Power to the People

Next week from 31 October-4 November is the festival of lights, and that is when domestic demand for electricity will surge as it does this time every year.  

However, this year the the Nepal Electricity Authority (NEA) will be hard pressed to ensure adequate supply because of the damage to power plants and transmission lines on 28 September. In a flash, Nepal lost nearly half its electricity generation capacity as a dozen power plants were knocked out.

Most of them are now back in operation, but the 456MW Upper Tama Kosi was damaged in a massive rock fall, and will take at least six months to return to full operation. The export of over 1,000MW of power to India has been slashed to meet in-country demand over the festival.

The flood was a warning that Nepal must not bunch up power plants on just one river basin. An Indian company is building a cascade of four plants on the Arun to cumulatively generate 3,000MW in the next five years -- half of Nepal's total. We should also not rely solely on hydro, but diversify to solar. 

But how can Nepal increase domestic power consumption?

Even without catastrophic floods like the one last month, the math is simple: unless domestic power consumption is increased and the distribution system upgraded, Nepal is on track to ‘spill’ millions of units of electricity worth billions of rupees.   

“Domestic consumption of electricity is very much linked to GDP and economic growth,” says Chandan Kumar Ghosh of the Nepal Electricity Authority (NEA). “Expansion of our network doesn’t necessarily mean increased consumption. What we are seeing right now is a worrying decline in electricity demand in rural areas due to outmigration.”

Transportation has been seen as the low hanging fruit to increase domestic energy demand. The government’s tax rebates on battery-operated vehicles has increased EV uptake. In fact, among Asian countries, Nepal has the highest annual sale of EVs in proportion of total vehicles sold.  

However, the same subsidies and incentives to electrical appliances would have a bigger impact on electricity consumption. Only 3% of Nepali households own  cars, jeeps, and vans but nearly all households cook three meals a day.

The government did provide subsidies for induction stoves, but cultural factors because of the shape of cooking pots, lack of maintenance backup, and insufficient amperes in the current means there were few buyers. 

“Use of electrical and electronic appliances in Nepali households was very low even by South Asian standards until 2010, but it increased due to awareness, accessibility and availability of electricity,” says Prabhakar Shumsher Thapa of Golchha Group which sells the Himstar brand.

He adds: “But the market is becoming more challenging mainly because a large portion of young Nepali consumers have migrated.”

Sales figures show that demand for tvs, refrigerators and washing machines are still growing, while rice cookers are best sellers. 

Air conditioners in the Tarai and heaters in the mountains also have seasonal sales peaks. Chilling stations which use up significant energy have become a lifeline for farmers across the country to keep produce from going to waste.

“Induction stoves are popular but it is culturally more challenging, so many choose the infrared option which takes utensils of various make or rice cookers which are always high on demand,” explains Sefali Agrawal of the Triveni Group which has its own local brand Yasuda.

The NEA’s Ghosh, speaking as the energy supplier, is not so keen on increasing domestic consumption of electricity with cooking appliances because of peaking demand. Nepal’s existing transmission lines cannot handle a morning and evening spike. The higher investment on distribution may not be justified if there is low demand the rest of the day. 

“The solution is balancing out such peaks with electrification of industries and the IT sector,” Ghosh says. “And what would really help is day-ahead forecasts with a binding agreement of how much power the industries would need so that we can also provide quality supply. This helps when we import power from India during winter at a very high rate, so we won’t buy what we don’t need and waste money.”

Captains of industry, however, say the government needs to have a pro-manufacturing policy in place to encourage local production of household appliances by reducing taxes on imported raw materials and even subsidies. That way Made in Nepal appliances can be competitive, and even exported.

However, Thapa of Golchha Group adds that while certain goods that are manufactured in Nepal are eligible for preferential treatment under the South Asian Free Trade Area (SAFTA) agreement, not all countries reciprocate. 

India has non-tariff barriers on appliance imports that have to meet its energy efficiency ratings and the Bureau of Indian Standards (BIS) certification which protect its own manufacturing industry. 

“The solution to increasing the domestic electricity consumption is by making larger customers pay less per unit,” says Thapa. 

Experts say that electricity tariffs should be as low as possible for consumers because Nepal risks wasting hydropower during monsoon. They recommend unbundling the NEA into a regulatory body and an operator, and deregulating the market. 

Other measures can be time-of-day metering as well as reverse metering so households and industries with solar arrays can export power to the grid.

And the warning from the floods last month was that Nepal should not have all its eggs in the hydropower basket, and look into utility-scale solar generation sites combined with pumped storage hydropower so that solar energy can be stored for evening and morning peak demand without using expensive batteries.

EV envy

The sales of electric vehicles in Nepal continue to rise, with the number of battery-powered cars, buses, vans, and tempos now totalling more than 50,000. Ten months into this year, nearly 80% of all private vehicles sold across the country are electric, the highest proportion among Asian countries.

Nearly 12,000 EVs were imported between June 2023 and June of this year, with Chinese EVs such as best-seller BYD now having overtaken Indian models. This is despite fluctuating tax policies, which are generally more favourable than those of their petrol and diesel counterparts. 

Smaller EVs are also well suited for Kathmandu, while the improved range of new e-SUVs and e-vans means they can travel from Kathmandu to Dharan or Pokhara on a single charge.

There is, however, still a gap in electric buses that are five times as expensive as fossil variants of the same capacity, but do not get any subsidy or tax rebate. The real transformation in transport in Nepal will come when batery-powered buses get the same incentives.

There are over 1.2 million motorcycles and scooters just in Kathmandu. Replacing them with electric two-wheelers will open a bigger market while also cleaning up the air and improving public health. However, petrol two-wheeler sales have fallen by 30% in the past year, according to retailers.

There is a direct corelation between increased EV sales and Nepal's import of petrol and diesel from India which was down by 10% in July-August compared to the same months in 2023, although tight credit and an economic slump were also factors.

Reducing petroleum imports by just 10% and replacing it with domestically generated hydroelectricity would save Nepal at least Rs30 billion a year, while contributing to the need to increase domestic demand for power.