India's rising power demand offers Nepal a market, but not forever

India's ambitious goal to become a developed nation by 2047 is driving a massive expansion in its electricity demand and generation capacity. Projections show peak demand reaching 458.7 GW by 2035-36, necessitating a doubling of installed capacity to over 1,121 GW. Prime Minister Narendra Modi has highlighted nuclear power as a key component of the country's energy security, targeting 100 GW by 2047.

This burgeoning demand presents a significant market opportunity for Nepal's electricity exports. However, energy experts caution that Nepal cannot rely on this market indefinitely. India is aggressively investing in a diversified energy portfolio, including solar, wind, hydropower, battery storage, and nuclear energy. This diversification could lead India to prioritize its own generation and become more discerning about imported power.

Experts stress the importance of securing long-term Power Purchase Agreements (PPAs) with India or Bangladesh for individual projects. "For that, the government must move seriously to ensure the market for electricity, from developing hydropower projects to expanding cross-border transmission lines and exporting power," said former energy minister Kulman Ghising. Nepal's substantial theoretical hydropower potential of 83,000 MW, with a feasible potential of around 43,000 MW, could be leveraged if strategic agreements are in place.

Furthermore, Nepal faces geopolitical risks associated with over-reliance on a single market. Historical tensions and economic blockades between Nepal and India underscore the potential for bilateral relations to sour, impacting trade. As India enhances its domestic energy capabilities, it gains greater flexibility to dictate terms for electricity imports. This evolving landscape requires Nepal to focus on providing reliable, competitively priced power, especially during peak demand, rather than just surplus monsoon generation, to remain a viable energy partner for India.

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Now we need to focus on agreements of five, 15 and 25 years with India or Bangladesh for individual projects. For that, the government must move seriously to ensure the market for electricity, from developing hydropower projects to expanding cross-border transmission lines and exporting power.