Reliable energy a must to boost Nepal's economic growth

Kathmandu, January 4

Unreliable supply of energy has long been considered as the major constraint for economic growth of the country. Despite having huge potential of hydroelectricity, Nepal has exploited negligible quantum in its 110-year history of hydropower generation. Hydroelectricity is contributing just 3.7 per cent of the total energy demand of the country.

Against this backdrop, involvement of private sector in hydroelectricity generation has been giving momentum to development of hydropower projects in recent years.

By 2017, IPPs contributed altogether 520 megawatts to the national grid against 530-megawatt generation capacity of Nepal Electricity Authority (NEA) projects. Policy instability and procedural hassles in land acquisition, right-of-the-way clearance, among others, are major challenges to develop hydropower in Nepal.

Khadga Bahadur Bisht, former president of Independent Power Producers' Association Nepal (IPPAN), said that the latest technology in construction, including tunnelling, could accelerate developing hydropower projects, but procedural hassles and local obstructions during land acquisition and right-of-the-way clearance tend to extend execution period. “If the government eases the procedures and the locals are cooperative, many projects could be completed in three to four years,” said Bisht.

Following the energy crisis, the government led by former energy minister Janardan Sharma took some significant steps for enabling the investment climate in the country's hydropower sector. Predecessor of Sharma had also taken some bold decisions like ending the practice of holding licence without doing anything in hydropower sector and given a deadline to take forward the project or surrender the licence.

The country has finally overcome the challenge of crippling power cuts since last one year as the power utility has effectively managed the demand and supply through additional import of electricity from India - around 372 megawatts during dry season. Energy import - hydroelectricity and petroleum products - are the major imports of Nepal from India. If Nepal can exploit its hydroelectric potential, the country can significantly minimise the widening trade gap with the southern neighbouring giant.

Major policy reforms

Following the Ministry of Energy's instruction, the NEA board has reinstated the provision of ‘take-or-pay' in power purchase agreement (PPA), with major focus on peaking-run-of-the-river (PRoR) and storage projects. This policy is important from the perspective of energy security because most of the private sector developers were focused on run-of-the-river (RoR) projects.

Generation from the RoR projects plunges to one-third of the rated capacity when the water level in snow-fed rivers drops during winter season. Hence, Ministry of Energy had introduced a separate tariff for the PRoR and storage projects for six months of the dry season.

As per the recent tariff policy, RoR projects, which can meet the energy requirement of 30 per cent for six months (from June to November), will also get dry season rate of Rs 8.40 per unit for whole six months.

Likewise, the reservoir projects that meet 35 per cent of (rated capacity) energy during dry season can obtain Rs 12.40 per and the tariff for wet season is Rs 7.10 per unit.

PRoR projects can sell energy at up to Rs 10.55 as per their peaking capacity (from at least four to six hours a day) in dry season and Rs 8.40 per unit in non-peaking hours of the dry season. And for wet season (July to October), similar tariff like that for RoR projects of Rs 4.80 per unit is applied for PRoR projects.

New connections

From winter season of next year, largest capacity peaking project, Upper Tamakoshi will be connected to the national grid as the tunnel breakthrough of the project was carried out in the last month and 92 per cent of the works have already been completed. The country will have sufficient energy to cater to the demand after completion of the 456-megawatt Upper Tamakoshi.

Similarly, tunnel breakthrough of one of the longest running NEA projects, Upper Trishuli 3A, was carried out in September and the 60-megawatt UT3A project is also expected to be completed by this year.

Improving the system

The power utility should give due consideration to early completion of generation and transmission projects, work for augmentation of transmission lines and distribution system eyeing the possibilities of industrialisation in the country.

Cheaper electricity can significantly bring down the production cost and the country can attract electricity intensive industries, which will generate employment opportunities in the country.

According to Kulman Ghising, managing director of NEA, there is a huge demand for electricity from the industrial sector and the NEA will have surplus energy by the end of this year.

However, the power utility may not be able to supply electricity as demanded by the industries because the old distribution system (substation, feeders, cables) cannot handle the additional load. Hence, NEA has prioritised transmission and distribution system upgradation and augmentation. However, procedural hassles related to procurement, hiring workers and others have been creating obstructions.