Kathmandu, December 30:

The government has formulated an ambitious plan this year — the micro-hydroelectricity sector will produce up to 3 MW of electricity each year for the next five years.

These projects are meant to electrify 1,50,000 houses in most hilly regions during this period.

Micro-hydro projects are ones which generate up to 100 KW electricity to serve nearby households through a local grid. Apart from lighting, these projects have been used to operate grinding mills and oil expellers in remote areas.

The main question, however, is whether this plan can be realised within the specified time frame. Experts say this is a tough task because of some major problems with such projects.

The government provides a subsidy of 40 to 50 per cent on these projects but

the remaining amount has to be arranged by the community for whom the project is to based.

It is difficult for financial institutions to lend money for these projects because the whole community has to pay back the installments and it is not possible for them to chase after every member of the community, said Brijesh Mainali, programme officer at Energy Sector Assistance Programme under the Alternative Energy Promotion Centre (AEPC) — a body that sanctions subsidies for micro-hydro projects.

The Agriculture Development Bank which provides loans is hesitant because some earlier projects have not yet paid back the loans.

The profitability is not high so this poses an additional hurdle in getting loans for such projects.

The government replaced the old Subsidy Policy 2000 for micro-hydropower in September 2006 with the Subsidy for Renewable (Rural) Energy 2006.

According to the new provisions, subsidy is given on a per household basis i.e. each project is supposed to benefit a certain number of houses but the community must come up with the remaining amount even before the project starts.

Janak Das Koirala, Treasurer, Nepal Micro Hydro Power Association, said these provisions are creating problems because the community may initially raise the money in the form of loans from financial institutions. A few households may also choose to provide money on behalf of other households to start the project. But some of these households which have pledged to pay back the money might not do so.

Households might not be bothered by the fact that they are not connected to the grid of the project since they did not have electricity to start with. But as the subsidy for these projects is based on a per household basis, this will affect other people who have invested in the project.

Koirala said there are 200 micro-hydropower projects in the pipeline, but only about 50 per cent have been properly implemented. As projects get delayed, their costs rise due to factors such as inflation and the increase in the prices of transport and equipment, and it becomes even more difficult for villagers to obtain loans.

This is the reason why it will be tough for the government to reach its target, said Koirala and Mainali.

Mainali also said if the government is serious about increasing Nepal’s electricity access, solemn efforts should be made to integrate the national grid with small micro-hydro projects.

The Nepal Electricity Authority has bought many micro-hydro projects but has shut them down once the national grid reached the areas in which these projects were located.

Since there will be a significant increase in such projects in the future, it will be more sensible for the government to integrate these projects into the gird.

“That is how the future of micro-hydro projects should be. The government will invest a huge amount in the projects and shutting them down will mean a huge loss. Instead, the capacities of both the national grid and the local micro-hydro grids should be integrated,” said Mainali.