capacity of 3,281 MW is currently underway. However, the country's surplus production is being underutilized, with over 500 MW of electricity going to waste due to low local consumption - a problem that is expected to worsen during the upcoming rainy season when production could reach 3,000 MW.

To address this challenge, Nepal must increase its export of surplus energy, a move that could significantly ease the burden of its ballooning trade deficit. The benefits of such an arrangement, however, extend beyond Nepal, as India is bound by international agreements to achieve zero carbon emissions by 2070. To achieve this target, India must transition to renewable energy from traditional coal-based power plants, making the export of Nepal's green energy a vital step towards realizing this goal.

However, there are a few bottlenecks which both Nepal and India, particularly the latter, should work to remove. For example India has been restricting Nepal's energy exports, citing the Guidelines for Import/Export (Cross Border) of Electricity-2018, thereby hindering Nepal's ability to sell its surplus energy to both the Indian and Bangladeshi markets. If India adopts a more flexible policy that allows Nepal to export its energy without restrictions, both countries stand to benefit.

So, India needs to create an avenue for Nepal to sell electricity to Bangladesh in unlimited quantities, a move that will attract more investors to Nepal's hydropower sector and guarantee an increased supply of low-cost and green energy from Nepal to India as well. In a world of expanding globalization, no country is entirely self-sufficient in all products. As India continues to experience rapid growth, its demand for energy will inevitably increase. Given that its resource-rich neighbor is situated close by, it would be a wise decision for India to leverage Nepal's energy resources by honestly supporting the country's energy production to the fullest.

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