The British Broadcasting Corporation (BBC) selected “load shedding” as one of the keywords for 2022. The Pan South African Language Board nominated the word to reflect the year in South Africa, which saw its biggest ever power crisis with several hours of rolling blackouts even in the capital city.

Nepal experienced almost a decade-long era of load shedding that ended in 2017. Now it faces a different challenge: There isn’t enough demand to absorb all the energy it can generate. Hopefully, Nepal will do more than coin a new word for this phenomenon for the BBC to consider.

Nepal already has close to 2,000 megawatts of generating capacity. Kulman Ghising, managing director of the Nepal Electricity Authority (NEA), expects it will increase to 3,000 megawatts within the current fiscal year, grow to 5,000 megawatts within the next three years, and to 15,000 megawatts within the next six years.

Electricity demand, unfortunately, is not keeping pace. Peak demand is hovering at 1,800 megawatts. Electricity demand isn’t going to exhibit the jump that is currently projected for generation capacity. So much so that several publications routinely report that the state-owned utility has stopped signing new power purchase agreements.

Looking everywhere

The government of Nepal and the NEA are looking everywhere for demand. Lowering electricity tariffs to encourage increased use, distributing induction cook stoves to electrify cooking, promoting electric vehicles with all sorts of tax rebates, and of course, selling electricity to India, which this year alone has netted Nepal approximately Rs11 billion.

But no one is looking at agriculture—the sector which could deliver significant increases in electricity demand and in ways that directly benefit most Nepalis.

Nepal used to be an agrarian economy. No one is quite sure what the country is anymore. In the three decades between 1991 and 2021, the share of agriculture in the gross domestic product (GDP) has declined from 48 percent to 21 percent, World Bank data reveals. Annual real income per person employed in agriculture has increased at a miserly rate of 1 percent on average over that same duration, the lowest across other sectors. In Nepal’s agrarian economy, agriculture is now regarded as a dying sector.

Approximately 11 million of the 17 million in Nepal’s workforce still derive their livelihoods from agriculture. Other parts of the economy simply have not been able to absorb the workforce from agriculture.

If the decline in agriculture doesn’t worry you, consider its implications on food security and imports of agricultural products. Nepal imported Rs379 billion in agricultural products in 2021-22, a 17 percent jump over the previous year and a doubling over the last seven years. Today, agricultural products account for approximately 20 percent of total imports. Rice, fruits, vegetables and staple food alone account for 30 percent of farm product imports. Food prices and supply security now represent large risks for Nepal.

Nepal's agriculture urgently needs transformative investments that help raise rural incomes, enhance productivity, reduce reliance on food imports, and create new opportunities for agricultural processing industries. But it can also do more: Agricultural growth could drive significant increases in electricity demand.

While growth in agriculture could increase electricity demand, the flip side is equally true. Nepal’s agriculture must modernise before it can grow. Access to reliable and affordable energy is the only way Nepal can drive modernisation in its agriculture. With electricity in abundance, Nepal must quickly shift its focus to providing reliable and affordable electricity to farmers and the agriculture sector.

Nepal’s agriculture is currently extremely traditional, with very little energy inputs to drive modernisation. For example, Nepal’s agriculture only used 22 kg of oil equivalent (kgoe) in energy input per agricultural worker in 2021, based on data from the Energy Sector Synopsis Report 2021-22 produced by the Water and Energy Commission Secretariat. A benchmark study by the Food and Agricultural Organisation (FAO), though slightly dated, found that the average energy input per agricultural worker for developing countries was 99, the world average was 394, and for Africa, it was 26. Other metrics, such as kgoe per hectare of cultivated land and kgoe per tonne of cereal produced, also validate the exceedingly low levels of energy use in Nepal’s agriculture. In short, whichever way you put it, Nepal’s energy input in agriculture is at least two to three times lower than what it should be.

Scope for electrification

Nepal’s agriculture sector offers tremendous scope for electrification. The Water and Energy Commission Secretariat estimated that in 2021, only 7 percent of total energy consumption in agriculture was electricity. The rest was petrol and kerosene. In Nepal’s case, electrification in agriculture should be much deeper—closer to 100 percent than under 10 percent as it is currently.

Electrifying and modernising Nepal’s agriculture sector could easily increase energy use two to three times within the next few years. Even with energy use simply doubling, a modernised electrified agriculture sector could increase electricity demand by 2,800 GWh, or 32 percent of the total demand in 2021-22. This alone would fully absorb the 400 megawatts of electricity that Nepal intends to export to India.

There are tremendous opportunities in other applications across agriculture as well, for example, in cold chain and irrigation. Cold chain is the temperature-controlled storage and transport network from farm gate to market designed to keep agriculture fresh and reduce spoilage. Nepal’s cold storage capacity for agriculture is currently only approximately 260,000 tonnes, when the requirement could be closer to 2 million tonnes, based on data drawn from the 2018 Global Cold Storage Capacity Report. Fully meeting cold chain requirements in Nepal’s agriculture could increase electricity demand by another 8-10 percent annually.

For Nepali agriculture to thrive and drive electricity demand, the power sector must also be able to take the benefits of improved electricity supply to the farmlands. Nepali agriculture can benefit from the improved electricity supply and contribute to increasing demand only if distribution lines serving agricultural areas are improved. Transmission and distribution infrastructure feeding rural and agricultural areas are currently too weak and outdated to be able to push higher volumes, increase reliability, and consistently deliver high qualify power.

Not enough investments are flowing to improve the quality of transmission and distribution infrastructure of rural agricultural areas. Electricity access alone isn’t enough. The distribution network serving these areas must be enhanced and modernised. Several countries, India, for example, have benefited significantly from separating agricultural feeder lines. There are several such opportunities for Nepal as well. Without improved electricity distribution infrastructure which provides reliable and consistent high-quality power, Nepal’s agriculture will never be able to electrify and modernise.

Igniting Nepali agriculture through electrification and modernisation requires changing the sector’s political economy. Consider this: Rs15 billion will be spent to move some of the electric wires underground in Kathmandu. The mess of tangled overhead wires will be gone, the city will look neater, and voltage fluctuations and power outages will be reduced. All good things. Approximately 1.5 million people living in Kathmandu will benefit from underground electric cables. Approximately 20 million people are dependent on agriculture in Nepal. When will they begin to benefit from the abundance of electricity supply in Nepal?