Unlocking Nepal’s Hydropower Potential: A Gateway to Cross-Border Energy Trade

In a recent webinar hosted by the Nepal Hydropower Association, Sushil Aryal took center stage, shedding light on Nepal’s thriving hydropower sector and the exciting possibilities of cross-border energy trade. As a participant in this enlightening session, here’s an in-depth exploration of the key insights shared and the ensuing discussions that unfolded.

Nepal’s Hydropower Landscape: Current State and Future Projections

Aryal commenced the presentation by underscoring the substantial progress made by the Nepal Electricity Authority (NEA). Power Purchase Agreements (PPAs) for new projects have propelled the installed capacity to an impressive 5.4 GW as of 2021. Remarkably, 88% of this capacity is attributed to Run-of-River (ROR) hydropower projects, amounting to 4.76 GW. Aryal projected an even more remarkable future, with the installed capacity expected to reach 6.51 GW by 2025, surpassing double the forecasted demand of 2.95 GW.

Surplus Hydropower Generation and Cross-Border Aspirations

One of the standout revelations was the anticipation of surplus hydropower generation in the medium term. Despite a peak demand of 1.8 GW in 2023, the total installed capacity is projected to soar to 2.8 GW. This surplus has sparked the interest of both NEA and the Government of Nepal (GoN), who expressed their intent to trade this surplus renewable energy (RE) with India. A critical question emerged – how much RE would be surplus and available for trading with India? The answer lies in the ambitious projection of reaching 8,845.4 MW by the fiscal year 2030/31, dominated by ROR hydro.

Transmission Line Constraints and Inaugural Milestones

However, the road to seamless cross-border trading faces hurdles, primarily transmission line constraints. Four 132 kV and one 400 kV existing cross-border transmission lines link Nepal and India, with a total transmission capacity of 1,356 MW. Aryal highlighted the recent inauguration of three 132 kV transmission lines, connecting Bihar and Uttar Pradesh in India, a significant step towards overcoming transmission limitations.

Yet, concerns were voiced regarding the decision to guarantee 10,000 MW of Nepal’s hydroelectricity for the Indian market. Stakeholders emphasized the need for wide national discussions and parliamentary oversight, given the intrinsic link between hydropower and water resources.

Planning for the Future: Transmission Line Upgrades and Financial Implications

Looking ahead, Aryal outlined plans for the capacity upgrade of two 132 kV transmission lines and the construction of a new 400 kV transmission line (2210 MW). However, uncertainties surround the commissioning date of the 400 kV transmission line, prompting the consideration of two scenarios to address this uncertainty. In case surplus RE cannot be traded, it would be curtailed, with projected figures of 3.2 TWH in fiscal year 2025, constituting 36.5% of tradable energy, and 5.5 TWH in fiscal year 2030 under TL-Low scenarios, representing 66% of tradable energy.

Financial Implications and Emission Savings Potential

Financial implications came into focus, with existing Power Purchase Agreements (PPAs) between NEA and Independent Power Producers (IPPs) on a ’take or pay’ basis. Aryal compared Nepal’s electricity price, based on the posted PPA rate of ROR-type hydro, with India’s electricity price, derived from the 2019 average IEX price in Northern and Eastern regions.

Highlighting the emission savings potential, Aryal showcased the average grid emission factor of India in 2018 (0.82 kg/kWh). The projection indicated that if Nepal’s surplus renewable energy could be traded with India, total emission savings of 81.5 MTCO2 eq. could be achieved from 2021 to 2030, amounting to about 9% of India’s power sector emissions in 2018.

Cross-Border Trading Potential and Environmental Benefits

The path ahead for Nepal appears promising, with the potential to commence cross-border trading from fiscal year 2021. The trading potential is forecasted to increase nearly eightfold from 2021 to 2030. In 2025, a remarkable 42% of available renewable energy could be traded with India, a percentage that is expected to remain well above 30% from 2023 onwards. Notably, 85% of tradable renewable energy will be available during six months of the year, emphasizing the seasonality of surplus generation from May to October, the wet season.

Managing Surplus Energy and Integration Challenges

Professor Shobhakhar Dhakal took the stage to address the crucial aspect of managing surplus energy in Nepal. He emphasized the necessity of finding avenues for trading as facing a surplus without trading options could lead to substantial losses. To mitigate this, the presentation proposed trading with India through the existing transmission lines, ensuring that Nepal’s surplus energy finds a market.

Moreover, Dhakal delved into the complexities of integrating surplus energy into the national grid. With the intermittent nature of hydropower and the need for grid stability, strategies for balancing, storage, and demand-side management were explored. Additionally, he emphasized the importance of robust forecasting mechanisms to anticipate and manage surplus energy effectively.

Paper Insights: Medium-term Assessment of Cross-Border Trading Potential

The session concluded with an insightful overview of the paper authored by Aryal and Dhakal, titled “Medium-term Assessment of Cross-Border Trading Potential of Nepal’s Renewable Energy Using TIMES Energy System Optimization Platform.” This paper provides a comprehensive assessment of Nepal’s renewable energy generation, the potential for cross-border trade, and the associated financial and environmental implications. It serves as a valuable resource for stakeholders and policymakers involved in shaping the future of Nepal’s energy landscape.

Closing Remarks: A Vision for Sustainable Energy Future

In closing, the webinar provided a panoramic view of Nepal’s hydropower potential and its aspirations for cross-border energy trade. The challenges of transmission constraints, financial implications, and environmental considerations were transparently discussed. The participants expressed a collective vision for a sustainable energy future, acknowledging the need for careful planning, stakeholder collaboration, and a robust regulatory framework.

As Nepal navigates the complexities of unlocking its hydropower potential, the journey towards cross-border energy trade unfolds as a significant chapter in the nation’s energy narrative. The collaboration between experts, policymakers, and the public will play a pivotal role in shaping this narrative, ensuring that Nepal’s surplus renewable energy becomes a catalyst for regional energy sustainability.

Additional Information:

These numerical insights underscore the dynamic energy landscape in Nepal and the intricate considerations surrounding cross-border trading opportunities. The presented data emphasizes the need for strategic planning, infrastructure development, and policy initiatives to harness the full potential of Nepal’s hydropower resources and contribute to regional energy sustainability.