IMAGE: REUTERS
NEPAL HAS a brutal contradiction. It has more electricity than it can always use, yet its power system still struggles to deliver enough at the right time and place. During the monsoon, swollen rivers send hydropower production soaring. The grid cannot always carry the surplus. In the dry season, river flows collapse and the country imports electricity from India. For investors, this mismatch points towards a fat opportunity that has received far less attention than the construction of dams: the infrastructure between the power station and the customer.
The case is becoming difficult to ignore. In October the Asian Development Bank and Nepal Electricity Authority agreed to prepare two projects under a public-private partnership model. One is a 134km, 400kV transmission line linking the Tingla and New Khimti areas with Dhalkebar. The other is a network of utility-scale battery systems with 100–150 megawatt-hours of storage. The projects are expected to mobilise more than $200m in private investment.
That is a pissant sum beside the ambitions of Nepal’s hydropower industry. It could, however, mark a change in where private capital goes. For years investors have scrapped to build generating capacity. The country’s high-voltage network reached 6,760 circuit-kilometres by the end of fiscal year 2024-25, while substation capacity stood at 14,123 MVA. The Nepal Electricity Authority says a further 2,034 circuit-kilometres of transmission lines and 6,338 MVA of substation capacity are at various stages of construction. The figures suggest a large infrastructure pipeline. They also show how much work remains—and how much of it keeps slipping.
The consequences of crap connections are already seen. In July the authority ordered hydropower plants to cut output as monsoon generation exceeded domestic demand and transmission constraints limited exports. Developers screamed that plants were being curtailed even when water was plentiful. One estimate put installed generation capacity at about 4,300MW, against peak domestic demand of roughly 2,200MW. Exports to India and Bangladesh absorb some of the excess, yet the system cannot always move the electricity to where it can be sold.
A power plant earns money only when its electricity can reach a buyer. A transmission line can therefore be as commercially important as the turbine at its source. New substations and stronger domestic connections could reduce curtailment and make existing plants more productive. They could also improve supply to industrial customers, for whom unreliable electricity raises operating costs and scares off investment.
Cross-border infrastructure offers a bigger market. Nepal has begun exporting electricity to Bangladesh through the Indian grid, while India remains its principal trading partner. The 400kV Dhalkebar-Muzaffarpur connection has helped make large-scale trade possible. Two further links, between Inaruwa and New Purnea, and between Lamki and Bareilly, moved closer to development after Nepal Electricity Authority and India’s Power Grid Corporation signed joint-venture agreements in October 2025. These connections would give Nepal more routes to flog surplus power and reduce its dependence on a single corridor.
The ambition is enormous. Nepal and India have agreed on a framework for long-term electricity trade, with Nepal seeking to export up to 10,000MW to India over ten years. That target needs transmission capacity on both sides of the border, regulatory approval and buyers willing to sign contracts. India controls the routes through which Nepal can reach other regional markets. Its willingness to approve imports from particular projects will shape the economics of the entire sector.
Storage could help smooth the system. Batteries can absorb electricity when generation is high and release it during periods of peak demand. They can also help stabilise the grid as more solar and hydropower enter the network. But batteries have limits. A system holding 100–150MWh can shift electricity across hours; it cannot store the enormous seasonal surplus created by monsoon rivers for use through the dry months. That requires larger reservoir projects and better regional trading arrangements. Storage manages the grid. It substitutes for transmission.
The investment model will matter as much as the engineering. Nepal Electricity Authority has long dominated transmission, while private developers have concentrated on generation. Public-private partnerships could bring private finance and operating expertise into a sector where the state has struggled to complete projects on schedule. In July seven hydropower companies pooled money to finish the Markichowk-Bharatpur line after years of delay. The episode showed that developers have a direct financial interest in the wires connecting their plants to the grid.
Transmission projects are difficult, filthy investments. They require large upfront spending and years of construction. Routes cross private land and forests; compensation disputes and local opposition can delay work. Returns depend on regulated tariffs and the authority’s ability to pay. Cross-border projects carry an additional political risk: a line may be physically ready while permission to trade electricity stays stuck in a ministry drawer.
Investors should therefore stay wary of treating Nepal’s power lines as a basic infrastructure boom. The commercial opportunity will depend on transparent procurement, credible contracts and a regulator capable of setting predictable returns. Private capital will also need assurance that the authority will honour payments and allow projects to operate independently of political interference.
Nepal’s hydropower story has often been told in megawatts. That is: how much can be built, how many rivers remain untapped, how much electricity might be exported. The next chapter may be told in kilometres of cable and hours of stored power. The country has learned to make electricity. Its gruesome task is building a system that can sell it. ■
