Nepal’s Resource Curse

· On the night of 15 May, two glacial lakes burst in Tharka in Humla and the debris flow washed away homes and bridges. 

· Last week, a slurry surge on the Kali Gandaki in Upper Mustang caused at least Rs15 million in damage, and was traced to a melting glacier.

· Dozens are feared dead after an expanding glacial lake in Tibet overflowed, sweeping down into Nepal and damaging four hydropower plants generating 230MW, nearly 8% of the country’s total grid supply. 

And those are just in the past month. Climate scientists say Himalayan glacial lake outbursts are becoming more frequent and destructive, and a warning for Nepal not to put all its eggs in the hydropower basket. 

Record precipitation last September unleashed floods that killed 200 people, and temporarily slashed Nepal’s total generation capacity of 3,000MW by nearly half. The Melamchi flood of 2021 caused by permafrost melting on a glacier upstream nearly destroyed a $800 million water supply scheme, Nepal’s largest infrastructure project which four years later still has not resumed full operation.

The glacial lake overflow in Sikkim caused by record rainfall in September 2023 that destroyed the $1.2 billion Chungthung Dam and caused catastrophic damage to infrastructure on the Teesta River. This was a warning to the cascade of hydropower plants on the Arun and Marsyangdi river basins. 

Nepal has set a target of generating an additional 28,500MW by 2035 -- out of the feasible 48,000MW -- but how viable is an energy strategy that is exposed to heightened risk due to climate breakdown?  

“As extreme weather events increase, we must design and build infrastructures respecting river flow and topography,” says former Energy Secretary Dwarika Nath Dhungel. “We must make the best use of our water resources, but not by letting excavators loose everywhere mining riverbeds and building haphazardly where we shouldn’t.” 

Although no project can be disaster-proof, climate smart design can minimise damage from flash floods and landslides. Recent disasters have driven up insurance premiums for energy projects in Nepal, and smaller ones cannot even afford them. The 456MW Upper Tamakosi hydroelectric project which is still not fully functional after the September floods has claimed insurance worth Rs1.8 billion.

The alternative to high risk high investment hydropower projects is energy diversification to other renewables such as solar, wind or biogas. Nepal gets annual sunlight of 300 days with 6-7 hours on average to total 50,000 terawatt-hours (TWh) per year. 

The Solar and Wind Energy Resource Assessment (SWERA) calculates that Nepal could source 3,000MW from wind energy alone, considering 10% of the area with more than 300W/m2 wind power density. Solar energy stations are cheaper and quicker to build, and would be an ideal alternative to reliance on hydropower. 

“There has been some investment in solar power, especially from the state sector,” says water expert Madhukar Upadhyay. “But there is an issue of land acquisition since the arrays need a lot of space. It is comparatively easier to get a permit to put up a hydropower plant on a river.”

As for biogas, there is simply no incentive to build on past success with household level plants to promote industrial-scale production. Scaling up biogas by integrating it with urban biodegradable waste would still be a viable alternative to LPG. 

Nepal’s public sphere is buzzing with excitement over the discovery of potentially 430 billion cubic metres of methane gas beneath Dailekh district that, if properly harnessed, would meet the country’s energy demand for the next 50 years. Even though a feasibility study is awaited, politicians from the prime minister down see this as a petro bonanza that will make Nepal rich.

But drilling, storage and distribution of CNG in the country’s current kleptocratic state make that unlikely. If Nepal was to get rich solely on its hydro-energy potential, it could have done so in the past 50 years.

Says Dhungel: “This is not exactly a new discovery, but it is premature to celebrate until its extraction is proven to be cost effective. And let us hope it does not get tangled in geopolitics, since China is involved in the prospecting and drilling, which could make India uneasy.” 

The country suffers from the Dutch Disease curse even before its resource is fully exploited. And the same cronyism, corruption and rent-seeking structure cannot deliver the riches we expect from Dailekh’s methane discovery.

Now, with hydropower in jeopardy, Nepal’s planners will have to evolve a new strategy for energy security into the future. But first, governance needs to be cleaned up with long-term strategic planning that takes climate risk into account. For example, do we need to mine fossil gas when there are renewable options? Will Dailekh take Nepal away from its climate commitments?

Says Madhukar Upadhyay: “Nepal has always been resource rich and management poor. And the larger the resource, the bigger our management incapacity. It is a societal malaise.”