27 July 2026, NIICE Commentary 12585
Shammi Thakur
South Asia’s energy insecurity is no longer defined only by insufficient generation or dependence on imported fuels. It is now shaped by rising cooling demand, unstable hydrology, ageing networks, concentrated fuel exposure, and cross-border rules vulnerable to political and technical delay. Nepal brings these pressures into sharp focus. It possesses substantial hydropower resources and has begun supplying electricity beyond its borders, yet it still faces dry-season shortages, transmission constraints, and continued dependence on imported petroleum. The central question is not whether South Asia can produce more energy. It is whether the region can convert its resources into a dependable, affordable, and climate-resilient supply. That shift demands a broader understanding of security, one that joins physical supply with affordability, institutional credibility, and the capacity to absorb climatic shocks. Nepal’s experience suggests that the answer will depend on three linked choices: treating extreme weather as a reliability issue, using electricity more productively at home, and replacing ad hoc cross-border permissions with durable regional arrangements.
Heat Has Turned Reliability into a Climate Test
Extreme heat has exposed the weakness of measuring energy security through installed capacity alone. India’s peak electricity demand reached a record level in May 2026 as cooling loads surged, demonstrating how quickly a system that appears adequately supplied can come under pressure when temperatures remain elevated.
Similar conditions elsewhere in South Asia have intensified power cuts, raised the cost of emergency generation, and increased exposure to imported coal, gas, and petroleum products. Heat does not create a single shortage; it compresses several risks into the same period. Demand rises sharply, transformers and distribution equipment operate under heavier stress, hydropower becomes more sensitive to water availability, and households with the least ability to absorb higher bills face the greatest disruption.
For Nepal, the climate dimension is more complex. Hydropower provides a low-carbon foundation, but much of the country’s generation depends on river flows that vary between the monsoon and dry seasons. Intense rainfall can increase output in one period while also bringing floods, landslides, sedimentation, and damage to transmission corridors. Reduced winter flows can then limit generation when domestic demand remains firm. A resilient response cannot rest on building additional run-of-river projects without strengthening the wider system. Storage hydropower, solar generation, battery energy storage systems, stronger substations, and climate-resilient transmission must be developed as complementary assets. Remote districts also require well-managed microgrid controllers that can maintain essential services when central connections fail. Climate adaptation is not an environmental addition to energy planning. It is part of the reliability standard by which every new investment should be judged.
Nepal’s Hydropower Paradox Cannot Be Solved by Exports Alone
Nepal’s shift from prolonged load-shedding to seasonal electricity exports is a major achievement, but it has produced a new policy contradiction. The country can send surplus electricity abroad during the monsoon and still import from India in winter when river flows decline. That pattern is commercially rational in the short term, yet it reveals that greater generation has not fully resolved year-round security. Export earnings matter, but a strategy centred too heavily on selling seasonal surplus risks overlooking domestic uses that could reduce Nepal’s structural dependence on petroleum and strengthen its productive base.
Electricity should be treated not only as a tradable resource but also as an instrument of economic transformation. Greater use of electric cooking can reduce exposure to imported liquefied petroleum gas. Electrified public transport can lower oil dependence and urban pollution. Reliable power for irrigation, cold storage, food processing, tourism facilities, and small manufacturing can spread the gains from hydropower beyond project sites and export revenues. Wider renewable energy deployment should therefore be linked to productive consumption, not simply to additional capacity.
This requires a different sequencing of policy. Transmission and distribution upgrades must reach areas where enterprises cannot expand because supply quality remains weak. Time-of-use tariffs can encourage consumption when electricity is abundant. Public procurement can accelerate electric mobility and institutional cooking. Storage should shift surplus power towards periods of higher need rather than allowing seasonal abundance to coexist with curtailment. Local energy systems can also help hospitals, schools, and municipal services integrate distributed solar, batteries, and backup supply more effectively. Nepal does not have to choose between domestic electrification and exports. It must ensure that external sales reinforce internal development rather than substitute for it.
Regional Trade Needs Rules, Not Occasional Permission
The resumption of Nepal’s 40 megawatt electricity supply to Bangladesh through India in June 2026 is strategically important because it demonstrates that three-country power trade is technically possible. Yet the failure to secure approval for an additional 20 megawatts during the same season also shows how fragile the arrangement remains. Nepal had surplus electricity, Bangladesh had demand, and India possessed the required transit geography, but transmission constraints and incomplete procedures prevented the expansion. The episode should not be reduced to a dispute over one approval. It exposes the absence of a sufficiently predictable framework for subregional electricity exchange.
India’s role is indispensable. Its grid connects the region’s largest demand centre with Nepal and Bhutan’s hydropower potential and Bangladesh’s need for additional supply. That position gives India both strategic influence and practical responsibility. Stable cooperation will require:
- Transparent capacity-allocation rules
- Published transmission charges
- Compatible scheduling procedures
- Timely project approvals
- Credible payment mechanisms; and
- Agreed processes for managing congestion.
South Asia should move gradually towards a rules-based electricity architecture rather than wait for an ambitious regional union. Nepal, India, Bangladesh, and Bhutan already possess complementary seasonal profiles and established bilateral links. They can begin with:
- Coordinated planning for cross-border lines
- Longer-term purchase commitments
- Emergency power-sharing protocols
- Common technical standards.
Such cooperation would allow hydropower, solar generation, and storage to support one another across different hours and seasons. It would also reduce the pressure to maintain expensive fossil-fuel capacity solely for periods of stress.
Secure Transition Must Be Built Before the Next Shock
Nepal’s relevance to South Asian energy security lies not only in the electricity it can export, but in the policy lesson its experience provides. Resource abundance does not guarantee reliability, and cross-border connectivity does not guarantee access. Security emerges when generation is diversified, networks can withstand climate stress, electricity supports domestic production, and regional exchanges operate through dependable rules.
Growth, sustainability, and cooperation are therefore not separate objectives. Growth without resilience deepens exposure during heatwaves and dry seasons. Sustainability without storage and stronger grids leaves clean electricity vulnerable to interruption. Cooperation without transparent procedures turns every cross-border flow into a recurring negotiation. Nepal can help shift the regional approach by aligning hydropower expansion with domestic electrification, climate adaptation, and structured power trade. South Asia will be better prepared for its next energy shock when electricity moves according to shared rules and resilient infrastructure, rather than temporary surplus and exceptional permission.
Shammi Thakur is Research Director at MarkNtel Advisors.
