Private sector’s plan to trade surplus electricity in foreign market in limbo

KATHMANDU: With the aim to sell country’s surplus energy to the neighboring countries, especially to India and the Bangladesh, the private sector independent power producers (IPPs) registered a company in 2019. Twenty private power developers came together to establish ‘Nepal Power Exchange Ltd’ to execute the plan to export Nepal’s surplus energy. Through this company, IPPs plans to supply power generated by private developers in the domestic market as well as export electricity to neighboring countries like India and Bangladesh.

However, the plan to export energy through Nepal Power Exchange Ltd is stand standstill especially due to lack of willingness from IPPs themselves and inadequate support from the government’s side to export the surplus energy.

At that time, the IPPs have jointly formed the energy trading company as the country was expected to start generating surplus energy by the end of next fiscal 2020-21 and that the government was lingering in addressing issues to open energy trade with different countries. At present, the country is generating 1,400 megawatts of electricity and almost half of the electricity is being generated by IPPs.

Despite all these efforts from IPPs, the government is not seen supporting IPPs as required as it is lingering to establish legal and institutional framework for IPPs. As the result, energy export from Nepal Power Exchange Ltd is still uncertain.

On the other hand, Nepal Power Exchange Limited’s proposal for electricity trading is gathering dust due to lack of law to license electricity trading for new companies. A new electricity bill with the provision of giving license for electricity trading awaits parliament’s approval.

However, in May this year, the Nepal Infrastructure Bank Limited (NIFRA) has proposed to establish a power trading company to ease the energy trade. But the NIFRA has gone through the back door to entry into the power trading.
According to the bank statement, the company would be established with the participation of the government, bank and financial institutions and private sector companies.

“To make the company technically capable and maintain professionalism as well as facilitate in arranging a large-scale investment in the future, government, private sector companies and public are proposed as the investors,” read the statement.

The bank also said that it was putting its efforts to bring in Indian and Bangladeshi companies as the investors to the company.
Ashish Garg, vice president of IPPAN, said they are fully capable to handle the Nepal Power Exchange company to trade electricity with India and Bangladesh.

“Despite our significant contribution to the energy sector, the government has largely ignored our genuine concerns,” said Garg, managing director of the company, who is also the promoter. “Hence, we have established a public company to ensure the market for electricity generated by IPPs.”

As per him, the company has submitted an application at the Electricity Regulatory Commission and the Ministry of Energy, Water Resources and Irrigation to ease further process. “But we have always face the setback from the government with our genuine plan” he said.

The company is finalising some of the projects in Arun basin developed by IPPs that can export energy to India and Bangladesh in the near future. “We have already inked a memorandum of understanding with the Bangladeshi government and their private sector regarding power trade and we will soon hold further discussions regarding mutual benefits for both parties,” Garg said.

Devendra Karki, secretary of the Ministry of Energy, Water Resource and Irrigation, said the government gearing up to facilitate the IPPs to trade electricity to neighbours countries. However, there are some legal hurdles as the Federal Parliament has not endorses the new Electricity Bill. “Without electricity bill, we cannot give not to the IPPs to conduct necessary things to trade the power. But, I believe that the Federal Parliament will soon to endorse the bill from parliament and the things will be gone on its way.”

As per IPPAN, they are planning to visit India to discuss the prospects of power trade with the southern neighbor soon. “We are scheduled to hold discussions with the Central Electricity Authority of India, along with other power-related entities for power sales and other transmission line issues,” said an official form IPPAN.

According to him, the establishment of the firm will increase competitiveness and break monopoly of Nepal Electricity Authority in power trade in inside and outside of the country.