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Twenty-Year Strategy

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Working page
Updated
2026-05-21

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This page lays out a rational 20-year phased strategy for Nepal's water-and-energy system, prioritizing transmission, storage, solar, and institutional reform in sequence.

A rational 20-year water-and-energy strategy for Nepal, synthesized from the strategy and evidence pages.

Phase 1: 2024–2030 — Complete and Connect

  • Complete all projects under construction (including Tanahu Hydropower Project)
  • Build Butwal-Gorakhpur cross-border line
  • Begin east-west 400 kV transmission backbone
  • Negotiate Bangladesh electricity transit arrangement through India
  • Pilot first pumped storage (200–500 MW)
  • Use cheap power to begin attracting energy-intensive industry

Key interventions: Decision Dossier — Hetauda–Dhalkebar Completion and Community Resolution (Hetauda–Dhalkebar, Butwal–Gorakhpur); Decision Dossier — Power-System Role Separation and Open Access (begin ISO and open-access work in this phase).

Priority: Fix Stranded Generation by building grid before licensing more generation.

Phase 2: 2030–2037 — Store and Industrialize

Key interventions: Decision Dossier — Electric-Cooking Evidence Gate and Pilot (build domestic demand to absorb monsoon surplus); Decision Dossier — Climate-Risk Requirements in Hydropower Studies (mandate climate-adjusted hydrology before licensing the Phase 2 pipeline); Decision Dossier — Hydropower Securities Disclosure (ensure Phase 2 IPOs are transparently disclosed).

Value capture: domestic electrification outranks export optimization

The deepest value-capture move in Phase 2 is not better export contracts. It is electrifying cooking, industrial heat, and transport at scale — turning Nepal from a seasonal kWh exporter into a country where electricity is the backbone of economic productivity.

The evidence from Domestic Electricity Demand Distribution is stark: only about 0.5% of Nepali households used electricity for cooking in the World Bank's 2021 estimate, still below 1% in 2025 (World Bank Economics of Household Cooking Using Electricity in Nepal). In a scenario where 20–30% of cooking shifts to electricity, the wiki's demand model estimates roughly 50–75 PJ of new electric demand — a magnitude larger than any plausible export contract. The per-unit economics favour domestic absorption, but not as a single magic ratio: the current Energy Substitution Pathway model estimates roughly 2.1-2.6× export value for LPG cooking and 4.3-6.6× for diesel mechanical displacement, while biomass depends on whether health and time costs are counted. The system captures more value per kWh when it displaces imported or unhealthy fuels at home than when it exports surplus during glut hours.

This does not mean exports are unimportant. Bangladesh contracts, IEX real-time sales, and bilateral arrangements remain valuable revenue sources. But the sequencing matters: domestic demand first, export optimization second. A grid that electrifies cooking, industrial heat, and transport creates a tax base, jobs, and foreign-exchange savings that dwarf the marginal gain from negotiating slightly better export terms. See Domestic-Led Hydro Strategy for the structural argument and Energy Substitution Pathway for the full substitution logic.

Priority: Add Storage Deficit relief. Convert from seasonal surplus to year-round system value.

Phase 3: 2037–2044 — Leverage and Transform

  • 10,000+ MW installed
  • Major storage operational
  • Industrial electricity demand absorbing 30–40% of generation
  • Export revenue $500M+/year
  • Renegotiate Koshi and Gandak treaties from position of infrastructure strength
  • Design for Peak Water post-peak decline

Key interventions: All preceding interventions should be institutionalised by this phase. The domestic demand built through Decision Dossier — Electric-Cooking Evidence Gate and Pilot should be absorbing 30–40% of generation. Decision Dossier — Power-System Role Separation and Open Access should be fully legislated, with an independent ISO operating the grid. Decision Dossier — Climate-Risk Requirements in Hydropower Studies should be the licensing baseline for all projects, not just MDB-financed ones.

Priority: Use energy as foundation for Domestic-Led Hydro Strategy economic transformation.

Six Principles

  1. Move from capacity maximization to Firm Power maximization
  2. Build storage deliberately, not symbolically — sequenced around highest system value
  3. Treat transmission as part of generation economics — every basin plan judged with evacuation
  4. Build domestic demand at the same time — don't wait for industry to appear
  5. Upgrade for climate resilience — better hydromet, Sediment as Design Constraint monitoring, GLOF Risk design standards
  6. Think in basins, not just projects — project-by-project opportunism is the wrong scale

Precondition

All of this requires political stability enabling multi-decade commitment and Nepal Electricity Authority (NEA) capability building that matches ambition. Without institutional reform — specifically Decision Dossier — Power-System Role Separation and Open Access and Decision Dossier — Hetauda–Dhalkebar Completion and Community Resolution in Phase 1 — the engineering plans are fiction.

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