Hydropower market

South Asian countries need to evolve a long-term regional, and if possible multinational, approach to harness the vast water resources potential for the common benefit. Nepal has an estimated potential of generating 83,000 MW of power of which 42,000 MW is commercially viable. Compared to the huge potential, Nepal’s installed production in the next few weeks will be 450 MW, thanks to the commissioning of the 144-MW Kali Gandaki A hydroelectricity project. India, which offers a huge market for Nepal’s electricity, is energy-starved as it is reportedly in urgent need of additional 111,500 MW between now and 2017. In other words, India’s total shortfall in power will exceed 34,000 MW, including 14,000 MW in the northern India bordering Nepal. Yet, the volume of power trade between Nepal and India initiated through 19 exchange points across the border was increased only recently from 50 MW to 150 MW. Bangladesh, which will have a shortfall of 1,300 MW in the next five years, could be yet another market. If everything goes as planned, Nepal could possibly have a surplus of 550 MW during wet season and 475 MW during dry season by the year 2012.

However, Nepal is not the only country producing hydroelectricity in the region. The neighbouring kingdom of Bhutan is emerging as a strong and steady producer of power. Today, Thimphu already produces 444 MW. This is remarkable for a country that started quite late in harnessing the Himalayan river waters for electricity. Its first hydropower project, the 336 MW Chukha, was built in 1988, several decades after Nepal’s first plant was built at Pharping. Bhutan has the potential of generating 30,000 MW, of which 16,000 MW is believed to be commercially viable. Today, it exports nearly 1.5 billion units of electricity, earning Rs. 2.25 billion annually from power export alone. This is a huge amount and accounts for nearly half the national budget. Several other hydropower projects are under construction. For example, the 60 MW Kurichi hydroelectricity project is under construction in eastern Bhutan. Several others are under consideration, which when built would not only help meet the power deficit but also continue to propel Bhutan’s economic growth and social progress. Nepal needs to consider these hard facts, as well as the competitiveness of tariff rates. Bhutan sells electricity to India at the rate of Rs. 1.5 per unit; it could now be raised to Rs. 1.7. For domestic consumption, the electricity tariff is a maximum of 80 paisa for urban consumers. This is far less than Nepal’s electricity tariffs, which undoubtedly is one of the world’s costliest at about Rs. 10 per unit. Unless prices are competitive, markets would remain severely constrained. Both the constraints could be eased if regional and multinational efforts are made to harness the water resources in the region in order to change the economic and social landscape of one of the world’s poorest regions.