Until a few years ago, there was uncertainty about whether India would buy Nepal's electricity. Currently, Nepal's electricity is being exported to its southern neighbor, although small in quantity. During Prime Minister Pushpa Kamal Dahal's recent visit to India, India signed an agreement to purchase 10,000 megawatts of electricity from Nepal in the next 10 years. How does this procurement process go on? What progress has been made in Nepal's electricity trade with India and Bangladesh? Nepalkhabar talked to Kulman Ghising, Managing Director of Nepal Electricity Authority, who recently returned from a visit to India with Prime Minister Pushpa Kamal Dahal. Excerpts:
The power sector was on the prime agenda of the Prime Minister's visit to India. You said there was a 'breakthrough' in the power trade agreement. However, it is also said that Nepal did not achieve as desired. How successful was the tour?
Certainly, the Prime Minister's visit to India is a 'breakthrough' in the energy trade. Trade with India and Bangladesh is important for Nepal. How much hydropower is developed in Nepal depends on how much Nepal's electricity market is. Our earlier effort was to ensure a market for Nepal's electricity. The first attempt was to increase domestic consumption. What to do with the remaining electricity after internal consumption? This has also been ensured by this visit to India.
The agreement that India will buy 10,000 megawatts in 10 years has been finalized. As the first agreement, the secretaries of Nepal and India have already signed the preliminary agreement. Now the final signature will be done after it is passed by the Council of Ministers of India.
What is the process of the 10,000 megawatts power trade agreement now?
We can consider the initial agreement reached now as the first step. It is important in itself that Narendra Modi, the Prime Minister of India, publicly said that India would buy 10,000 megawatts. In that too, the first phase agreement was made on the same day.
We call this a 'breakthrough'. Now there is a lot of planning to do. It should be followed continuously to complete the legal procedures. Overall, there will be an 'umbrella agreement'. There are many things in it.
We are making a contract for electricity export for five years immediately. Then we will plan to sign it for 25 years. This agreement will now pave the way for more private sector and government investment in Nepal. After the export market is ensured, the confidence to increase investment for production will increase. Rather than exporting 10,000 megawatts, we should produce at least 20,000 to 25,000 megawatts. Because domestic consumption alone is 5,000 megawatts.
The domestic market alone cannot attract investors. With the assurance of the international market, the confidence of the World Bank and other investors in Nepali hydropower will increase. This will prove to be a milestone in hydropower exports.
There is also an opinion that electricity should be produced for domestic consumption rather than export!
Internal consumption is the same in monsoon and winter. Now there is a demand for 3,000 megawatts. If it increases to 5,000 megawatts, we have to produce three times that amount, i.e., 15,000 megawatts in the dry season. In other words, only if 15,000 megawatts are produced in winter, the demand of 5,000 megawatts in winter can be met.
We have to export electricity in winter and import it in winter. In this, we have to trade electricity in such a way that it can meet the demand of winter and export the electricity that is wasted during the rainy season.
In the next 10 years, we will have a demand of 5000 to 7000 megawatts in winter. For this, we need to generate 15,000 to 20,000 megawatts. For this, a PPA of 25,000 to 30,000 megawatts should be done as well as infrastructure should be built, accordingly. Therefore, internal consumption and the external market should go together. If we cannot maintain balance, we ourselves will be in trouble. The Indian market must be ensured to manage the power lost during winter and the power required in winter. If 5,000 megawatts of electricity are produced to meet the demand in winter, 15,000 megawatts are produced in the dry season. Given this situation, the 10,000 megawatts produced in the dry season should be dumped, or the industry should be run only during the dry season. We also need to ensure trade with India and Bangladesh to accommodate seasonal fluctuations in electricity demand.
Even if the production of electricity remains the same, the demand changes within seconds. In such a situation, when there is a small demand, the electricity produced is wasted, and when the demand is high, the electricity does not meet the demand. We need India and Bangladesh markets to manage it.
Our first priority is to secure the electricity market. For this, legal procedures, regulatory approvals, and transmission connectivity had to be agreed upon. Ensuring the power market was made the main agenda of the Prime Minister's visit to India because there should be an agreement on 'power flow'.
What effect will this latest agreement with India have on Nepal's energy sector?
Indian Prime Minister Narendra Modi has also said that we will import 10,000 megawatts within 10 years as per the long-term agreement. Accordingly, a secretary-level agreement was also made. This has added a lot of confidence to Nepali producers. The agreement not only encouraged us to plan to export 10,000 megawatts but also added the obligation to increase the production capacity for export to 15,000 to 20,000 megawatts. Now it will help plan where to build the transmission line. After the transmission line from Butwal to Gorakhpur, three transmission lines have been constructed. Two more are under construction. It is adding 12 to 15 thousand capacity.
