Breakthrough In Trilateral Energy Cooperation

In what may be a major breakthrough in regional energy trade, Nepal exported 40 megawatts of hydroelectricity to Bangladesh on November 15, using an Indian power grid. The export started at noon and came to an end at midnight. Nepal will resume power export from mid-June next year. The energy trade has commenced in accordance with a tripartite power sales agreement signed among the Nepal Electricity Authority (NEA), India’s NTPC Vidyut Vyapar Nigam, and the Bangladesh Power Development Board about one and a half months ago in Kathmandu. With the signing of this agreement, the tripartite power trading arrangement has come into force. The deal allows Nepal to export 40 MW of electricity to Bangladesh annually from June 15 to November 15, for five years. Under this deal, Bangladesh will pay Nepal for the electricity it imports and Indi will receive a transit fee for the use of its national power grid.

New beginning

Though the export of 40 MW electricity is not so remarkable, the power trade marks a new beginning in the trilateral energy cooperation in the South Asia. The deal is the first of its kind in the region. The implementation of this agreement has paved the way for opening up more avenues of regional cooperation, especially in energy connectivity. One of the prominent features of this agreement is that Nepal earns US Dollars from selling electricity. According to the NEA, Nepal sells electricity for 6.4 US cents per unit. The country is anticipated to sell about 144,000 MWh of power for five months. Both Nepal and Bangladesh stand to reap the benefit from the power trade in the sense that the former makes foreign exchange earnings while the latter gets green energy at a much cheaper price. 

Despite having ceaseless hydropower potential, Nepal’s installed capacity of hydropower has not gone beyond 2,800 MW. Since the country does not have adequate reservoir-based power plants, the energy generated in winter is not enough to meet the growing internal demand. However, many snow-fed rivers in the nation get swollen in summer because of the melting of snow, and the power plants generate more energy. So, Nepal exports about 450 MW electricity to India only in summer while the former imports some electricity from the latter in winter. As Nepal possesses surplus power in summer, it looks for energy markets. Bangladesh requires importing power in order to fulfill its increasing demand.    

It may be recalled here that Nepal, India and Bangladesh began holding talks on the power trade arrangement in 2022. For many years, Nepal had been requesting India for allowing the southern neighbour’s national power grid to export electricity to Bangladesh. This type of regional power cooperation would not have been possible without India’s goodwill and support as Nepal and Bangladesh do not share their borders. Government authorities from the three nations have termed the trilateral power transaction as ‘the historic occasion’.  

The power supply from Nepal to Bangladesh was jointly inaugurated by Minister for Energy, Water Resources and Irrigation Dipak Khadka, India’s Union Power Minister Manohar Lal, Bangladesh’s Power Minister Muhammad Fouzul Kabir Khan amidst a virtual programme on November 15. Highlighting the power export to Bangladesh, Minister Khadka said that the green energy initiative had promised industrial growth and regional prosperity. 

With the energy supply to Bangladesh, Nepal is likely to witness more investments in hydropower plants in the days to come. Agriculture, tourism and hydropower are considered as the three most potential sectors in Nepal. Over the years, the hydropower sector has attracted a lot of investments from domestic as well as foreign investors. Up until one and a half decades ago, the country had to go through power outage up to 18 hours a day. The nation has become free from that perennial problem over the past few years, thanks to the operation of more power plants. However, much remains to be done for the development of the hydropower sector and the export of electricity.

With the availability of hydroelectricity, its consumption seems to have been increasing significantly every year. There has also been a rising trend among people to use electric vehicles with the installation of charging stations on major roads and highways. This tendency is anticipated to be helpful for substituting fossil fuels. Nepal imports fossil fuels such as petrol, diesel, cooking gas and aviation fuel in a large quantity, spending lots of foreign exchanges every year. The increasing import of such non-renewable sources of energy is one of the key factors leading to widening trade deficit. The country’s current trade deficit hovers around Rs. 1.44 trillion. The nation could reduce its trade deficit considerably by exporting hydroelectricity considering the ever-increasing demand for this energy in neighbouring India and Bangladesh. 

Long-term deal

Nepal and India have already reached a long-term power trade agreement. The two nations have also shown their firm commitment towards greater sub-regional cooperation in the energy sector. India has decided to import 10,000 MW hydroelectricity from Nepal in the next 10 years. Better cross-border transmission lines and other infrastructures are being built to facilitate energy connectivity between the two close neighbours. Nepal also aims to generate an estimated 28,000 MW of hydroelectricity by 2035 with a view to exporting it to India and Bangladesh. It is notable that India appears to have given priority to forging energy connectivity for making greater trade and investment linkages with other countries in the region. The southern neighbour has helped build pipelines to Nepal and Bangladesh for the swift and cheaper transportation of petrol and diesel.

As Nepal is suitable for producing hydropower, which is recognised as a sustainable source of energy, the country needs to prioritise this sector along with agriculture and tourism to boost the national economy. 

(The author is a former deputy executive editor of this daily.)