Bangladesh eyes cost-effective power from Nepal's planned mega-dam

Bangladesh has been presented with a fresh opportunity to consider importing cost-effective electricity from Nepal in the coming years as the Himalayan country gears up to initiate the construction of a new 1,040MW hydropower plant on the Arun River.

Nepal's Arun River indirectly feeds into the Ganges River system, ultimately replenishing Bangladesh's Padma River via interconnected waterways. 

As per the requirement of the World Bank, which is partly funding the $1.9 billion Upper Arun Hydroelectric plant project, Nepal on 28 December sought Bangladesh's "no objection" to the construction of this power plant on the river.

According to documents seen by TBS, the Ministry for Water Resources and the Joint Rivers Commission of Bangladesh have so far issued their no objection to this project, saying as a run-of-river hydropower plant, it will not disrupt the flow of water in the Ganges and Padma rivers. 

The Ministry of Power and the Ministry of Foreign Affairs are yet to provide their perspectives on the proposed project.

Construction of the plant 200 kilometres east of Kathmandu is scheduled to begin in November, with the project anticipated to be completed by 2034.

Bangladesh is currently in talks to establish the power tariff for its inaugural import of 40MW of hydropower from Nepal through India. Nepal has suggested a tariff of $0.07 per kilowatt hour (or unit), whereas Bangladesh is striving to secure a tariff of $0.05.

The agreement for this 40MW power import is expected to be completed before 15 June. This tariff underscores the cost-effectiveness of Nepal's hydropower compared to coal or Liquefied Natural Gas (LNG) based power, which currently costs Bangladesh between Tk 14-15 per unit.

In December, Bangladesh conveyed its interest to Nepal regarding the purchase of 500MW of hydropower.

Nepal's hydropower prospect

Relying on hydropower plants to produce more than 90% of its total electricity, Nepal heavily depends on hydro resources to fulfil its energy requirements. Given the vast scale of its potential, hydropower holds significant importance for Nepal's economic future, according to the US Agency for International Development.

Nepal intends to increase its hydropower generation capacity, taking advantage of its expanding power market access in India and Bangladesh. 

Electricity production in Nepal reached 10,536 GWh in July 2023, compared with 9,521 GWh in the previous year. Electricity production data of Nepal is updated yearly averaging at 1,243 GWh from Jul 1975 to Jul 2023.

According to the Word Bank document, the proposed run-of-river Upper Arun Hydroelectric plant project has an optimum design capacity of about 1,040MW. It will provide firm energy for domestic customers during the dry season and will allow for exports of clean electricity to India and Bangladesh during the monsoon season.

Nepal is currently selling 13,000MW of electricity to India daily. India has been allowing Nepal to sell its power in its day-ahead market since November 2021.

According to the World Bank, "Aside from meeting Nepal's energy needs, the Upper Arun Hydro-electric project will enable the displacement of more expensive, and carbon-intensive thermal generation in India and Bangladesh and support integration of variable renewable energy sources (such as solar) in the region".

The proposed Project is Phase 1 of a series of projects in support of the Sub-South Asia Power Pool, which would include Bangladesh, Bhutan, India, Nepal, and Sri Lanka to increase the trade of electricity. Future phases may include strengthening transmission interconnections between these countries, and support to Bhutan in developing its hydropower.

According to World Bank documents, the proposed Project stands as the second hydro-electric project (HPP) within a series of five HPPs planned along the Arun River. Commencing from the most upstream project, the Kimathanka HPP (currently in the planning stage) situated at the China-Nepal border, the series includes the Arun 3 HPP (currently under construction). Downstream of the proposed project lie the Arun 4 and Lower Arun HPPs, also in the planning stage.

Power Secretary Md Habibur Rahman said new transmission lines will be necessary to facilitate the import of power from Nepal, including electricity generated by the proposed hydroelectric plant. This endeavour will entail a tripartite agreement, which the Power Division is actively pursuing.

What the WB says about the proposed plant

The Arun River serves as a tributary to the Sapta Koshi River. Subsequently, the Sapta Koshi River in Nepal continues into India, becoming the Koshi River, which eventually merges with the Ganges in India before flowing through Bangladesh as the Padma River.

According to World Bank documents, the proposed power plant adopts a run-of-river design, meaning it will not extract water from the Arun River. Instead, during the dry season (November to May), the reservoir will be filled by temporarily halting the river flow for 18 hours at specific intervals of the day to generate hydroelectricity through controlled release.

In the letter sent to Bangladesh authorities, the World Bank said the proposed project would not result in any substantial alteration to the water flow in the Koshi River, a tributary of the Ganges.

Seeking Bangladesh's consent to the project, the World Bank said due to the significant distance between the proposed project site and Farakka Point in India, it is improbable that short-term variations in the water flow of the Arun River would redirect the flow of the Ganges at Farakka. Moreover, the control of the Ganges flow in Bangladesh is managed by the Farakka Barrage. As a result, the hydropower plant's impact downstream of the Farakka Barrage is anticipated to be minimal.

According to Economic Relations Department (ERD) sources, under the World Bank's Operational Policy for Projects on International Waterways, the global lender is required to inform other countries sharing the waterway if it undertakes any project. In the event of objections raised by a riparian country, the World Bank may appoint independent experts according to its procedures. Following a thorough examination of the expert's report, the World Bank retains the option to withdraw from the project or proceed with financing despite objections.

Faris Hadad-Zervos, the World Bank Country Director for Maldives, Nepal and Sri Lanka, wrote to the Secretary of the Economic Relations Division on 20 December last year seeking Bangladesh's opinion on the proposed project.

In the letter, he said the proposed project will be located on the Arun River – a tributary to the Koshi River system, which is considered an international waterway. The World Bank's Operational Policy regarding projects on international waterways requires that the beneficiary country notifies other riparian countries of the project.

Faris Hadad-Zervos also said given the run-of-river nature of the proposed Project, the planned small reservoir size, and its location upstream of the under-construction Arun III hydroelectric project with significantly larger storage capacity than the proposed project, it is the considered view of the World Bank that the proposed investments would not have any appreciable impact on the quality and quantity of water flows of the Koshi River to other riparian countries.