Stay on the right track

With new plans and investments pouring into the hydro power sector Nepal should now focus on turning its dream into reality


It’s not news anymore that Nepal has high potential in hydro power; however, what still makes news is how Nepal fails miserably at tapping into this much talked about potential. The country has still not been able to capitalise on the available resources and generate required electricity through self reliant means. It is estimated that Nepal has the potential to generate over 40,000 MW of technically and economically viable electricity. However, Nepal never really laboured on such possibilities and has failed to make any sustainable progress in the hydropower sector due to its lackadaisical approach and short sighted plans and projects. As a result, the country, time and again, grumbles under the burden of load shedding due to deficit in electricity supply.

However, on second glance the situation is not as abysmal. In the past year, Nepal Electricity Authority (NEA) has proved that internal management of the electricity distribution and efficient operation of hydropower plants can mitigate load shedding. However, there are many insidious problems that need serious treatments. It’s high time that Nepal reforms its perspectives on hydro power and tackles the prevalent problems of delay in the construction of hydropower projects and substations and installs proper mechanism to increase the efficacy of hydel projects to assure that load shedding never surfaces again and the country increases its reliance on electric energy.

Load shedding management 

Continuing with load shedding management schemes, NEA is all set to supply 24 hours of continuous power to consumers even in the upcoming driest months. Major cities like Kathmandu and Pokhara will be made load shedding free for the entire period and the remaining parts of the country will also feel minimum power cuts during dry season through effective and efficient management in demand and supply.

At present, there is a demand of 1312 MW of power and NEA has been generating 306 MW whereas the contribution from Independent Power Producers (IPP) amounts to 356 MW. NEA also imports 340 MW of power from India. However, there is a load shedding of 310 MW which is addressed through internal management, limitation of power to industrial consumers and augmentation of transmission and distribution facilities. Bharat Khadka, Information Officer at NEA informs, “Continuing last year’s initiative, NEA will resort to managing 24 hour supply of power to general consumers in the upcoming dry season as well. NEA will curtail the industrial supply during peak hours and also employ other management schemes.”

However, NEA won’t be able to import more electricity from India due to delay in construction of Dhalkebar substation which will play pivotal role in the cross-border trade of electricity as the country plans to increase import of electricity through Muzaffarpur-Dhalkebar cross-border electricity transmission line of 400 kV. The plan to reduce load shedding by simply importing an additional 100 MW of electricity from India after the completion of Dhalkebar substation is in disarray after NEA terminated the contract of Dhalkebar substation as the Chinese contractor had intentionally delayed the project. Therefore, Nepal will have to manage with the existing import of electricity from India until the project is completed.

On the right track

In the last fiscal year (2016/17), NEA has made lots of progress in its operational capacity, management skills, loss reduction and financial expenses. NEA has proved that utility of the power plants can be maximised as Kaligandaki, Marshyagdi and Middle Marshyagdi power plants were run for peaking operations during dry season to meet the peak

demand of the existing system.

Likewise, NEA has improved its financial performance as it managed to generate operational profit after many years amounting to Rs 2,407.38 million. The annual report published by NEA also shows that total revenue generated from energy sales and other income also reached Rs 50,229.48 million in comparison to Rs 53,073.48 million in the previous year. Most importantly, NEA also managed to reduce its net loss in the last fiscal year to Rs 978.92 million in comparison to the loss of Rs 8,890.19 million in the fiscal year 2015/16.

Meanwhile, the increment in Power Purchase Agreement (PPA) with IPP is also a great leap forward for the development of the hydro sector. NEA has also eased the procedure for PPA to increase the participation of the private sector through open rates for the purchase of energy from three categories of hydro power projects — Run-of-River, Peaking Run of River and Storage type. 10 new hydro power projects developed by IPPs with a combined capacity of 188.61 MW were brought into operation in the last fiscal year. Furthermore, a total of 28 new PPAs were signed which increased the total number of PPA has signed with IPPs to 213. Dinesh Kumar Ghimire, Spokesperson at Ministry of Energy (MoE) says, “By the end of the next fiscal year, more than 150 projects from IPPs will be added to the system which will reduce power deficit.”

Increasing investment in hydro power

In the past few years, there has been an exponential surge in investment in the hydro sector. Besides the active participation of IPPs from Nepal, the hydro power development firms from China and India have also been playing active role in Nepali hydro power scene. 102 IPP’s hydro power plants with the combined capacity of 2043.613 MW are under construction and are expected to be in operation in the next three to five years. Bijay Bahadur Shrestha, Chairperson of Nepal Hydro and Electric Limited, is of the opinion that the market should be left open with minimum restriction on investors. Shrestha shares, “Investors are eyeing for the perfect opportunity to invest in the hydro power sector. So, the government must ensure favourable environment for investors by reducing risks.”

Nepal and the United States of America have also signed a grant agreement worth $500 million under the Millennium Challenge Corporation (MCC) and with this agreement, Nepal will be able to mobilise large sum of amounts in the development of electric transmission project. 300-km high voltage electricity transmission lines will be built from Lapsifedi (Kathmandu) to Damauli (Tanahu), Galchhi (Dhading) to Hetauda (Makawanpur), Damauli (Tanahu) to Sunwal (Nawalparasi) along with three substations of 400 kV at Galchhi, Damauli and Sunwal.

The  state-owned Hydroelectricity Investment and Development Company Ltd (HIDCL) has unveiled its plan to invest Rs 36 billion in hydro power sector within the next five years. Speaking with THT Perspectives, Chabbi Raj Pokharel, CEO of HIDCL says, “HIDCL will invest Rs 5.09 billion in the projects developed by IPPs with capacity to generate 565 MW and Rs 16.21 billion in projects developed by government-owned companies with the capacity to generate 1,640 MW in the next five years.” Pokharel also informed that HIDCL will provide loan of Rs 14.46 billion to 18 projects developed by IPPs.

Besides these projects, Nepal and India are also working to finalise the Detailed Project Report (DPR) of the Pancheswar Multipurpose Project. The two sides have conducted two joint meetings to sort out technical issues of DPR.  Ghimire says, “We are in dialogue with Indian side to discuss on the matter of benefit assessment, cost apportionment in accordance with the Mahakali Treaty. We have principally agreed to fix 925 MW as the firm capacity and Nepal will get half of the electricity generated from the project.”

With all these investments, Nepal should shift its focus to reservoir projects because 91 per cent of electricity generated in Nepal comes from run-of-river projects which are not reliable source of power and are fully operational only during wet season. Pradeep Gangol, a senior hydropower engineer, says, “We should focus our attention in the implementation of reservoir projects. Though the demand for base load can be met from run-of- river plants, the peak power demand can only be met by reservoir projects. The government should announce more rebates, incentives to lure developers to construct more daily peaking run-of-river projects, and pumped storage hydropower projects. Also, NEA should expedite the implementation of storage hydropower projects like Budhi Gandaki storage, Dudhkoshi, Storage, Nalsinghgad storage, Tanahu storage projects in order to meet seasonal peak power needs.”

Along with the development of hydro power plants, other necessary infrastructure like transmission lines, substation should also be developed simultaneously. Besides investing in infrastructure, the government should also lead bilateral talks with neighbouring countries in equal terms for the investment in large scale projects.  Therefore, it is important that the concerned authorities such as MoE, NEA, HIDCL, IBN jointly work to create a full proof plan that be executed efficiently for the evolution of hydro power sector.