The MCC was set up in 2004 by the US Congress during the George W Bush presidency to help developing nations reduce poverty through financial aid. Since then, as Sino-US tensions grew it has taken on a strategic dimension as the two powers compete for global connectivity. The $500 million MCC grant to Nepal was sanctioned in 2017 to improve Nepal’s energy and road infrastructure.
Nepal was suffering 18 hours of power cuts a day when the agreement was signed, and after much deliberation, Nepal’s planners, politicians and bureaucrats decided that transmission lines were the most urgently needed since powerplants were already under construction. The generated electricity need to be taken to load centres, this would increase the renewable component of Nepal’s energy mix by replacing imported petroleum, and finally, to export any surplus to India.
Meanwhile, the Millennium Challenge Authority Nepal (MCA-Nepal) has been set up and the office has already finalised the design of the 315km transmission line of 400KVa capacity with three new sub-stations. But the delay in Parliament’s ratification of the project means it cannot issue tender bids, and this will put 2,600MW of electricity at risk of being wasted in eh coming two years.
Khadga Bahadur Bista, the CEO of MCA-Nepal estimates about it takes up to five months to select a contractor even if the project is ratified by Parliament, and after that, it will take another nine months to start construction.
“We are all set to kick start this project and are ready to call for international tender bids, but due to it still pending in the Parliament we have not been able to make progress,” Bista told Nepali Times.
Just Do It
The NEA says that Nepal is now generating 1,400MW of electricity, and this is set to more than triple in the next three years to 5,000MW, with the largest hydropower project so far in Nepal, the 456MW Upper Tama Kosi coming on stream in July, if it is not delayed again by the lockdown.
Other hydroelectricity projects totalling 2,500MW are planned are in the financial negotiations stage, they are set to come into operation by 2026.
But the more urgent need is power transmission to accommodate the new projects in the next three years as Nepal struggles to keep up with demand. The current peak demand is 1,150MW, which drops to 700MW at night. Generation capacity also fluctuates during the monsoon and dry season between surplus and scarcity because most of the hydro projects are of the run-of-river type without large reservoirs.
To avoid electricity from going to waste during the monsoon, Nepal can export the surplus power to India, and import in winter. The agreements are in place with India to facilitate power trade, but current transmission lines cannot bear future load. The MCC-funded transmission lines are also required for domestic distribution and grid management.
The present Dhalkebar-Muzaffarpur crossborder transmission line connects India and Nepal but can only handle 1,000MW each way, but practically it can only bear 800MW. This means by late next year, Nepal’s new surplus monsoon electricity is sure to go waste.
This will not just be a wasted opportunity for Nepal to reduce its trade imbalance and partly pay for its winter power import from India, but also affect private hydropower investors in Nepal. This scenario can be avoided if the proposed 400KVa Butwal-Gorakhpur transmission line.
The catch here is that the NEA has signed an understanding with the private hydropower investors that it will buy electricity they generate only if the surplus can be exported to India. Any delay in building the Butwal-Gorakhpur transmission line to India, therefore would ultimately impact Nepal’s own private power producers. This put their investment at risk, affect the banking sector, and ultimately Nepal’s overall economy.