Nepal which has been selling its electricity to India's day-ahead market since Nov 2021, can now sell electricity to India’s real-time market also.
Amending the Cross Border Electricity Trade (CBET) rules, the Central Electricity Authority of India has allowed neighboring countries Nepal, Bhutan, Myanmar, and Bangladesh to buy or sell electricity through its real-time market.
Until now, the neighboring countries were allowed to trade only in the day-ahead market in the Indian power exchanges. So far, Nepal has got approval to sell 452.6 MW in India’s day-ahead power market, where the price of power is determined a day ahead of trading.
According to the Indian Energy Exchange Ltd (IEX) data, Nepal and Bhutan have traded 4.41bn units of electricity so far in the Indian power exchange.
The real time market is a segment in the power exchanges that enables buyers and sellers to meet their energy requirement closer to real time operation. The market features a new auction session every half an hour with power to be delivered after 4-time blocks or an hour after gate closure of the auction. The price and quantum of electricity trading is determined through a double-sided closed auction bidding process.
NEA Spokesperson Suresh Bhattarai said this is a welcome move. “Currently, NEA is selling electricity at a competitive price in the day-head market of India. A bid must be made one day before the sale of electricity,” said Bhattarai, “In the real time market, if there is excess electricity in the system, it can be sold immediately.”
While the real time market will provide greater flexibility for cross-border entities for optimally utilizing their resources by procuring power close to real-time basis, Nepal will not benefit from it immediately unless India gives approval to sell more electricity to Indian energy exchange.
“So far, we have been participating only in the day ahead market for selling 452 MW of power. Now we can sell this 452 MW power of 10 projects in any of the two markets or both markets,” NEA official.
Nepal may benefit from it both in import and export of power when there is sudden demand rise or fall. It can be beneficial even when sudden plant outages take place or suddenly rainfall takes place and we have increased generation. “We can transact power by submitting bids 1 hour and 15 minutes prior to actual physical trading under real time market,” he said.
The latest move by India to allow neighboring countries to enter into the real time market, has come at a time when Nepal is waiting for India’s approval on a number of energy export issues. The NEA has been seeking the approval from the Indian authorities for selling electricity to the Indian market on a short-term and long-term basis. There has also been delay on the part of India to approve NEA’s proposal to export 1,000 MW of electricity from 18 hydel projects.
Nepal has been requesting the southern neighbor for a long-term power trade deal arguing that an inter-government agreement would lock in the market and end the unpredictability of the Indian market’s availability for electricity from Nepal in the long run.
On the other hand, the much-hyped 25-year-long intergovernmental framework agreement between Nepal and India is yet to be formalized. While officials of both countries sign preliminary agreements during Prime Minister Pushpa Kamal Dahal’s recent India visit, India is delaying the signing of the final agreement which would ensure long-term market access for the Nepal-generated electricity to the Indian market.
The 25-year agreement is an umbrella agreement that will pave the way for power trading agencies in Nepal and India such as Nepal Electricity Authority and NTPC Vidyut Vyapar Nigam Limited (NVVN) to enter into a long-term power purchase agreement (PPA). The NEA and NVVN will sign a separate agreement for commercial deals.
The long-term power deal has become of paramount importance for Nepal with the country’s electricity generation capacity gradually increasing. If the market for Nepali electricity is not ensured, the country faces the risk of electricity spillage every year, especially during the wet season.
NEA is targeting to export 1,200 MW this wet season to India. The authority has been selling electricity in the day-ahead market of Indian Energy Exchange Limited through daily bidding. Currently, the southern neighbor has allowed Nepal to sell 452.6 MW of electricity generated by 10 hydropower projects in the Indian power market. But the approvals given to the 10 hydropower projects need to be renewed every year.
NEA has reported that it earned Rs 2.83bn from exports from July to the end of the last fiscal year 2021/22 and an additional Rs 8.32bn in fiscal year 2022/23. The authority has set a target of Rs 16bn within the current fiscal following a resumption of exports in May.
