Nepal is embarking on a journey to establish itself as a major player in South Asia’s clean energy landscape. The nation is leveraging its vast hydroelectric resources to position itself as a green energy powerhouse. This ambition is backed by the recent introduction of the third Nepal Trade Integration Strategy (NTIS)-2023, which highlights electricity as a key service product with significant export potential.
Evolution of Export Strategy
Nepal has been actively identifying products with high export potential through its Nepal Trade Integration Strategy (NTIS) since 2010. The most recent iteration, NTIS-2023, marks a notable shift by including electricity among its high-potential export products. This marks a departure from the past when electricity was excluded due to the challenges posed by extended periods of load shedding, lasting up to 18 hours a day between the early 2000s and 2018.
Shifting from Importer to Exporter
With the increasing capacity of cross-border power lines and a surge in hydropower production, Nepal is poised to transition from a net electricity importer to a net exporter. The NTIS-2023 report states that within the next five years, Nepal could generate surplus power exceeding domestic demand. This excess power has the potential to be exported, contributing significantly to the economy.
Nepal began exporting power to India in November 2021, with approval to sell up to 452.6 MW to the Indian power exchange market. In 2022, Nepal’s electricity exports to India exceeded NPR 11 billion, according to the Nepal Electricity Authority (NEA). Former Energy Minister Pampha Bhusal projected that Nepal could potentially export up to NPR 70 billion annually within five years, a figure that could substantially boost Nepal’s economy.
Rapid Capacity Growth
Nepal’s electricity generation capacity has reached 2800 MW, surpassing a peak domestic demand of around 2000 MW. With projections estimating power generation to reach 4,507 MW by mid-2024 and 5,251 MW by mid-2025, the NEA foresees Nepal becoming a net exporter of electricity as early as 2026. This shift would eliminate the need for power imports during the winter season.
Regional Collaboration and Beyond
Nepal’s clean energy ambitions are complemented by regional partnerships. India’s commitment to purchase 10,000 MW of power from Nepal over the next decade and Bangladesh’s interest in importing 40 MW underline the expanding market for Nepal’s hydropower. Additionally, Nepal and India have issued a Joint Vision Statement on Power Sector Cooperation, with plans to involve partner countries under the BBIN framework (Bangladesh, Bhutan, India, Nepal). There is potential for cooperation to extend to Southeast Asia, including member countries of BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation).
Aligning with Green Initiatives
Nepal’s clean energy drive coincides with the de-carbonisation efforts of South Asian nations. India is targeting 50 percent renewable energy by 2030, with a goal of net-zero carbon emissions by 2070. Nepal aims to generate 15,000 MW of clean energy by 2030, with a substantial portion from sources like mini and micro-hydro power, solar, wind, and bio-energy.
Tapping into Untapped Potential
Despite generating around 3000 MW, Nepal’s hydropower potential remains largely untapped. A 2019 study revealed a potential of 72,544 MW from major river basins. The challenge lies in expanding transmission infrastructure to capitalize on this potential fully. Indian companies are stepping in to develop large-scale hydropower projects, signaling growing collaboration between the two nations.
Infrastructure and Approval Hurdles
Weak transmission infrastructure and procedural delays in gaining Indian approval for power exports remain key challenges. Nepal and India lack high-capacity transmission lines, though efforts are underway to construct new lines. A dedicated power line between Nepal and Bangladesh is also missing. Gaining Indian approval for electricity exports from projects involving Chinese and Pakistani elements poses an additional hurdle.
Nepal’s journey to becoming a clean energy powerhouse in South Asia is marked by strategic planning, regional collaboration, and alignment with broader green initiatives. By leveraging its abundant hydroelectric resources and addressing infrastructure challenges, Nepal has the potential to drive its economic growth, strengthen regional energy security, and contribute to a more sustainable future for the entire region.