As Bangladesh, Nepal and India have finalized a draft of a tripartite power trade agreement, Dhaka Tribune Special Correspondent Nurul Islam Hasib talks with Sunil KC, founder of Nepal-based think tank The Asian Institute of Diplomacy and International Affairs (AIDIA), to understand the opportunities and challenges of this landmark agreement. The AIDIA was involved in preparing power related study reports in Nepal. He is also the vice president of the Nepal-India Chamber of Commerce and Industry, an adviser at the Independent Power Producers of Nepal, and member of the Board of Directors of Singati Hydro Energy Limited (25 MW), a public company in Nepal.
Dhaka Tribune: What is the significance of this trilateral agreement?
Sunil KC: This deal holds great significance in promoting regional energy cooperation and integration. It aims to promote the exchange of electricity among the three countries, ensuring a reliable and sustainable energy supply, fostering economic growth, and enhancing energy security in the region.
Apart from the economic benefits it brings, the agreement aligns with the commitment of these countries under the Paris Agreement in 2015 to reduce carbon emissions substantially or achieve a carbon-free economy by 2070. This commitment underscores the importance of transitioning from fossil fuels to renewable energy sources.
By harnessing the power of hydroelectricity, these countries can reduce their reliance on fossil fuels and increase the share of renewable energy in their energy mix. This shift not only contributes to mitigating climate change but also improves energy security and sustainability in the region.
Furthermore, trilateral power cooperation has broader implications beyond the power sector. It helps reduce regional asymmetry in energy availability and consumption, creating a more balanced and interconnected energy market.
As trust and confidence build through this collaboration, it paves the way for expanded cooperation in other sectors as well. This comprehensive approach to regional integration fosters economic growth, strengthens diplomatic ties, and promotes overall stability in the region.
The success of this trilateral energy trade agreement can serve as a model for other countries and regions to follow, encouraging collective efforts to address global challenges such as climate change and sustainable development. So, overall, I must say this is something transformative that is going to happen for the region.
What are the key objectives of this deal?
The key objectives of the agreement include promoting cross-border electricity trade, facilitating power exchanges to meet the energy demands of each country, establishing a framework for long-term energy cooperation, and harnessing the potential of renewable energy sources for a greener and more sustainable energy sector.
From a Nepali perspective, the Agreement holds immense value for the energy market in Nepal. The agreement opens up new avenues for energy trade and cooperation, which will have a positive impact on the country's economy.
Firstly, the agreement will enhance the confidence of both domestic and foreign investors to invest in Nepal's energy sector.
Secondly, regular energy exports from Nepal to these countries will have a significant impact on Nepal's GDP. The revenue generated from exporting electricity will contribute to the country's economic growth and development.
To illustrate the positive trend, it is worth noting that in 2022, the NEA (Nepal Electricity Authority) earned Rs 11 million from electricity exports to India alone. This figure demonstrates the potential and benefits of energy trade with neighbouring countries. With the implementation of the trilateral energy trade agreement, the scale of exports is expected to grow, resulting in a further boost to Nepal's GDP. Overall, the agreement presents a transformative opportunity for Nepal's energy market.
How will the other participating countries benefit?
The agreement will bring multiple benefits to the participating countries. It will allow them to optimize their energy resources by sharing surplus electricity and accessing additional power during periods of high demand. This will lead to increased energy reliability, reduced dependency on fossil fuels, and lower carbon emissions. Additionally, the agreement will create new avenues for economic growth, generate employment opportunities, and strengthen regional cooperation.
What are the key challenges in implementing this agreement?
The implementation of the agreement may face certain challenges, such as developing robust transmission infrastructure to facilitate cross-border electricity exchanges, harmonizing technical standards and regulations, resolving potential pricing and tariff issues, and addressing political and geopolitical factors that may impact the energy trade dynamics among the three countries. However, these challenges can be overcome through close collaboration, dialogue, and mutual understanding.
How will this deal impact the renewable energy sector in the region?
The agreement will provide a significant boost to the renewable energy sector in the region. It will create a market for clean and green electricity generated from renewable sources such as hydropower, solar, and wind. This will incentivize investments in renewable energy projects, promote technology transfer, and accelerate the transition towards a more sustainable energy mix, contributing to the global efforts to combat climate change.
What are the potential risks?
Fluctuations in energy demand and supply, vulnerability to natural disasters and climate change impacts, geopolitical tensions affecting energy flows, and the need for robust mechanisms to resolve any disputes or disagreements that may arise among the participating countries are some of the potential risks. Effective risk management strategies and contingency plans will be crucial for ensuring the success of the agreement.
What role can private sector investment play?
Private sector investment is very crucial to the implementation of the agreement. It can bring in the necessary capital, expertise, and technology required to develop and upgrade the energy infrastructure, including transmission lines, substations, and interconnectors. Private sector participation can also foster innovation, promote competition, and drive efficiency in the energy sector. The involvement of the private sector brings a business-driven approach, which can accelerate the development of renewable energy projects and help achieve the goals of this much-coveted trilateral agreement.