Towards the BBIN energy framework: How far has the Bangladesh-Nepal energy deal come?

The discussion around energy cooperation between Bangladesh and Nepal has come a long way. From engaging in extensive talks on potential export agreements to navigating the 'India hurdle', the possibility of an agreement is on the horizon. 

Both countries have been considering various logistical and infrastructural challenges, and with India's critical role as a transit country, this cooperation could mark a significant step forward in regional energy integration. 

So, you may ask, how soon?

The energy cooperation between Bangladesh and Nepal is potentially setting a precedent for regional collaboration in South Asia. Even though the time for signing the deal is yet to be set, recent developments suggest that an agreement could be formalised in the near future.

In Kathmandu, The Business Standard talked to Ram Krishna Khatiwada, a former Commissioner at the Electricity Regulatory Commission of Nepal, who was involved in the negotiations between the countries, about different aspects of the Kathmandu-Dhaka energy deal. 

We also delved into the prospect of the Bangladesh, Bhutan, India, Nepal (BBIN) Initiative's energy framework; and how cooperation in the energy sector could connect a broader region that has often been marred by conflicts. 

Khatiwada is a seasoned professional with a life-long career in development finance and project management. As the commissioner of the Electricity Regulatory Commission of Nepal, he led economic and financial matters, shaping policies and strategies. His expertise includes tariff determination, power purchase agreements, and project acquisitions. 

He also worked as the Chief Executive Officer of Nepal Infrastructure Bank Limited. His extensive experience blends public and private sector insights, manifested in his leadership roles in financial institutions and regulatory bodies. 

Khatiwada was an important part of the delegation teams that negotiated with the Bangladeshi and Indian counterparts, related to energy trading and cross-border connectivity. He was one of the speakers at Energy Transition and Climate Finance Week at the Himalayan Climate Data Field Lab held in Kathmandu. 

In a meeting led by the energy transition working group, which includes participants from the Hindu Kush Himalayan (HKH) region and beyond, he spoke about energy infrastructure and regional connectivity.

This interview was conducted as a side conversation during the event, where he shared his views on the much-discussed energy deal and the BBIN energy framework. 

Abiral Khatri, a climate finance researcher based in Kathmandu, helped facilitate the interview. 

Where does Bangladesh-Nepal energy cooperation stand at the moment? 

The discussion [about Bangladesh-Nepal energy trade] has been going on since around 2013-2014 when we had the SAARC Framework Agreement on Energy Cooperation. Then we moved to the BBIN framework [Bangladesh, Bhutan, India, Nepal (BBIN) Initiative]. 

But in the real sense, it has not been happening for two reasons. 

Because ultimately, for Bangladesh to import, Nepal should also have a uniform power. Nepal itself, even this year, has been importing [power] from India. So Bangladesh wants to have dedicated power.

Our Bangladeshi counterparts, especially the private sector, have expressed interest in project development in Nepal, and want to import power to Bangladesh. The discussion is going on, but it has not materialised yet. One major reason is India. 

However, recently, India has also cleared out the regulatory and policy problems. Until 2021-2022, the regulatory and policy provisions were not there. 

Despite Nepal and Bangladesh's eagerness to export and import, it wouldn't have happened due to the regulations, but now after a change in the regime on regional energy trading [it is due to happen]. 

Ever since GMR Upper Karnali Hydropower Limited has been talking extensively about their 900MW export potential, and 500MW of that export would be to Bangladesh. 

They have chalked out the basic documentation and taken certain clearances from Bangladesh government agencies, including the Ministries of Law, Planning, and Energy; and now it has moved to the Bangladesh Power Development Board (BPDB) to have a power project between power stations located in the western part of Nepal and Dhaka. 

One of the major bottlenecks, however, is transmission. For that, the company [Karnali Hydropower Limited] itself is using the transmission infrastructure of India that runs throughout the Indian territory. 

They will take power from the Nepali power station to the Indian substation in Bareilly, using the Indian grid, because India is a one-grid nation.

However, they don't have to evacuate that Bareilly power to Dhaka. It can be taken from the eastern side of India, from Kolkata, or from similar other locations, so that power can be exported to Bangladesh. 

But again, the current cross-border [transmission line] between Bangladesh and India is more or less occupied, as it is already running at [full] capacity. 

For that, new infrastructure is required. That has to be built up. They will now be developing transmission infrastructure on the Indian side.

So it may be slow, but steadily, there is some progress. 

And finally, under the G2G arrangement, the BPDB is importing power from the Nepal Electricity Authority (NEA). The discussion is about 40MW. Basically, they are piloting the real-sense power trade from Nepal to Bangladesh. I think that is going to happen very shortly. 

When do you think the deal may actually happen?

