China and the World

Too much energy

Sino-Indian rivalry hurts Nepalese power exports


The Upper Tamakoshi Dam

On paper the synergies seem undeniable: to the north is China, with a track record in hydroelectric power projects. In the middle is Nepal, whose topography is suited to hydroelectric power generation. And to the south is India, which needs new sources of electricity that reduce its dependence on coal-fired power.

But then there are is the political reality: New Delhi is deeply suspicious of Chinese activity in Nepal and refuses to buy any power generated from Nepali projects with Chinese involvement.

As a result Nepal has struggled to monetise its status as a surplus electricity producer – eventually securing a convoluted deal with Delhi last November in which India only buys hydropower generated by two dams built with Indian assistance.

Nepal was until last August a net power importer. That changed with the opening of the Upper Tamokshi Hydroelectric Project on the Nepal-Tibet border. The 456 MW dam is three times larger than the next largest hydropower generator in Nepal and its launch converted the Himalayan nation’s power deficit to a sizeable power surplus.

The transformative project – built by Chinese state-owned civil engineering company Sinohydro – was initially conceived in 2007 but completion was delayed first by a massive earthquake in 2015 and then by Covid-19 and security threats to Chinese workers.

The Nepalese have had to live with lengthy power cuts for decades but are now being encouraged to use more electricity in their homes and workplaces to absorb the energy surplus.

Nepal’s ultimate goal is to become a regional power supplier, thus reducing its dependence on India and giving a much-needed boost to its economy – which the Kathmandu Post described in December as “limping” and “crippled”.

Hydropower has the advantage of being a cleaner and renewable source that would also help South Asian countries meet their carbon reduction goals without having to sacrifice energy consumption.

Nepal’s offer to sell its electricity should be particularly attractive to the Indians at the moment because the price of coal – which supports about half of India’s installed generating capacity – is hitting record highs. India has pledged to become carbon natural by 2070, while neighbouring Bangladesh has committed to reduce emissions by 22% by the end of this decade.

According to the Nepal Electricity Authority, the country can now generate 2,000 MW of electricity a day, of which 1,900 MW comes from the country’s 30-plus hydropower projects. Under the new power trading agreement with India, Nepal can sell up to 39 MW of power a day. That figure was arrived at because it is equivalent to the output of the Devigaht and Trishuli hydropower stations – both of which were built with Indian input.

India’s limitation on the deal to 39 MW is designed to deter Kathmandu from signing further hydropower deals with China. That annoys the Nepalese, who have strong cultural and historical ties with India but often feel treated as a vassal state by their more powerful partner. Meanwhile Beijing has spent over a decade carefully wooing Kathmandu with aid and investment, replacing India as Nepal’s largest source of foreign direct investment in 2014.

As well as hydroelectric dams, China has also backed investment in roads, industrial parks and railway links.

In 2019 alone China initiated a series of projects worth $2.4 billion in Nepal — equivalent to 7% of Nepal’s GDP. And last June it signed another deal to develop three more hydropower projects, even though Nepal is running some of its generating capacity at reduced levels, because it can’t find enough customers for its output.

“Will India ignore the cost and harm others, while also hurting itself with such a narrow way of thinking? Or will it follow the rules of the market economy and choose to purchase clean and efficient hydropower from Nepal to alleviate its own power shortages?” asked the Global Times.

Currently Nepal still needs to buy power from India in the winter months, when its rivers run at lower levels. But that will change as more hydro plants are built, experts say, bringing an end to Indian imports.

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