Nepal Earns NPR 3 Billion from Electricity Exports Amid Growing Concerns Over Production and Market Expansion
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Energy Minister Biraj Bhakta Shrestha announced on Monday during a program organized by the Nepal Electricity Authority (NEA) that Nepal is positioned to export nearly NPR 3 billion worth of electric power.
He interpreted the electric power trade data from last fiscal year in foreign markets as not only an achievement but also as evidence that “Nepal is undergoing transformation.”
However, some energy experts note that despite the positive statistics, full confidence is yet to be established regarding the reliability of foreign markets and the expansion of domestic consumption alongside continuously increasing production. They warn that when production increases without corresponding market and consumption growth, there is a heightened risk of electricity being wasted in a disorganized manner.
Notably, in recent years, the issue of electricity wastage during the monsoon season has become evident.
“Overproduction of one or two hundred megawatts is not necessarily a problem; it can be considered as reserve capacity,” said Mohan Dangi, President of the Independent Power Producers’ Association Nepal (IPPAN). “However, as new production increases, this issue could become a significant problem.”
Private Sector Calls for Greater Role in Electricity Trade and Transmission
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Former Executive Director of Nepal Electricity Authority, Hitendra Dev Shakya, noted delays over several years in expanding the transmission and distribution systems.
“Since the private sector is now capable of electricity production, the primary focus should be on expanding transmission and distribution. However, the required urgency and attention in these sectors are lacking,” he stated.
Energy producers stress that to prevent electricity wastage, permissions should also be granted to the private sector for market expansion and construction of transmission lines alongside production.
“Indian traders are also interested in supporting electricity trade, and the private sector has gained experience in building from hydropower production centers to main transmission lines,” IPPAN President Dangi added.
Ministry of Energy spokesperson Sandip Kumar Dev informed that legal amendments are in progress to allow private sector participation.
“The new Electricity Act had been introduced in Parliament but could not progress due to parliamentary dissolution. Preparations are underway to present the bill again, which will include provisions for private sector involvement,” said Dev. “However, as this process may take time, we are also seeking solutions via Act amendments.”
Current Electricity Exports from Nepal to India
Photo Credit: NEA
According to officials at the Nepal Electricity Authority, the total installed production capacity has reached 4,120 megawatts.
The peak domestic consumption has hit 2,500 megawatts, while up to 1,200 megawatts are exported to India.
“On Tuesday morning, about 900 megawatts of electricity was being exported to India,” acting Executive Director Dirghayu Kumar Shrestha said.
Nepal exports electricity to India and Bangladesh, with exports to Bangladesh routed through India. However, this export is largely limited to the monsoon months.
Many additional electricity projects are underway under new plans, increasing pressure to expand domestic consumption and secure export markets. “Currently, approximately 6,200 megawatts are under production,” IPPAN’s Dangi said.
Minister Shrestha asserted that the government has clear plans for both production and transmission to avoid power wastage.
“Currently, the government’s priorities include increasing domestic consumption alongside production, improving transmission and distribution systems, and expanding foreign markets.”
Status of Domestic Electricity Consumption
Photo Credit: NEA
Electricity consumption increased by nearly 13 percent last fiscal year compared to the previous year.
“This figure has remained at an average consistent rate. In recent years, annual domestic consumption growth has ranged between 12 and 15 percent,” explained NEA Director Shrestha.
Officials at the Ministry of Energy stated that the government prioritizes domestic electricity consumption.
“Our main objective is to reduce the trade deficit. Reducing production or trying to sell electricity without achieving consumption levels would be a significant mistake,” said Ministry spokesperson Dev.
Yet, experts say the likelihood of domestic consumption quickly rising to meet production levels is low.
Former Executive Director Shakya pointed out two main reasons for the lag in increasing domestic consumption.
“Firstly, the income of our people must increase, which is tied to economic growth. This growth rate must be sustained. Secondly, there must be policy interventions to improve the quality of transmission and distribution.”
“Annually, every customer experiences roughly 500 hours of power outages, indicating significant dependency problems in the distribution system for households and industries,” he added.
Shrestha acknowledged ongoing efforts to improve electricity quality but noted that increases in household consumption alone will not significantly raise overall domestic demand.
“Household consumption mainly affects only peak hours, so for long-term growth, attracting large consumers such as industries and data centers is necessary.”
Challenges in Electricity Exports
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Nepal has expanded electricity production and exports targeting India and Bangladesh in recent years. Despite improvements in inter-country transmission network expansion, experts say procedural complexities with India remain a challenge.
Although long-term agreements exist, projects still need separate approvals for export capacities specific to each production unit.
Former Executive Director Shakya pointed out that India’s decision-making process is difficult to predict, which poses a significant problem.
“It is unclear which projects will be approved and what steps are needed, creating uncertainty. I hope for clarity from the highest levels,” he said.
“I estimate that projects with about 1,200 megawatts capacity are currently waiting for Indian approvals.”
However, NEA’s Shrestha noted that projects currently awaiting approvals have a combined capacity below 200 megawatts but agreed that clear information at senior levels is essential.
Energy Ministry spokesperson Dev said initiatives are underway to address this issue. Nepal has requested India to process project approvals in a ‘one-by-one’ manner simultaneously.
“This would streamline the process for both sides. With access to regional markets, there’s potential to expand our electricity reach through India to other markets, benefiting the entire region,” he added.
“We also expect this topic to be discussed during upcoming high-level visits, which should improve the situation.”
A recent Nepal-India energy secretary-level meeting held in Pokhara agreed to increase electricity export capacity from 1,100 megawatts to 1,650 megawatts via the Dhalkebar-Muzaffarpur and Dhalkebar-Sitamadhi transmission lines.
Regarding transmission lines, Dev announced that within the next five to seven months, Nepal will have three new transmission lines with 400 kV capacity.
“Alongside these, transmission lines will be prepared aiming to export nearly 15,000 megawatts of electricity to India over the coming decade.”