Sub-National Energy Trade: Ushering a New Dawn in India-Nepal Relation

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Ramapati Kumar (CEO, CEED India): India and Nepal have seen enduring friendship and harmony since the onset of civilisation in the Indian subcontinent, and no other countries in the region share the same set of cultural practices and social system that these seemingly two siblings epitomise. India and Nepal also face same set of challenges in terms of eradicating poverty, providing energy access to millions of masses and moving onto sustainable development pathway. In such backdrop, the trans-boundary energy trade between India-Nepal has limitless possibility.

In fact, India and Nepal have moved from the narratives of ‘power development’ to ‘energy exchange’ to ‘energy trade with business sense’ for mutual benefit which can usher in inclusive development in the region and promote a deeper flow of engagement between these nations. Within the realm of transboundary trade, an exciting opportunity also emerges for ‘Sub-National Trade’ via states like Bihar and Uttar Pradesh, who share a long boundary with Nepal, and their’s geographical proximity suitably fits for interconnection and transmission lines with capitalising on each other’s infrastructure and energy sources.

For instance, Nepal can gain by developing its major resource, hydropower potential, for which it will have a burgeoning market in India and potential of earnings from exports. India, on the other hand, can export renewable sources like solar power whose intermittency can be balanced by subsequent import from Nepal’s flexible hydropower capacity. Thus, trans-boundary trade creates a win-win situation for both countries and in this connection Bihar and Uttar Pradesh are low hanging fruits for the realisation of Sub-national energy trade.

Energy potential and Opportunity ahead

India has put forwarded eight Nationally Determined Contributions (NDCs) under the Paris Agreement of United Nation Framework on Combating Climate Change (UNFCCC, 2011),  and has set an ambitious target of 175 Gigawatt (GW) capacities by the year 2022 with a share of non-fossil based capacity in the energy mix of more than 40% by the year 2030, and a reduction in the emissions intensity of its GDP of 33-35% by the year 2030 from renewable sources. India has an overall potential of around 750 GW in Solar and another 700 GW in Wind and with this the target of 175 GW looks paltry, but the Renewable Energy (RE) installed capacity currently stands at 86 GW in comparison with the conventional power that stands at 350 GW. On the other hand, Nepal has a hydro potential (technical) of 86 GW and has a demand forecast of more than 37500 GWh by 2040, whereas India has a demand forecast of 480 GW by 2036.

Moving onto Indian states, Uttar Pradesh has a RE potential of around 27.5 GW with solar having a larger share of around 23 GW and a current demand of 23 GW; whereas Bihar having a solar potential of around 11 GW and a projected demand of 10 GW in next few years. On the other hand, Nepal has an economic hydro potential of 43 GW with a demand of just 1.5 GW which has been projected to increase to 17 GW in next few years. The mentioned potential of solar in UP and Bihar and that of hydro in Nepal largely remains untapped or unexplored which itself places a huge opportunity for making best use of each other’s resources.

Bedrock of Sub-national Energy Trade

Since India and Nepal are moving towards a more sustainable and cleaner energy transition path, the need of the hour is to look at the locally available renewable resources in excess during the peak seasons to be traded for better energy access, low cost and less wastage solutions. The main bedrock of India-Nepal energy trade is to harness the peak solar power generation from Bihar and UP during the pre-monsoon period which will assist Nepal in energy supply at domestic level; whereas the hydro power from Nepal will assist in managing Bihar’s winter loads thereby helping each other through strategic use of resources to become energy independent.

Considering India and Nepal are well positioned for harnessing the local resources for mutual advancement in various spheres of life, there exist various collaborative mechanisms, e.g., joint working group, joint steering committee and joint technical committee along with intergovernmental task force envisaged under the bilateral energy agreement and subsequent guidelines between the period of 2014-2018. However, the pace of trans boundary or Sub-national energy trade is not on expected lines. What is required here is coherent policy framework that can enable greater integration of electricity and power markets through regional roadmaps, harmonised policies and regulations with clear role of regional entities and networks, along with creation of cross-border infrastructure. The coordinated sub-national trade can facilitate renewable energy integration by increasing access to resources available for balancing and energy mix.

Ushering a New Dawn

The bilateral trade of energy and electricity requires not only the efforts of political establishments, governments, inter-governmental bodies, multilateral agencies, distribution companies, business and industries associations to make it a sound business proposition for both sides; but also to catalyse it as a social initiative for ensuring energy security for all the masses at the bottom of pyramid in the region. This is high time to make strategic investment in policy frameworks and enterprising efforts for changing the energy paradigm in favour of the renewables for realisation of energy access and energy security in the region. The sub-national energy trade shows us a path which can be instrumental in reducing poverty, improving health, promoting economic growth, and ensuring well being of people at large.

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