Electricity trade in South Asia: Implications of a trilateral power trade agreement between Bangladesh, India and Nepal

 Keywords: South Asia, India, Nepal, Bangladesh, Cross-Border Trade, Electricity

Date: 18th Sept 2023

India, Nepal and Bangladesh have been negotiating a tripartite power trade agreement under which Nepal would use India's transmission line to provide up to 500 megawatts (MW) of hydropower to Bangladesh. The successful conclusion of the trilateral agreement will increase cross-border electricity trading in the South Asian region. 

This has come at a time when Bangladesh is struggling with regular blackouts and a scarcity of foreign currency is restricting gasoline imports. Meanwhile, during its wet season, Nepal produces approximately 30 percent more hydroelectricity than it requires and the country has long desired to export some of the excess to Bangladesh. 

Additionally, there are current official-level discussions underway to build a separate transmission line that would link Bangladesh and Nepal via India. For the same, two paths have been identified. While South Asian nations are currently engaged in bilateral power trading, a tripartite agreement will expand the region's opportunities for electricity commerce in the future, especially for green energy. 

These events come in the aftermath of India’s recent expression of interest to engage in regional electricity trading. It was on 1 June 2023, when the Indian Prime Minister Narendra Modi informed his visiting Nepali counterpart, Pushpa Kamal Dahal, that New Delhi would enable the line to be used to improve regional energy connectivity. 

After Bangladesh and Nepalese authorities recently reached an agreement with India on the usage of a high-voltage transmission line, the signing of the deal should hopefully be an achievable reality. Moving even further, a top government official has also stated that India is open to permit transit of electricity from Nepal or Bhutan to countries like Bangladesh or even Sri Lanka, if they have grid interconnection capacity available and they are able to harmonize grid operations with India.

According to the planned three-way agreement, Bangladesh will receive hydropower from Nepal using India's high-voltage distribution line. Initially, Nepal will use the cross-border transmission connection between India and Bangladesh to deliver 50 MW to Bangladesh. The 900 MW Upper Karnali hydropower project in Nepal will supply the electricity. 

India has approved Bangladesh's first effort to purchase 500 (MW) on a long-term basis from a single hydropower project in Nepal. In exchange, Bangladesh is expected to grant India access to build transmission lines connecting its Northeastern States. 

According to trade sources, India, which already operates the world's largest single grid system, has a lot to achieve through this deal. Given Nepal's hydropower potential and expanding demand for renewables in South Asia, India may be in a position to leverage its grid to deliver electricity in the entire region. 

India has insisted that it will support more such collaborations if two conditions are met. First, if power is exported or imported from or into India, it should not have an impact on India's energy supply or security. Second, such power plants should not have been created with any investment or support from a foreign country, as this would be inimical to India's strategic interests. 

Nepal and Bangladesh have selected two corridors for a dedicated transmission line, according to officials. The first is the Anarmari (Nepal)-Panchagarh (Bangladesh) corridor, which will span 49 kilometres, 24 of which will be in India. The second is the 83-kilometer Anarmari (Nepal)-Thakurgaon (Bangladesh) line, 33 km of which will be in Indian territory. 

The Nepal Electricity Authority and the state-owned Bangladesh Power Development Board have worked out arrangements to use the Baharampur-Bheramara high-voltage line with NTPC Vidyut Vyapar Nigam (NVVN), India's agency for cross-border power trade. 

Bangladesh already imports 500 MW of power from India via the Baharampur-Bheramara transmission line, an Asian Development Bank-funded $193 million connection that links India's eastern grid at Baharampur with Bangladesh's western electrical grid at Bheramara, opening the door for cross-border electricity commerce. 

Along with this, around 150-160 MW of electricity is also bilaterally traded from India through the Tripura-Comilla grid interconnection project. Furthermore, Bangladesh now receives coal-fired power from Adani's Godda (Jharkhand) thermal power plant as well. 

In the upcoming years, both India and Bangladesh want to considerably increase their use of renewable energy. The Indian government wants to employ 50 percent renewable energy by 2030 and produce 500 gigawatts of power from non-fossil sources. Bangladesh wants to increase the current 3 percent share of renewable energy in its power mix to 40 percent by 2050. With its rich water resources, Nepal may assist both South Asian neighbors in achieving their goals. 

The time has arrived already for cross-border electricity trade to move in the forward direction, and this proposed deal could pave the way to foster the much-needed regional cooperation in an extremely important aspect. If it does turn out to be a success, other regional countries can also join hands by engaging themselves in the same. 

The whole of South Asia can take advantage of this clean energy thanks to regional grid connectivity. Besides this, the deal can also push the countries in the region to further harness their abundant energy resources. For instance, Bhutan and Nepal both have enormous hydroelectric potential. They only use less than 10 percent of their viable hydropower producing potential, which is roughly 50,000 MW. 

The tripartite electricity agreement arrives as a ‘powerful’ statement as a path-breaking move that could open the doorway for a potential Bangladesh-Bhutan-India-Nepal (BBIN) Cross-Border Electricity Trade (CBET). This can be considered as a major milestone in the region's energy dynamics and a positive step towards South Asian energy sustainability. 

The region's diversity of energy sources, the substantial untapped hydroelectric potential in Nepal and Bhutan, the variations in seasonal and hourly load shapes among the countries and the availability of transmission capacity between India and each of these nations have the potential to bring about sizable economic benefits to the region.

Sagnik Sarkar is a postgraduate student of International Relations at Jadavpur University.

Disclaimer: The views expressed above and the information available are those of the author/s and can therefore in no way be taken to reflect the position of Asian Confluence