Securing Nepal’s Energy Future: A Blueprint for Reliable Electricity

Introduction

Nepal’s electricity sector is at a pivotal juncture, poised for transformative growth yet grappling with persistent challenges. With an installed capacity of approximately 3,505 MW as of 2023, predominantly from hydropower, the nation is leveraging its abundant water resources to power nearly 100% of its population as per Nepal Electricity Authority (NEA) Annual Report, FY 2023/24).

Ambitious targets outlined in the Energy Development Roadmap and Action Plan, 2081 release by Government of Nepal (GoN) aim to scale this capacity to 28,500 MW by 2035, with 13,500 MW for domestic consumption and 15,000 MW for export. However, seasonal fluctuations in hydropower generation, transmission losses of 15-17%, and rising peak demand exceeding 2,000 MW threaten reliability. This article presents a comprehensive strategy to ensure a robust and dependable electricity system by optimizing existing infrastructure, integrating innovative technologies such as Pumped Storage Hydropower (PSH), solar with Battery Energy Storage Systems (BESS), standalone BESS, and targeted grid enhancements.

Current Landscape of Nepal’s Power Sector

Nepal’s electricity infrastructure is a blend of opportunity and constraint. Hydropower dominates, contributing 3,339 MW to the total installed capacity of 3,421 MW, with key facilities like Upper Tamakoshi (456 MW), Kali Gandaki A (144 MW), and Middle Marsyangdi (70 MW) leading the charge, complemented by smaller run-of-river plants operated by NEA and independent power producers (IPPAN Status of Hydropower Projects, 2024). Solar (107 MW), thermal (53 MW), and co-generation (6 MW) provide modest contributions. The transmission network spans 6,507 circuit kilometers, incorporating high-voltage lines (400 kV, 220 kV, 132 kV, and 66 kV) and critical substations at Hetauda, Dhalkebar, and Inaruwa. Ongoing upgrades, including Lapsiphedi, Ratmate, and New Butwal, are strengthening the grid’s 400 kV backbone.

Despite near-universal electrification, reliability remains elusive. Transmission losses, outdated infrastructure, and seasonal hydropower variability, robust in the wet season but diminished in the dry months, create supply gaps. Peak demand, recorded at 2,352 MW in September 2023 and 2,021 MW in February 2024, grows 8-10% annually, driven by urbanization, industrial expansion, and electrification initiatives like electric vehicles (EVs) and cooking (NEA Annual Report, FY 2023/24). Nepal’s energy trade with India, exporting 632 MW in the wet season (generating NPR 14.5 billion in 2023) and importing 500-700 MW in the dry season, underscores its regional integration, with agreements targeting 10,000 MW exports by 2035.

Recent Progress

Nepal’s power sector is gaining momentum. Major hydropower projects, including Arun III (900 MW), Upper Arun (1,063 MW), Budhi Gandaki (1,200 MW), and Dudh Koshi (635+200 MW), are advancing, enhancing storage and generation capacity. Transmission infrastructure is expanding, with the Millennium Challenge Corporation’s 315-kilometer 400 kV line under construction. Regional cooperation through the BBIN (Bangladesh, Bhutan, India, Nepal) framework and bilateral trade agreements with India and Bangladesh is fostering export opportunities (BBIN Energy Cooperation Progress Report, MoEWRI, 2025). However, challenges persist, including vulnerabilities exposed by 2021 floods and glacier retreat, highlighting the need for resilient infrastructure.

Key Challenges

Despite its strides, Nepal’s power system grapples with stubborn roadblocks. Seasonal swings plague run-of-river hydropower, which thrives in the wet months but sputters during the dry season (November to April). Transmission woes, bottlenecks and high losses, stymie the flow of power from plants to homes. Storage remains a weak link, with little capacity to stash surplus energy or meet peak demand spikes. Climate change adds fuel to the fire, with sedimentation clogging rivers, erratic flows disrupting generation, and extreme weather threatening infrastructure. Aging equipment and sluggish upgrades further hobble the system’s ability to scale up.

