The decade of the 2000s was one of the worst for power cuts in Nepal, lasting up to 16–18 hours a day, which severely impacted the quality of life and crippled the economy of the country. Several households and organisations installed generators and even solar-powered systems to deal with electricity issues. Through the mid-2010s, power cuts became less frequent with improved regulations and purchasing of electricity from India. Though Indian imports significantly improved the situation, the country’s high reliance on imports raises concerns about fiscal sustainability.

Demand and supply

Nepal is currently urbanising at a faster rate, with 21 percent residing in urban areas in 2021 (as per the World Bank collection of development indicators compiled from various official sources), and the urban population is expected to rise sharply in the upcoming years. A growing population, changing lifestyles, the expansion of industries large and small, and the upgrading of health and welfare services all require greater energy resources. The per capita electricity consumption was 350kWh per person in 2021-22, according to the Ministry of Energy, Water Resources and Irrigation (MoEWRI). Nepal Electricity Authority (NEA) has shared that since 2017, the demand for energy has increased annually by 7–10 percent. Under the business-as-usual scenario, the Nepali government projected an annual electricity demand growth of 12.19 percent through 2025.

According to MoEWRI, the total installed electricity generation capacity in Nepal was 2,191 megawatts in 2022. The state-owned NEA, which operates 20 power plants, and the Independent Power Producers, which run 108 projects, are responsible for generating this power. Many of these are produced through hydropower production, including large-scale hydropower dams with installed capacities of 14 megawatts and higher, as well as several smaller hydropower plants. It is clear that Nepal faces challenges meeting demand as the peak demand is on the rise. NEA also shared that the peak electricity demand in 2022 increased by 16 percent as compared to the previous year.

Challenges

Hydropower encounters seasonal problems because the majority of these facilities depend on monsoon rainfall to maintain a sustainable supply. Nepal has surplus electricity during the wet seasons and has the potential to export electricity to India. In contrast, during the dry season, these hydropower plants produce less electricity. The majority of dams in Nepal are run-off hydropower plants with little or no storage facility. This makes Nepal’s hydropower projects seasonally dependent as the production is minimal in winter when the demand is high, forcing Nepal to import electricity from India. The amount of electricity wasted during transmission and distribution is a crucial sign of how efficiently the power sector is operating. Nearly 30 percent of the electricity produced in Nepal is lost. To put it into perspective, the OECD countries’ average electricity loss is 6 percent.

Importing and using electricity from coal-fired thermal plants in India promotes the use of fossil fuels and greenhouse emissions. This could serve as an obstacle in achieving net zero emissions by 2045, as pledged by Nepal. Additionally, the sustainability of hydropower may be threatened by the uncertainty brought on by climate change and its impacts on water resources. There is evidence of glacier melt, drought and subsequent drying of water in rivers and streams. Nepal has a high risk of natural disasters, including floods, landslides, earthquakes, and glacial lake outbursts (GLOF). These disasters have impacted numerous hydropower structures in the past.

Though hydropower is regarded as a clean energy source, the functional loss of a hydropower reservoir’s capacities due to sedimentation or siltation may negatively affect the economy and the environment. Nepal currently lacks a comprehensive power development plan with specific power production targets. Hence, the survey and construction licences are distributed to too many hydropower projects in one river system. These structures will prevent the free flow of the river. Consequently, the fragmentation of aquatic habitats will put aquatic biodiversity at risk and potentially cause it to disappear. Hydro-infrastructures will hinder upstream-downstream connectivity, limiting the ability of aquatic species, particularly fish, to migrate and also deteriorate the water quality.

A provision in the 2001 Hydropower Development Policy states the release of at least 10 percent of the river’s minimum monthly average flow or the minimum quantity specified in the Environmental Impact Assessment (EIA) report. However, neither the hydroelectric projects nor the policy’s compliance is regularly monitored to ensure that these provisions are being followed.

The livelihood of the farming and riverine populations, as well as the cultural and traditional traditions, may be affected by this lack of flow. Community displacement and the high cost of relocation and compensation are two social repercussions of hydropower development if the project site is in a settlement area.

Path to sustainability

Nepal has to lessen its over-dependence on hydropower and concentrate on new renewables and regional trade as part of policy interventions. Nepal also has substantial solar potential in addition to hydropower. Because of its geographic location and the high annual number of sunny days, Nepal has a reasonable amount of solar potential. Wind potentials must also be thoroughly studied in addition to solar potentials.

We must also evaluate how to strike a balance between hydropower production and river conservation. To do this, it is necessary to conduct studies that will improve our knowledge of rivers’ characteristics, as well as how communities, economies, and the environment use them. When choosing the hydropower project’s location and design, a comprehensive strategy and assessment are required. By taking these actions, the significant environmental and socioeconomic effects of hydropower development could be eliminated. The mitigation measures recommended by the EIA must be implemented effectively. Effective environmental management measures include the construction of fish ladders to promote fish migration, preserving the river’s natural flow, providing people with economical options, and equitably compensating the displaced population

A 2019 report published by the Institute for Integrated Development Studies (IIDS) and the Confederation of Nepalese Industries (CNI) advised that the energy sector strategy should take into account the most effective use of energy resources, systematic planning and efficient development of the energy system and hydropower, competitive bidding in the development of hydropower, diversification of the mix of electricity supply, and climate proofing of the energy infrastructure. In order to attract private sector investment, policy adjustments should also concentrate on proactive investment measures, such as tax incentives, risk reduction, and removing administrative barriers, as well as bilateral agreements with nations that can facilitate cross-border electricity trading.

The first step towards sustainability may be challenging, but it will yield optimal benefits in the long run. Furthermore, it helps realise Sustainable Development Goal 7, which calls for ensuring that everyone has access to modern, reliable, affordable energy by 2030. Therefore, every stakeholder needs to contribute to the development of sustainable and clean energy by considering innovative and viable solutions. For this, the countries in the region, especially Nepal, should focus on reducing the number of hydropower projects and diversify their construction activities to alternative sources of energy like solar, wind and biomass.