Securing Nepal’s electric future

The country is set to increase hydropower generation eightfold, but risks wasting the power

Reservoir pond of the Pharping hydropower project 12 km south of Kathmandu Valley. Nepal first started producing hydroelectricity in 1911 and was at the time only the second country in Asia to generate hydropower. Photo: ASMIT RAJBHANDARI

For decades, Nepalis have lamented the country’s inability to harness its enormous hydropower potential. Now, the problem seems to be the country’s inability to use the surplus that will soon be generated.

Since 1989, 123 large hydropower projects have been constructed on Nepal’s fast-flowing Himalayan rivers bringing the total generation capacity to 2,148.5MW. After new projects come online in the next six years, generation capacity could be 18,000MW during the monsoon and 11,000MW in winter.

Our focus now should be not just on generating more power, but finding out ways to boost consumption by making electricity more competitive and sustainable.

Private sector projects generate 51% of Nepal’s hydropower, and the rest are government projects. We also need to decide on these three options: whether to entirely privatise hydropower production, give more ownership to the government, or create a strong regulatory body to let private and public go hand in hand.

Private investments in power projects usually revert to government ownership in 30. Given how battery and hydrogen technology is revolutionising the world, it is difficult to say what will happen in the energy sector in the next three decades. Even so, Nepal’s development may continue to rely on hydropower as the primary alternative to petroleum.

At present, 95% of Nepali households have access to electricity. But domestic consumption is not likely to keep pace with the increase in generation capacity. As it is, much of the valuable electricity generated in the monsoon is ‘spilled’ in the monsoon while there is a shortage in winter when 30% of power demand is met with imports from India (at up to Rs32 per unit last year).

Nepal first started producing hydroelectricity in 1911 with the opening of Chandra Jyoti in Pharping. King Prithvi Bir Bikram Shah ushered in the dawn of the electric age by turning on the first electric lamp in Tundikhel.

Nepal was only the second country in Asia to generate hydropower 111 years ago, and it was Prime Minister Chandra Shumsher Rana who brought in British engineers to commission the plant.

Kulekhani Dam opened in 1982
The Kulekhani Dam opened in 1982, and is still the only large reservoir project in Nepal. Photos: NT ARCHIVE

The intervening decades have been characterised with inaction and wasted opportunities. Nepal now has to play catchup so that electricity is affordable and accessible to increase consumption. One way to do that is to lower the electricity tariff so that it is competitive with the price of LPG.

Nepal is still overwhelmingly dependent on biomass for energy, and many rural homes use only one electric bulb for light and cook in firewood. This is largely due to the lack of access to electric stoves, refrigerators and other appliances.

In 2021, the government announced that it would shift entirely to electric vehicles (EVs) by 2031. But this means investing in the necessary infrastructure as well such as charging stations, and incentives for EVs.

Cement and steel industries are the largest consumers of electricity in Nepal. Proper planning is necessary to keep electricity production from going to waste, especially as it is expected to rise almost eightfold by 2030. Sadly, there seems to be no sense of urgency on the part of the government.

It costs about Rs200 million to generate 1MW of electricity. A waste of 5,000MW is a loss of Rs1 trillion, and that is money invested by private shareholders and banks. Under such circumstances, loans and interests cannot be paid on time, which could lead to defaults.

The trickle-down effect on the rest of the economy could be devastating. Serious economic diplomacy is needed to push efforts to export surplus electricity to India at a meaningful price until domestic demand rises.

Despite rhetoric to increase production, Nepal also lacks enough domestic and foreign investment in the sector. Banks do not have enough capital and the interest is too high. We do not have the necessary infrastructure either: project sites are accessible only for five months in a year due to bad roads during the monsoon.

Extension of transmission lines is sluggish. Local obstruction like in the construction of a substation in Lapsiphedi is hindering progress. A national strategy and consensus is needed to expedite transmission lines.

During the Panchayat era, a resettlement company was formed to arrange accommodation for residents displaced by the construction of large projects. But it was dissolved when democracy was restored in1990. Today, there is no land acquisition body at the national level.

Moreover, related agencies are working at cross purposes and have conflicting interests. For example, the Nepal Electricity Authority (NEA) is not only a producer but also the sole buyer of electricity generated by the private sector. It also determines the price of power, and it is often not attractive enough for the private sector.

The Electricity Production Company, Hydropower Investment and Development Company and Electricity Development Department were all formed to generate hydroelectricity but there is no effective regulation of these bodies. The Electricity Regulatory Commission does everything but solve the existing problems or prepare for future challenges.

Governmental agencies like the Ministry of Energy, NEA, Nepal Stock Exchange, Nepal Securities Board, CIAA, and Electricity Regulation Commission and Parliament committees should all coordinate their activities with a national strategy in mind.

With such vested interests, hydropower investors also have to navigate a sluggish bureaucracy. But if we want to secure the future of electricity in Nepal, and not waste precious power, it is imperative that a single strong regulatory body is formed to streamline the sector in the national interest.

Kumar Pandey is General Secretary of the Independent Power Producers' Association, Nepal (IPPAN).

Translated from the Himal Khabar original.

Read also:

How they kept Nepal in the dark ages, Ramesh Kumar

The geopolitics of Nepal’s water and electricity

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