India has reiterated that it is committed to allowing Nepal to participate in its power exchange market, but Nepali energy officials say it might take some time for that to happen owing to technical and legal complications.

“Before we start exporting large amounts of power to trade on the Indian power exchange, we have to ensure that our grid is reliable and fully synchronised with India’s, and the southern neighbour must validate Nepal’s participation in the energy exchange through its regulations,” said Prabin Raj Aryal, spokesperson for the Ministry of Energy, Water Resources and Irrigation.

“Our Indian counterparts were forthcoming about framing a Conduct of Business Rules ensuring Nepal’s participation in the market at the recent secretary-level meeting held between the two countries,” Aryal said.

In line with the power trade commitment, Nepal and India have agreed to enforce technical reforms on strengthening and protecting the existing and under-construction cross-border transmission lines and operate their grids in synchronous mode within six months.

“Once the grids are synchronised, Nepal and India can flow power back and forth seamlessly in line with demand and supply requirements,” said Aryal.

According to Aryal, the Nepal Electricity Authority, in line with its projections of surplus power generation in the country, has started work to reinforce the power exchange infrastructure.

In January, Nepal had requested India to allow transaction of power through India’s power exchange market in the form of Day-Ahead and Term-Ahead market through the 400 kV Dhalekbar-Muzaffarpur and Tanakpur-Mahendranagar transmission lines.

The Indian side had said that the process could be initiated by appointing an Indian trading company as the agency representing Nepal’s power utility in the Indian market as per guidelines issued by India’s Central Electricity Regulatory Commission.

“Any electricity trading licensee of India may, after obtaining approval from the Designated Authority, trade in the Indian Power Exchanges on behalf of any Participating Entity of neighbouring country, for the specified quantum as provided in the Approval subject to compliance with the applicable regulations of the Commission,” state the guidelines.

In line with the guidelines, the state-owned power utility has signed a memorandum of understanding with India’s NTPC Vidyut Vyapar Nigam, a registered exchange member, on representing Nepal in the Indian power market, four months ago.

And during the recent meeting between Nepali and Indian energy officials, Indian officials agreed to draft business rules for Nepal to participate in the market.

Once the rules are approved, the power utility, if allowed by the Energy Ministry, will be able to trade energy in the Indian Day-Ahead and Term Ahead markets through NTPC Vidyut Vyapar Nigam.

Access to the Day-Ahead market will allow the power utility to transact electricity a day in advance and Term-Ahead market will allow it to enter into buy-sell contracts 11 days ahead of the delivery day through a closed auction bidding process.

As per the arrangement between Nepal and India, Nepal will be liable to pay wheeling charges for the use of India transmission lines while selling or buying power on Indian power exchange markets.

According to energy officials, Nepal is mulling to participate in power exchange through Indian Energy Exchange, India's largest power trading platform with the involvement of more than 56 distribution companies, over 500 electricity producers and 4,000 open access consumers including metal, food processing, textile, cement, ceramic, automobile and other commercial entities of India.

The decision to participate in the market follows surplus power projections in the country. According to the Nepal Electricity Authority, Nepal will see 649 megawatts of surplus power in the fiscal year 2021-22 and 7,943 megawatts of additional energy by 2025.