Construction work on the 220/132 kV New Butwal substation at Sunwal in Nawalparasi has reached the final stage, and it is expected to become operational by March.

According to the Nepal Electricity Authority, the substation is part of the move to reinforce the transmission system to facilitate bilateral and regional power trade, and enhance the national grid for domestic energy distribution.

“A majority of time-consuming civil works have been executed, and if the project does not come up against any obstruction, the project will be completed in the stipulated time,” said Kulman Ghising, managing director of the Nepal Electricity Authority. "The foundation work has been executed, equipment has been hauled to the project site, and some equipment is being shipped. Only the installation work remains to be initiated.”

The Indian contractor, Tata Project, which has mobilised more than 100 workers at the construction site, has also expressed its commitment to give final shape to the crucial transmission infrastructure by March.

As per a report issued by the National Renewable Energy Laboratory’s Strategic Energy Analysis Centre of the US, Butwal in south-central Nepal is strategically located for cross-border energy trade between India and Nepal because of its proximity and ability to connect with India’s Uttar Pradesh state and the Northern Regional Load Dispatch Centre via Gorakhpur where power demand is high during the monsoon.

The state-owned power utility plans to evacuate electricity generated by schemes in the Kali Gandaki River basin through the 220 kV Kali Gandaki corridor to New Butwal substation and to the national grid.

New Butwal substation is also the starting point of the second high capacity transmission link between Nepal and India for bulk movement of hydroelectricity. Another 400 kV substation has also been planned at the site for cross-border energy exchange.

In October, the two South Asian neighbours agreed to fund the transmission line connecting Butwal to Gorakhpur in India through a commercial entity with both countries pledging equal entity in the funding of the project.

The proposed transmission line is also a major component of the $630 million Nepal Compact—an agreement between the government of Nepal and Millennium Challenge Corporation of the US, which has stirred political controversy in Nepal of late.

Millennium Challenge Account-Nepal, the implementing agency of the transmission and road projects under the US grant, plans to set up a 400 kV transmission line from Damauli in Tanahu and connect it to New Butwal substation.

Also, the Nepal Electricity Authority is building a 220 kV Bardaghat-Butwal transmission line financed by the World Bank Another 400 kV link to western Nepal, from Butwal to Kohalpur and to Upper Karnali via Surkhet, has been proposed to be built with preparatory studies ongoing under a $21 million grant from the Asian Development Bank.

“In addition to building greater generation capacity, Nepal must also upgrade and expand its limited transmission and distribution networks. A major obstacle to exploiting Nepal's hydropower export potential is the shortage of adequate infrastructure to transmit electricity to neighbouring India,” said the multilateral lending agency. “Developing Nepal's hydropower generation, transmission, and export infrastructure would benefit both countries.”

New Butwal substation, once built, will be the second largest electricity hub and transmission infrastructure after Dhalkebar substation in Dhanusha.

Nepal is currently trading up to 250 megawatts of electricity with India through the Dhalkebar-Muzaffarpur setup, and work is underway to upgrade Dhalkebar substation to 400 kV capacity in a bid to relay a larger amount of power. The move is also expected to allow the two countries to run their electricity grid in synchronous mode, and facilitate a smooth and reliable flow of electricity.

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