Nepal | July 04, 2020

World Bank stresses on need for country to reform power sector

Himalayan News Service
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Hydropower reformKathmandu, October 5

As the country wants to generate 10,000 megawatts of electricity in the next 10 years against only 300 megawatts added in the past 10 years, the government should focus on various reforms to realise investment amounting to tens of billions of dollars in the hydropower sector, according to a World Bank report titled ‘Powering Recovery’.

The report has identified some critical areas like strategic planning for generation and sales optimisation, improvement of the regulatory framework including competition in the power market, improvement of investment environment and restructuring of Nepal Electricity Authority (NEA) — the single power offtaker of the country.

Since 2001, the government has introduced five strategic plans for the development of energy sector.  But the plans have not been implemented due to lack of proper reforms that are required to lure investment for the development of the sector.

Very recently, the ‘National Energy Crisis Prevention and Electricity Development Decade, 2016’, which was unveiled by the Ministry of Energy (MoE), has envisaged to generate 10,000 megawatts of electricity within a decade.

But according to the World Bank report, radical reforms are necessary in the energy sector so that this strategic plan does not face the challenges that hindered implementation of previous plans.

“Attracting and retaining investment that amounts to tens of billions of dollars requires mechanisms for sharing risks, the provision of common infrastructure such as transmission corridors and roads and streamlined procedures within the context of a clear and strong legal and regulatory framework,” says the report.

To move towards higher growth trajectory, power is critical to expand economic activities in the country, according to the report. The rampant power outage in the past decade has crippled the manufacturing sector and also affected other sectors.

The report has stressed on clean, reliable and affordable electricity — the single most important source for recovery and longer-term growth of Nepal.

“Electricity sector could not only meet the domestic demand reliably, affordably, and cleanly, but would earn revenue from export of surplus hydropower through enhanced regional electricity markets to neighbouring countries by integrating the wider South Asia power market,” the report has stated.

Growth of the power sector itself is weak as it has been lagging behind due to various hurdles. Between 2002 and 2016, NEA produced only five megawatts of electricity every year and Independent Power Producers added 25 megawatts per year. Along with generation, transmission and distribution systems are also facing similar problems. Delay in installing transmission lines and lack of proper upgradation of the distribution system to the major load centres may cause perennial problem of power outage in the long run, the report has warned.

“To overcome all the challenges hindering development of electricity, the country needs radical reforms in the power sector,” stressed Damir Cosic, senior country economist of the World Bank in Nepal.

A version of this article appears in print on October 06, 2016 of The Himalayan Times.

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