Strategic Recommendations

To address these challenges, Nepal can build a resilient electricity system by leveraging existing assets and adopting innovative solutions. The following recommendations integrate technical, policy, and regional strategies.

a.    Optimize Existing Hydropower

Nepal’s 3,339 MW hydropower fleet offers untapped potential. Upgrades such as sediment-flushing systems and modern turbines could boost efficiency by 5-10% (Technical Assessment of Hydropower Efficiency Upgrades, NEA, 2023). By maximizing output during the wet season for export and prioritizing domestic supply in the dry season, plants like Kali Gandaki A and Upper Tamakoshi can anchor a reliable base-load supply.

b.    Pumped Storage Hydropower (PSH)

Imagine harnessing Nepal’s Himalayan basins to store energy like a giant battery. PSH can transform Nepal’s Himalayan basins into energy reservoirs. With an estimated potential of 1,260 gigawatt-hours (GWh) and 42,000 MW capacity, projects like Syarphu Lake (332 MW), Dudh Koshi (200 MW), and Hulingtar-Dukim (1,596 MW) are under study (NEA Annual Report, FY 2023/24). A pilot project of 50-100 MW, say at Upper Seti, could kick off by 2027, with plans to scale up to 1,000 MW by 2035 in basins like Karnali and Koshi. These systems would plug into the 220 kV and 400 kV lines at hubs like Dana and Hetauda. During the wet season, surplus power pumps water uphill; in the dry season, it flows back down, generating 500-700 MW to slash imports by 25%. By 2035, PSH could add 1,000 MW to the grid’s backbone.

c.    Utility-Scale Solar with BESS

Nepal’s sun-soaked plains and highlands are ripe for solar power. The global horizontal irradiation in Terai region basks in 4-5 kWh/m2/day, while Mustang enjoys even more than 5 kWh/m2/day and in the range of 5.5-6.5 kWh/m2/day. Picture this: by 2027, Mustang hosts a 50 MW solar farm paired with a 10 MW/20 MWh Battery Energy Storage System (BESS), growing to 500 MW and 100 MW/200 MWh by 2035, churning out approximately 900 GWh yearly. In the Terai, a 100 MW solar setup with 20 MW/80 MWh BESS starts by 2027, ballooning to 1,000 MW and 200 MW/800 MWh by 2035, delivering,1500 GWh annually. Mustang’s power ties into the 132 kV line to Dana, later upgrading to 220 kV to Ratmate, while Terai links to the 400 kV grid at Dhalkebar and New Butwal. Solar fills 15-20% of dry-season gaps, and BESS keeps the lights on for 2-4 hours each evening, steadying the grid. By 2035, this duo could hit 1,500 MW and 2,400 GWh per year.

d.    Standalone BESS at Substations

Deploying BESS at key 400 kV substations, such as Hetauda, Dhalkebar, Inaruwa, Ratmate, and New Butwal, enhances grid stability. By 2027, each could house a 10 MW/40 MWh BESS, totalling 50 MW/200 MWh across all five, scaling to 20 MW/80 MWh per site (100 MW/400 MWh total) by 2035. These systems tap into existing busbars, managed by SCADA tech, and charge up using spare grid power. During peak hours, they dish out 100 MW for four hours, cutting outages by 5% and keeping voltage and frequency in check. By 2035, they’re a quiet hero, bolstering grid toughness without adding new generation.

e.    Wind Power

High-altitude gusts in places like Mustang and Dolpa whisper untapped potential for wind energy. A 50 MW pilot in Dolpa could spin up by 2027, growing to 200 MW by 2035. These turbines would hook into existing 132 kV lines, like the Dana-Mustang corridor, later beefed up to 220 kV. Wind adds a fresh flavor to the mix, complementing solar and hydropower with its own rhythm, and by 2035, it could contribute 200 MW of diverse power.

