Prospects of energy trade between Nepal and Bangladesh are growing.

Dhaka recently proposed power trade between Nepal and Bangladesh in a way that suits the interest of both countries.

"We can import surplus electricity from Nepal during the summer and monsoon seasons and both of them will benefit if they take electricity from our country when their power generation decreases in the winter season,” said Nasrul Hamid, state minister for power, energy and mineral resources of Bangladeshi government, according to a statement by the ministry.

During the bilateral meeting with the delegation led by Nepal’s Energy Minister Pampha Bhusal early this week, the Bangladeshi minister said that Bangladesh has been importing electricity from India; the process of importing hydropower from Nepal is almost in the final stage; and a memorandum of understanding for importing hydropower from Bhutan is in the process of signing.

The remarks by the Bangladeshi minister come at a time when India, which lies between the two countries, has expressed its eagerness to promote sub-regional cooperation on energy with Nepal, Bangladesh and Bhutan.

The southern neighbour was earlier reluctant to provide transmission access to Nepal and Bangladesh for electricity trade, according to a former Nepali government secretary.

As per the Joint Vision Statement on Power Sector Cooperation issued in early April during Nepali Prime Minister Sher Bahadur Deuba’s India visit, the two countries aim to expand cooperation in the power sector to include their partner countries under the Bangladesh, Bhutan, India and Nepal (BBIN) framework, subject to mutually agreed terms and conditions between all involved parties.

“The vision statement talks about power cooperation in the BBIN region and Indian officials have also been assuring us that it would provide transmission access to enable energy trade between Nepal and Bangladesh,” said Kul Man Ghising, managing director of the Nepal Electricity Authority (NEA).

Officials and experts say if India gives access to its transmission infrastructure, bilateral power trade between Nepal and Bangladesh is possible and such trade is also compatible to the needs of both countries.

Bangladesh faces surplus energy during the winter when demands remain low but Nepal faces power shortages because of low water levels in the rivers as most of Nepal’s energy is produced by run-of-the-river plants. On the other hand, Nepal produces surplus energy during summer and monsoon when power demand in Bangladesh surges. Since last year, Nepal has been able to sell its surplus energy to India’s power exchange market.

“In fact, Bangladesh’s proposal makes perfect sense,” said Ghising.

According to him, Bangladesh has been telling Nepal for long that it would buy power from Nepal from May to December and would sell its electricity to Nepal from December to February.

“Seasonal variation in production and consumption of electricity between the two countries makes power trade between Nepal and Bangladesh a win-win deal,” said Posh Raj Pandey, executive chair at South Asia Watch on Trade, Economic and Environment (SAWTEE), a South Asian think tank headquartered in Kathmandu.

According to a report published in WhiteBoard, a flag-ship publication of the Centre for Research and Information (CRI), a not-for-profit policy research organisation in Bangladesh, in March last year, the excess power generation situation in winter looks worse during the winter.

The lowest demand in 2020 was on January 4, at just 7,537MW while peak power production during winter of 2020 was around 11,000MW, according to the report.

Bangladesh has no option but to keep this excess capacity on standby during four-five months of winter. This problem has existed for several years now, according to the report.

The Bangladesh Power Development Board claimed to have grid production capacity of 21,000MW but effective capacity was around 15,000 MW in 2020, according to the report.

During the summer’s peak in 2020, actual demand for electricity stood at 13,000MW while highest power generation in 2020 was 12,892MW and the record was set on September 6 that year, the report says.

“Energy in Bangladesh is too expensive and it has to pay a minimum amount to certain power plants known as rental power plants even when it is not using power,” said Ghising. “But Nepal can give an option to Bangladesh because our energy is not only cheap but also clean.”

The Bangladeshi state minister also acknowledged Nepal’s potentially important role in helping Bangladesh to achieve its target of markedly increasing share of renewable and clean energy in its energy mix.

“The Department of Power [Bangladesh] is working towards the goal of generating electricity from 50 percent renewable energy and clean energy by 2040,” said State Minister Hamid. “In this case, the cooperation of neighbouring countries like Nepal and Bhutan will play a big role in achieving our goal.”

Bangladesh has already decided to buy 500MW of electricity from the 900MW Upper Karnali Hydropower Project to be developed by India’s GMR Group, which has set up GMR Upper Karnali Hydropower Limited to develop the plant in Nepal.

Bangladesh has also shown interest in developing hydropower projects in Nepal, including the Sunkoshi III Hydropower Project, according to the Energy Ministry.

During the secretary-level Joint Steering Committee meeting between Nepal and Bangladesh in September last year, the two sides also agreed to develop a dedicated transmission line between the two countries by bringing India on board.

While things appear rosy on the paper, officials and experts, however, point out some challenges to energy trade between Nepal and Bangladesh. One of the challenges is transmission infrastructure because there is no direct connectivity between the two countries.

“India can help in this regard,” said Pandey, the executive chairperson of SAWTEE. “India has been increasingly supportive of the idea of giving access to its transmission infrastructure for sub-regional trade considering its own interest in creating a regional bloc under its control.”

Despite India’s eagerness to help, Nepal and India don’t have transmission connectivity with the West Bengal state of India, through which power can be traded between Nepal and Bangladesh.

Nepal does have cross-border transmission lines with Indian states of Bihar, Uttar Pradesh and Uttarakhand. West Bengal is the only Indian bordering state not connected with Nepal by a transmission line.

During the meetings of secretary-level Joint Working Group and secretary-level Joint Steering Committee on bilateral power sector cooperation between Nepal and India held in Kathmandu on February 23-24, the two countries decided to conduct a study on the feasibility of a cross-border transmission line between Nepal and West Bengal.

The existing Joint Technical Team has been authorised to carry out the study. Officials said transmission connectivity with West Bengal could also open an avenue for transporting Nepal’s electricity to Bangladesh through the Indian territory.

“The immediate purpose of the agreement with India is to find out if transmission connectivity between Nepal and West Bengal is possible,” Chiranjeevi Chataut, joint-secretary at the Ministry of Energy, told the Post in February. “Once connectivity is established with this part of India, the possibility of exporting electricity to Bangladesh from Nepal through an existing or new dedicated transmission line in West Bengal cannot be ruled out.”

According to Pandey of SAWTEE, besides opening the opportunity for bilateral trade between Nepal and Bangladesh, a new opportunity for sub-regional energy trade among BBIN countries is also emerging, with India itself pushing for it.

“For this, transmission line connectivity alone will not be enough,” said Pandey. “There is a need for harmonised rules and regulations among the participating countries and there should be multilateral agreement on details including the wheeling charge of electricity among the participating countries.”