Nepal has achieved great progress in the electricity sector in the last 10 years. Until 10 years ago, there used to be terrible load shedding while the power generation capacity was not even 1000 MW, and no electrification was available except in cities and market areas in Nepal. However, the situation has changed a lot now.

The installed capacity of electricity produced in Nepal has reached around 3,000 megawatts. About 1,000 megawatts of electricity is produced by the Electricity Authority and its subsidiary companies, while almost 2,000 megawatts of electricity is produced by the private sector including projects that started trial production but have not started commercial production yet.

Nepal is also earning foreign currency by exporting up to 500 megawatts of electricity during the rainy season. However, in winter, Nepal will have to continue importing electricity for a few more years.

According to various studies, Nepal's power generation capacity is more than 200,000 megawatts. According to Prakash Dulal, Deputy Secretary General of the Independent Power Producers Association of Nepal (IPPAN), the financially feasible production capacity is 72,500 MW.

According to this calculation, Nepal is currently producing only 4 percent of its capacity. Nepal has a potential to produce about 30,000 megawatts of solar power but has not yet produced even 100 megawatts. Solar energy is considered very important for energy mix.

According to the data presented by IPPAN in various forums, hydroelectricity projects with capacity of 4,500 megawatts are currently under construction in Nepal with investments from the government, private sector and foreign investors.

Similarly, projects with capacity of around 10,000 megawatts are in a position to go into construction immediately if the investment and market is ensured. In addition to this, projects with capacity of 12,000 megawatts are awaiting power purchase and sale agreements, while projects of the same capacity are under study, says Deputy Secretary General Dulal.

Assuming an average cost of Rs 20 million per megawatt, it seems that an investment of Rs 60 billion is required to generate 30,000 megawatts of electricity in 10 years. A study conducted by the Nepal Electricity Authority shows that an additional investment of around Rs 8 billion to Rs 10 billion is required for the construction of transmission lines.

Indian investment in Nepal's hydropower

India has started investing in Nepal's hydropower sector including the 900 MW Arun 3. Sutlej Jalvidyut Nigam, which is owned by the Government of India, invested in the project under construction in Sankhuwasabha. India, which has entered Nepal through Arun 3, has recently been looking to expand investment in Nepal extensively.

India is showing interest in the construction of 3,000 megawatt capacity projects in the Arun river basin alone along with other three large projects in western Nepal as well. India also has a great interest in the Karnali river basin. However the private sector of India has not yet been able to advance any project in Nepal.

But after Prime Minister Pushpa Kamal Dahal's visit to India in May, India assured to buy 10,000 megawatts of electricity from Nepal in 10 years. The private sector of India is also now calculating profit and loss in hydropower generation in Nepal. Private sector promoters say that big Indian companies are looking for access to Nepal's electricity.

Hydropower projects that India intends to develop

India is constructing Arun-3 of 900 MW in the Arun river basin in addition to signing of agreement to build the Lower Arun of 679 MW and Arun-4 of 490 MW.

Sources at the Ministry of Energy say that they are also proposing to build the 1,061 MW Upper Arun and 756 MW Tamor reservoir projects by themselves. In this way, it seems that India is trying to advance projects with a capacity of 2,986 MW in the Arun river basin alone. Similarly, in western Nepal, India has already signed an agreement to produce 7,680 megawatts of electricity by undertaking the 6,480 megawatt Pancheswar (Nepal-India joint venture), 750 megawatt West Seti, and 450 megawatt Seti river-6 projects. An agreement has been reached for the construction of 900 MW Upper Karnali, 480 MW Fukot Karnali hydropower projects in the Karnali river basin, while attempts are being made to construct the 1,902 MW Mugu Karnali and 10,800 MW Karnali Chisapani projects with Indian investment.