Nepal exported electricity worth Rs 29.32 billion in the fiscal year 2082/83 (2025/26 AD), selling approximately 3.877 billion units, according to the Nepal Electricity Authority (NEA), the state-owned integrated power utility. This comes as the country’s electricity generation capacity has rapidly expanded, eliminating chronic power shortages and enabling exports to neighboring countries.
With an installed generation capacity of 4,120 MW by the end of FY 2082/83 and monsoon-season output often surpassing 3,000 MW, Nepal frequently produces substantially more electricity than its peak domestic demand of around 3,261 MW, creating a significant seasonal surplus.
Background
- Nepal's vast hydropower potential has long been regarded as one of the country’s most important economic assets, which remains significantly underutilised.
- In recent years, electricity generation capacity has expanded rapidly as new hydropower projects have come into operation, allowing Nepal to eliminate chronic power shortages and begin exporting electricity to neighbouring countries.
- Nepal's hydropower system is heavily dependent on run-of-river projects, which produce large surpluses during the monsoon but much lower output in winter.
Policymakers are now facing a strategic question: should Nepal continue exporting electricity at relatively low tariffs, or should it explore higher-value uses such as data centers and artificial intelligence (AI) computing? While exporting surplus is economically preferable to wasting it, analysts suggest Nepal risks behaving like a “banana economy” by exporting primary energy resources at low prices while importing high-value technology and services.
Globally, the digital economy is becoming a major consumer of electricity. Data centers accounted for roughly 1-1.5% of global electricity demand in 2023, a share expected to increase with the expansion of AI and cloud computing, according to the International Energy Agency. Major tech companies like Google, Microsoft, Amazon Web Services (AWS), and OpenAI are making multi-billion-dollar investments in AI and cloud infrastructure, highlighting the electricity-intensive nature of these industries.
An independent study by Energy and Environmental Economics, Inc. (E3) suggests that a 100 MW hyperscale data center for a company like Amazon could generate approximately $3.4 million in surplus value per year at 2025 rates, rising to about $6.1 million by 2030. Beyond direct revenue from electricity, leases, and taxes, data centers could generate significant spillover benefits, including high-skilled job creation, technology transfer, and the development of supporting industries. These benefits would provide a substantial economic boost for Nepal, which had a GDP of $45.84 billion in 2026.
The Government of Nepal’s Budget Speech for Fiscal Year 2083/84 (2026/27 AD) supports the development of digital industries powered by hydropower, emphasizing digital transformation, AI, innovation, and technology-driven economic growth. The budget proposes establishing a sovereign AI compute center and prioritizes continued investment in hydropower and digital infrastructure. Nepal’s first sovereign AI compute center is planned for Syuchatar, Kathmandu, with its establishment announced on October 25, 2083 (BS).
However, challenges remain, including limited infrastructure, an inadequate high-capacity transmission network, unreliable internet, and advanced cooling systems. Regulatory uncertainty surrounding digital infrastructure investment also discourages potential investors. Nepal also faces a shortage of skilled professionals in blockchain technology, cybersecurity, and data center management.
What happens next
Nepal's installed hydropower capacity is projected to reach 15,000 MW by 2030 and 25,800 MW by 2035. The plan for the sovereign AI compute center in Syuchatar, Kathmandu, aims to provide high-performance AI computing capabilities at concessional rates to domestic startups, researchers, and entrepreneurs.
