Nepal-India Power Barter

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Nepal-India Power Barter

The Nepal India energy secretarial level Joint Steering Committee (JSC) meeting is expected to commence soon once the Nepal’s government takes a full shape. It is understood that one of the focal points of the meeting will be to conclude negotiations on exchange of electricity between the two countries on the basis of energy banking. If such barter arrangement is agreed, it will be a big achievement worth rejoice.

The objective is for Nepal to meet its energy demand during the dry season (when the Nepal rivers will have low water flow and thus low hydropower generation) by banking with India the surplus energy Nepal generates during the wet season (i.e. summer and rainy season when Nepali rivers will have high water flow and thus generating energy in excess to Nepal’s demand). If the negotiation succeeds, there will be no ‘load shedding’ during the dry season. The excess electricity exported during the wet season will be reimported as needed later during the dry season. 

India generates power mainly through thermal plants using diesel, petrol and coal which are expensive inputs and increase the unit cost while Nepal’s power generation is hydro-based using water that would go waste if unused. It’s apparent that the unit power cost between the two countries will be different. 

Looking at the overall situation concerning energy demand in both Nepal and India, the amount of investment India incurs to generate power and the existing shortfall in Nepal particularly in dry season, it would be a wise deal to engage in power exchange by adopting the proposed policy of barter exchange rather than fixing monetary price. It will eliminate any grounds for criticism back in Nepal. The impending JSC meeting should discuss about the modality and fix an acceptable ratio for the exchange between the two countries. As Indian power is costlier than that of Nepal, Nepal will obviously have to shed more unit of electricity than it will receive from India. 

Developed countries like Norway and Germany have adopted similar modality for power exchange. The two countries have created a direct link between their energy markets by exchanging power through NordLink, the first interconnector between the two countries which allows Germany to export its surplus solar, wind and thermal power to Norway while Norway supplies back its hydropower when the Norway is flush with water. The connection is believed to have increased market efficiency and helped in stabilisation of energy prices. 

The electricity exchange could be milestone in Nepal India energy relations. With the two way deal, the exchange will improve the consistency of power supplies in both countries, while the transmission line between the two countries will be able to generate revenue. On Nepal’s part, it will supply renewable energy which is emission free and cheaper, reducing CO2 emissions in India to same extent. As thermal plants are emission oriented and nuclear plants are subject to huge risks, the exchange may become an opportunity to allow India contemplate its focus on thermal energy and the stance it has taken for power trading with other countries. 

As far as the stories revolving the possibility of exchanging power with China or its Autonomous Region of Tibet is concerned, it is impractical to think that China will purchase power from Nepal as Tibet itself holds similar if not larger power generation capacity as compared to Nepal. Even if it is possible, it will turn out to be a costly deal for both Nepal and China. 

With cases in hand, it seems better to negotiate power barter with India to meet Nepal’s shortfall during dry season.

Madan Lamsal
[email protected]

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