Nepal | May 29, 2020

Erratic plan in power sector generates no results

Pushpa Raj Acharya
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Kathmandu, May 8

Minister for Energy, Water Resources and Irrigation Barsha Man Pun unveiled the white paper and roadmap for the efficient management of water resources to achieve the ‘prosperity’ agenda of the government today.

Pun’s roadmap is the seventh strategic plan for the management of water resources and power sector development since 2001.

In recent years, there has been a trend of unveiling strategic plans for power sector development along with the change in the leadership of the ministry. Minister Pun has unveiled his plan to develop one mega hydroelectricity project in each province and ensure share investment from every Nepali in hydropower projects as ‘secured investment for the future’. The white paper and roadmap unveiled today envisage developing 3,000 megawatts of power in the next three years; 5,000 megawatts in five years; 10,000 megawatts in 10 years and 15,000 megawatts in 15 years.

It has changed the aim of the ‘National Energy Crisis Prevention and Electricity Development Decade, 2016’ that envisions developing 10,000 megawatts in 10 years.

Nepal Electricity Authority (NEA), the sole power off-taker had developed its strategy to purchase power as per this strategy. NEA had introduced ‘take-or-pay’ power purchase agreement in February this year for up to 10,000 megawatts of power that is going to be generated by 2026.

The power utility has fixed a quota of 30 per cent (3,000 megawatts) of the aforementioned quantum of electricity for run-of-the-river projects, 20 per cent for peaking run-of-the-river projects (2,000 megawatts) and 50 per cent (5,000 megawatts) for storage projects.

The quota allotted for run-of-the-river (RoR) projects that are going to be developed by 2026 is already over. In fact, NEA has been discouraging RoR projects as the power generation of the snow-fed river projects goes down to one-third of rated capacity during dry season.

“RoR projects are relatively cost-efficient and can be completed in a short period of time and this might be the reason why private sector players have influenced the minister to come up with the plan of 15 years, under which the quota of the RoR projects can be raised under ‘take-or-pay’ power purchase agreement (PPA) that will benefit the influential people who want to invest in RoR projects,” an independent analyst commented on Pun’s roadmap, on condition of anonymity.

“Instead of initiating reforms at NEA, its financial health, unbundling of works — generation, transmission and distribution — among others, to attract foreign and domestic investors in PRoR and reservoir projects, Minister Pun is focused on distributing licence of RoR projects under his 15,000 megawatts in 15-year roadmap.”

The independent power producers (IPPs) have said that the problem lies in transmission and NEA says that the real challenges are upgrading and augmenting the distribution system. “Generation is obviously the priority of the country, but not RoR projects. We must go for PRoR and reservoir projects for reliable energy supply for the longer term,” as per NEA officials. “To meet the demand, the country imports up to 450 megawatts of electricity in the dry season as the generation from snow-fed river based projects plummets heavily.”

In the 107-year history of power generation, the country’s total installed capacity has marginally crossed 1,000 megawatts, whereas current demand is 1,300 megawatts. Out of the total installed capacity of 1,073 megawatts, NEA projects contribute 562 megawatts and 511 megawatts is contributed by IPPs. Credit goes to the private sector as the country’s power sector has witnessed transformative changes after the investment was opened up for private sector players.

Debates are ongoing on accelerating the development of hydropower, to be independent in energy and also export clean and renewable energy across the region, but the implementation is disappointing. In fact, contribution of
hydroelectricity in total energy consumption stands at only 3.7 per cent.

Since 2001, six strategic documents have been unveiled — one every three years on an average. The government had adopted Water Resource Strategy in 2001, which was revised in 2005 to National Water Plan. In 2007, a plan calling for construction of 10,000 MW in 10 years was adopted, which was then altered in 2009 to become a plan for 25,000 MW in 10 years declaring ‘energy emergency’. In the wake of the trade disruptions that affected the import of petroleum products acutely, the government came up with another revamped plan, this time calling again for 10,000 MW in 10 years. And now, 15,000 megawatts in 15 years has been presented by Minister Pun.

“Developing hydroelectric projects is capital- and labour-intensive and the investors do not make investment without any guarantee of returns and assurance of investment protection and this is why we should focus on holistic approach regarding generation, transmission, distribution and cross-border trade,” said Shailendra Guragain, president of Independent Power Producers’ Association Nepal (IPPAN). “However, the erratic plans and policies adopted in the power sector could dampen investor sentiment.”

A version of this article appears in print on May 09, 2018 of The Himalayan Times.

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