Based on my information, [Bangladesh] is expected to export power from Nepal this season itself. So more or less, the Nepal side is ready. The Bangladesh side is ready. Indian clearance has been approved. 

Now the real agreement, the real pricing negotiation is going on. After finalising the pricing, they will have an agreement, and then power trade will materialise between Nepal and Bangladesh. And that will be a major milestone in real power trading from Nepal to Bangladesh. 

We initially heard that Bangladesh too would export to Nepal and then vice versa. How will this trade benefit both countries?

About Nepal importing power from Bangladesh, I am not confident that it is possible, because of the Indian issue. India has been exporting power to Nepal. It [Bangladesh exporting electricity to Nepal] is possible only if they [India] allow it. 

The reality is that Nepal requires power in the winter season. And if the prices are reasonable to the NEA, then it can import power from India, as well as Bangladesh.  

So the conversation right now that is happening involving the three countries is only about Nepal exporting to Bangladesh, not vice versa? 

Yes, not vice versa. However, when Bangladesh's power minister [Nasrul Hamid] was here two years ago, he mentioned that idea. 

What is the long-term strategy for engaging all the stakeholders, including India, Bangladesh, and Nepal, for a workable agreement?

So, when I was at the Nepal Electricity Regulatory Commission (ERC), the idea was to bring all the counterparts into one company. At that time, we tried to set up one power trading company, bringing Indian and Bangladeshi counterparts together. 

For longer-term arrangements, the Indian counterpart has to be involved—through transmission infrastructure or through trading arrangements. If they are involved in the whole ecosystem, then it will be much easier to manage the Indian system – whether through private or public sector entities. But normally, we prefer the public sector entity. Because, most of the time, the larger players are public entities. 

What are the long-term potentials of this regional energy discussion? 

[For the long-term viability of the regional energy discussion, we need river-basin planning.] We did a study of two river basins in the western part of Nepal back then, Karnali and Bheri. In those two corridors, there is around 10,000MW  energy potential. We prepared the financial projection and the whole exercise, based on 4500MW at a comparatively cheaper price. 

And if we develop the river basin plan and the transmission infrastructure according to the river basin plan, the cost of production would be much lower than the current practice. 

[Nepal doesn't have a river-basin plan approach at the moment. For example, they have over a dozen hydroelectric power stations on the Trishuli River. A river basin plan gives scope for broader sustainability and plans.]

Right now, many projects are developing haphazardly. So one generation is coming, a separate transmission system is being built, and after two, three, or four years, another generation is coming, for that different set of transmission infrastructure. 

So rather than going like that, focus on the river-based plan, and evacuate power using the dedicated transmission line. Evacuate power to the Indian power sector, or major consumer centres in the western part of India, such as Delhi, Haryana, Gurgaon, and Punjab. That is the major power-consuming hub. 

India is bringing power from Bhutan, which would be exported to Bangladesh.  If we export power to India's Bareilly, or a nearby location, to cater to those segments, and [then that power is transmitted to Bangladesh like Bhutan power], the transmission infrastructure cost would be much lower. Ultimately, when we talk about power evacuation, obviously, transmission cost issues are there.

If we go in this direction, this type of arrangement, then obviously it is possible. Transmission loss will be reduced this way, and wheeling charges will be lower. But for that to happen, we have to go with a river-based plan. 

How can Nepal and Bangladesh keep India interested in their bilateral deal?

Back in the day, when I met my Bangladeshi counterparts, I learned how serious Bangladesh is about improving its renewable energy portfolios. You know the problem. The Americans and the Europeans are imposing a carbon border tax. 

If Bangladesh still uses fossil fuels, it will hamper its export capabilities and competitiveness. They have also committed to the NDC, UNFCCC, etc. And there is international commitment. 

Bangladesh is very eager to improve its renewable energy portfolio. That is why Bangladesh itself is doing policy advocacy for its Indian counterpart. 

Can energy cooperation create open relationships in this region, which is often mired in conflicts?

Yes. 

In fact, the BBIN framework was an idea about energy integration itself. There are different frameworks for it. 

But the energy framework, quite interestingly, is going very smoothly. With the support of the ADB [Asian Development Bank], transmission, infrastructure connectivity work is going on to energy connectivity. 

Of course, transport is one of the ideas of the BBIN framework. It came in the BIMSTEC [Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation] as well. But a more prominent and active framework is the BBIN energy framework. 

As I see it, India has already become one grid, one nation. And Nepal's grid connectivity is also more or less connected to India, and it could be integrated into the Indian grid very soon; we just need to integrate into the Bangladesh part. 

With 3 other transmission plans that are underway in different phases of development, if Nepalese power is connected to Bangladesh through the Indian cross border, then BBIN would be interconnected in the area.