An agreement has been reached with Bangladesh to export 40 megawatts of electricity. Even though the transmission line between India and Bangladesh is of 1150 MW capacity, only 40 MW is left for us. We will not only earn by exporting that much, but it will also open the way to reach the Bangladeshi market.
The legal process and regulatory issues will be solved somewhat and it will be easier when exporting the next time. Then we can proceed with another 10,000 MW process. Now they are building a 765 KV transmission line between India and Bangladesh. This will further support Nepal's access to Bangladesh and Indian markets.
Yes, the export of 40 MW can be considered the first 'breakthrough' of this agreement. India has also agreed to buy electricity for both long and short term. It can be considered as opening the way for market assurance.
The issue of building a separate transmission line with Bangladesh was not discussed during the visit? Why?
A dedicated line is not the only solution for our exports. No matter who builds the transmission line, our electricity must go through Indian soil. Our focus is on how to use this line.
We can also export electricity by paying the rental charges on the transmission lines used by India. Cross-border transmission lines are built between India and Bangladesh, India and Nepal. And we also do business through the same transmission line. Both Bangladesh and Nepal have also demanded a dedicated line, but for the time being, why not consider the transmission line built by them as an alternative? Therefore, for the time being, we have decided to trade electricity through the Indian transmission line.
Does this agreement remove the problem of having to apply every day while importing and exporting?
According to the agreement, there are three levels of PPA -- long, medium, and short term, and daily business is also done, accordingly. It is completely based on market demand.
In the long term, we can go up to 70 percent, medium term to 20, and in short-term to 10 percent through daily bidding to manage our energy. Or it could be the other way around. Sometimes we can sell electricity at a high price through daily bidding and sometimes it can be cheap.
We are advancing the regional market to reach Nepal as well. For example, India, Bangladesh, and Nepal have trilateral trade, in which three countries can bid simultaneously. Europe and other countries also have such real-time markets. In this tripartite trade, Nepal can easily import electricity when there is a demand, and when the production is high, it can easily sell to both countries at the same time. Likewise, the discussion has also started on making a platform of electricity for Nepal, India, Bangladesh, Bhutan, and other countries. From this market, any country can throw electricity into the market if it has too much and take it immediately if it has too little.
India agreed to buy electricity after Indian companies were brought in for the development of many projects. Is it true?
From this visit also, it has been decided to give two big projects to India for 25 years. This is an advantage for Nepal. Twenty-two percent of the production produced by the Lower Arun and Phukot Karnali hydropower projects comes to us free of charge. Transmission line construction is expensive. Since it was not possible for us to build it ourselves, even though the Indian company operated it, we got 22 percent of its energy. It benefits us. After another 25 years, it will belong to Nepal.
In order to be self-sufficient, the morale of investors should be increased, and production should be increased to ensure the market. For this, international investors should be allowed to enter to strengthen the nation in energy. Since we cannot make it ourselves, we should be able to get foreign investment.
A huge investment in energy is required. Big projects are coming, this requires an open policy.
The transmission line is for electricity export and domestic consumption, right?
Even now, if we do not build the transmission line, we will have to bear more expenses. Whether internal or cross-border, both are important. If we are talking about the interior, it will cost 5 billion rupees to build a substation of 400 KV for one kilometer. In Kathmandu alone, the demand for electricity in winter is 500 megawatts, but if it increases to 3000 megawatts, electricity cannot be provided. Sixty billion should be invested to provide it. Who will make this investment?
Apart from this, we are planning to build transmission lines in 17 cities across the country. Eight billion investment is required for this. One billion should be invested annually. Where will this investment come from? For this we must bring in foreign investment. So it is not wrong to give the project to India. The Prime Minister's visit this time has ensured Nepal's electricity market in India and Bangladesh. This is an important achievement for the hydropower sector.
How much is the export target from Nepal this year?
This year we aim to export 1,000 to 1,200 megawatts of electricity. But this year we have also suffered a huge loss. This year, the production fell by 30 percent in winter. Last year at this time, the installed capacity was 2100 megawatts. This year this capacity was 2700 but the production was less than last year. This also reduced the electricity authority's profit by 30 percent. Last year we started exporting from May 30. We were able to export only one day this year. Due to non-production of electricity, we are not able to export even if there is a demand.
Now the demand for 2000 MW has increased in Terai alone. Since production is not possible, it is difficult to manage the internal market. We have to wait till June 15 for production to start. In the next three months, we can export 1,000 to 1,200 megawatts of electricity.
The agreement is low? How do you export 1200 megawatts?
Currently, there is an agreement for the export of more than 500 megawatts of electricity. We are in the negotiation stage for the rest. Therefore, this year, we can export 1,000 to 1,200 megawatts.