Until now, private companies in Nepal’s power sector have mostly built and run hydropower plants. Selling electricity across the border has been left to established institutions. A decision on Friday moves that line, though only slightly.
Energy Minister Biraj Bhakta Shrestha decided to issue letters of intent (LoIs) to private companies interested in cross-border electricity trading. The letters let a company look for buyers, test whether a deal makes commercial sense and prepare agreements. They do not allow anyone to start trading.
What an LoI does and does not do
The path has three stages, and the decision covers only the first.
- Letter of intent: a company can explore markets, find possible buyers and partners, assess feasibility and prepare agreements.
- Licences and approvals: the company must obtain the required authorisations and meet technical and regulatory conditions.
- Actual trading: power can be sold only when approvals, commercial arrangements and transmission access are all in place.
More room on the Nepal-India lines
The ministry presented a six-month review of its work on October 14. A headline item was cross-border capacity. Nepal and India have agreed to raise import transfer capacity from 1,000 MW to 1,400 MW, and export capacity from 1,100 MW to 1,650 MW. The corridors named are the Dhalkebar-Muzaffarpur and Dhalkebar-Sitamarhi 400 kV lines.
These are agreed transfer capabilities, not electricity actually traded. How much flows will depend on generation, demand, transmission, market approvals and bilateral arrangements. The idea is flexibility: export surplus hydropower when output is strong, and import when domestic supply falls short.
Transmission: the bottleneck
More generation does not help if the grid cannot carry it. The ministry reported the following status by October 14:
- Hetauda-Dhalkebar-Inaruwa, 400 kV: work in the Hetauda section at its final stage
- Bahrabise-Lapsiphedi, 400 kV: construction reported complete
- Bahrabise and New Khimti substations: complete and partly operating
- Markichowk-Bharatpur, 220 kV: reported in operation
- Dhalkebar-Balganga, 132 kV: reported completed and charged
- Lalbandi-Salempur, 132 kV: reported in operation with substations
New rules for power-purchase agreements
The ministry says it has drawn up criteria for new power-purchase agreements (PPAs) that tie approvals to what the grid needs. The priorities include power during peak evening demand in the dry season,steadier monthly output, a larger share of generation in dry months,proof that transmission will be ready by the project’s required commercial operation date.
The government has also extended the required commercial operation dates for 27 hydropower projects with a combined capacity of 540.47 MW. That is a scheduling change. It does not mean the projects are generating power. Whether the new criteria improve reliability and reduce wasted generation will depend on how they are applied.
Background
The government has also advanced other policy and legal changes, including renewable-energy and energy-efficiency legislation, transmission-tariff rules and arrangements for access to the transmission and distribution system.