f.    Transmission and Distribution Upgrades

Modernizing Nepal’s 400 kV, 220 kV, and 132 kV networks is critical. Completing the Ratmate-New Butwal 400 kV line by 2026, adopting high-temperature low-sag (HTLS) conductors, and implementing smart grid technologies like Advanced Metering Infrastructure (AMI) and SCADA could reduce losses to 10% by 2030 (Nepal Power System Expansion Project, ADB, 2024), ensuring 95% of generated power reaches consumers.

g.    Demand-Side Management and Resilience

Time-of-Use (TOU) tariffs, EV and electric cooking subsidies, and infrastructure. On the user end, Nepal can smooth out demand spikes and toughen up against nature’s wrath. Expanding Time-of-Use (TOU) tariffs through NEA’s billing system, plus subsidies for EVs and electric stoves, could shift 10-15% of peak load to quieter hours. Meanwhile, reinforcing dams and substations against floods and landslides, using Nepal’s existing engineering know-how, guards against climate chaos. Together, these steps lighten the grid’s load and keep it standing tall.

h.    Regional Integration

Nepal’s power future isn’t just local, it’s regional. The existing 400 kV Dhalkebar-Muzaffarpur line with India, plus the upcoming New Butwal-Gorakhpur link by 2026, opens doors. The strategy? Bank wet-season surplus with India, then draw back power in the dry months. This back-and-forth balances Nepal’s seasonal swings and fuels its 10,000 MW export goal.

i.    Policy and Institutional Reforms

To make this vision stick, Nepal needs sharp policies and strong institutions. Streamlining power purchase agreements (PPAs) and dangling tax incentives could lure private players into storage hydropower and renewables. Giving NEA more financial and operational freedom, splitting its generation, transmission, and distribution arms, would sharpen its edge. Empowering the Electricity Regulatory Commission (ERC) to set standards, track grid health, and settle disputes fast keeps things on track. Funding-wise, leaning on foreign investment and private equity, with a sprinkle of concessional loans, taps Nepal’s export potential, while a green energy fund could bankroll renewables. Finally, training Nepali engineers in PSH, storage tech, and climate-smart design through global partnerships builds the brain trust to pull it all off.

Implementation Roadmap

The transition to a reliable power system unfolds in three phases:

    Short-Term (2025–2027): Optimize 3,339 MW of hydropower, initiate a 50 MW PSH pilot, deploy 150 MW solar with 30 MW BESS, test 50 MW wind, and install 50 MW/200 MWh BESS at substations. Upgrade 132 kV lines and pilot smart grid technologies.
    Medium-Term (2027–2032): Commission Budhi Gandaki (1,200 MW), add 500 MW PSH, 700 MW solar with 140 MW BESS, 100 MW wind, and 100 MW/400 MWh BESS. Complete 400 kV grid expansion.

    Long-Term (2032–2035): Achieve 28,500 MW, including 25,800 MW hydropower (5,000 MW storage, 1,000 MW PSH), 1,500 MW solar, and 200 MW wind, ensuring 99% reliability with a smart grid.

Expected Outcomes

This strategy promises transformative results by 2035:

    Reliability: Near-uninterrupted power with outages below 1%, driven by diverse generation and storage.

    Capacity: 28,500 MW, delivering 20,000 GWh domestically.

    Economic Growth: $2-3 billion in annual exports and 100,000 jobs (Economic Survey FY 2023/24, Ministry of Finance, 2024).

    Energy Security: 30-40% reduction in imports (Nepal Energy Sector Assessment, World Bank, 2024).

Conclusion

Nepal stands on the cusp of an energy revolution. By optimizing its hydropower foundation, integrating PSH, solar with BESS, wind, and standalone storage, and modernizing its grid, the nation can overcome seasonal and climate challenges to deliver reliable, sustainable electricity. Achieving its 2035 vision will not only power Nepal’s homes and industries but also position it as a clean energy leader in South Asia, illuminating a path for regional prosperity.

Mr. KC is the Director of Projects and Partnership at PMIC, a project management and consulting service provider, Mr. Ranjan serves as the Project Manager at Dolma Himalayan Energy (DHE) Limited, and Mr. Shrestha is an energy expert specializing in Solar PV.