A major portion of energy demand in the country has to be met with the development of indigenous resources.

The Government has declared an energy crisis with the imposition of 63 hour power-cut a week. Nepal Electricity Authority (NEA) officials are also of the view that power-cut may be extended to 14 hours a day. To mitigate the impact of the power crisis, the cabinet has planned the establishment of 200 MW diesel power plants shortly. On the other hand, the business sector is claiming that Nepal will lose Nrs 75 million in the year ahead as a result of the crisis.

As per the World Bank’s current prices of power equipment in 2008, the country, roughly may need to have 25 units of 8 MW engines (at a cost of US$ 600/KW) with investment of about Nrs19 billion. Even if the plants can run at 80% capacity factor, the diesel plants would be able to generate 1,330 GWh (1 GWh is equivalent to 1 million units). The fuel oil requirement will be around 320,000 kilolitres a year which is equivalent to the current import of diesel in the country. For that, the country has to cough off an extra Nrs 20 billion for oil imports. Currently, Nepal is using 60% of export earnings for import of petroleum products. Furthermore, the cost of one unit including transmission and distribution losses comes to around Nrs 21 per unit which is almost three times the current price of one unit of electricity the consumers are paying. This cost is based on the assumption that the government is waiving the taxes of Nrs 12 per litre for supply of oil to the power plants because of the current energy crisis in the country. This unit cost is also based on the currently marketed diesel plants, and if they are older, the cost may go up further. The taxes and the unit cost differential would amount to Nrs 22 billion a year. Who will bear all these costs, the government or the general consumers?

Moreover, we need to have adequate and upgraded transmission lines. As per the Department of Electricity Development, the current grid cannot even sustain a power addition of 10 MW generation capacities. They need enough storage facilities developed at NOC depots the cost of which is not included in the unit cost of the power produced by the diesel plants. The current price of oil in the international market has come down to below US$ 50 per barrel, but as per oil analysts it may rise to US$ 200 a barrel in future. High dependence on imported oil is full of risks.

It seems that the government is only paying attention to supply side management, but it is also essential to look into the demand side management. The promotion of energy efficient light bulbs such as compact fluorescent lamps (CFLs) and electronic chokes in the currently used fluorescent lamps cannot be achieved through one or two unattractive billboards. It is proven that the CFLs are almost 80% more power efficient than the currently used incandescent lamps. First, in the household sector if the government comes with effective campaigns such as promotional and fiscal incentives for waiving customs duties and financial incentives for micro-financing, the reduction in peak power demand by almost 150/160 MW can be achieved now with the use of these efficient replacements. The other is differential tariffs. The time of the day tariff structure can manage the peak power time hours in a day. Use of renewable energy technology such as solar home systems can be encouraged.

In the short run, a package of demand side management promotion campaigns and initiatives,

promotion of renewable energy technologies, enhanced electricity trading with India and moderately sized oil-based plants are needed to cope with the electricity crisis. The oil based plants should be phased out in the longer run or run during the peak period only for which the unit cost may be even higher. If we talk about the economic costs to the country, the oil plants are not feasible if the consumers are only to bear these costs.

In the medium and long run, the major portion of energy demand in the country has to be met with the development of the indigenous resources — hydropower. Bhutan which has 24,000 MW of economic feasibility has already developed 1,480 MW of installed capacity. In Bhutan’s case, domestic consumption is 15% whereas 85% is exported to India. But, in Nepal’s case, as per a recent study, if we want high economic growth scenario, the total electrification by 2030 and major replacement of petroleum products in cooking, we may need around peak power of 5,000 MW by 2020 and 24,000 MW by 2030 for domestic consumption. As said, we have 83,000 MW as potential hydropower resources and out of it 43,000 MW is economically viable. Even if we develop 10,000 MW by 2020, we may have some surplus for exports. But, in subsequent years, what would happen? The government has to come up with sound integrated energy policy, required institutional capacity build-up, and strong focus on execution of its policies from all sectors of society and polity in order to ward off energy crisis in the future.

Nakarmi is professor at Centre for Energy Studies, IOE (TU)