Many centuries ago, Buddha set off from his palace and was awakened by three great sights that would forever change the course of humanity.

We are not Buddha. But could we use the analogy of his great sights to change the course of Nepal’s electricity sector?

Nepal’s electricity sector is dominated by the narrative that there isn't enough domestic demand. It is this idea that justifies the export of electricity from Nepal to India, and now even Bangladesh. It is also used to justify large investments in power generation, transmission and distribution to support increased electricity exports.

But this isn’t entirely true. On the contrary there are large unmet gaps in domestic electricity demand. The failure to meet this demand is costing Nepalis hundreds of billions in lost economic opportunity, income growth and better quality of life.

The narrative that there isn’t enough domestic demand is so deeply rooted and heavily set that nothing short of mythological inspiration will be enough to shake off that false belief.

As a start, I offer below three sights that I witnessed during a recent trip to Baglung in Gandaki province.

Three great sights

Sight 1: Almost every home had an old television that lay idle.

It was striking to see the old Cathode Ray Tube (CRT) television dusty, unused and abandoned in a corner of almost every home. The unused CRT is an illustration of latent electricity that is not being served.

The Nepal National Population and Housing Census 2021 estimated appliance ownership across households, showing most own at least one asset. These levels of electric appliance ownership, if used as they should be, suggest that electricity consumption in households should be at least 5,602 GWh, or 40 percent higher than what the Nepal Electricity Authority (NEA) supplied to households in 2022-23.

Arguing that the NEA has met all electricity demand in Nepal is like saying Nepalis buy televisions, fridges, fans and other electric household appliances only to keep them switched off. In addition, current household income levels are high enough to support purchases of many other appliances, as the wares on display in the markets of Baglung, and other similar towns across Nepal, will easily corroborate.

Electricity consumption in households and small commercial establishments in Nepal could be several times higher if reliable electricity were consistently available.

Sight 2: Power supply was being cut off to supply water to the fields.

At the time of my visit, one local community had no electricity. For instance, a little bike repair shop was waiting to run the air compressor. Next door, a small restaurant was waiting to start up the electric induction cookstove. Likewise, customers were complaining that the beer (one of the selling rural products, I learned) was not chilled enough. The community was being supplied by two sources: the NEA’s grid and a local micro-hydro. These sources delivered power through a separate, parallel distribution system that was not connected to the NEA’s power lines.

The NEA’s line had no power supply. At the same time, the local community was diverting water from the micro-hydro plant for irrigation. As a result, the micro-hydro was not generating electricity.

The diversion of water from the micro-hydro plant for irrigation instead of electricity generation illustrates the unmet demand for electricity in agriculture.

Nepal’s growth is highly dependent on agricultural productivity. Yet, the country’s agriculture remains extremely traditional, largely because of the lack of a reliable electricity supply to drive modernisation. For example, according to the Energy Sector Synopsis Report 2021-22 by the Water and Energy Commission Secretariat, Nepal’s agriculture used only 22 kg of oil equivalent (kgoe) in energy input per agricultural worker in 2021. This was significantly lower than in most countries.

A study by the Food and Agricultural Organisation (FAO) estimated that the average energy input per agricultural worker was 99 for developing countries and 394 for the world, respectively. Nepal’s electricity demand in agriculture would be at least two to three times higher, and agricultural incomes correspondingly higher, if farmers had access to reliable electricity supply.

Sight 3: Many of the homes and commercial establishments were being supplied simultaneously by the NEA’s grid and local micro hydro plants.

Many of the houses and commercial establishments that I visited in Baglung had multiple electricity metres. Often one or two would be for supply from the local micro hydro, and one for the NEA’s grid. They all operated with an improvised power system that included a changeover which allowed them to manually switch from one supply source to another.

The need to maintain multiple sources of electricity supply illustrates how poor electricity delivery undermines economic activity and growth. In most cases, households and enterprises avoid purchasing electric products because they fear they will remain stranded without an adequate supply. This forces them to divert investments towards managing supply, either by investing in multiple metres with a changeover or an individual generator to supplement grid supply. These supply management strategies divert investments from productive activities and reduce economic growth.

Out of 4.7 million households, approximately 2.1 million (or 45 percent) that have a metreed NEA grid connection consume about 7 kWh per household per month on average. The remaining 2.6 million households consume roughly 119 kWh per household each month on average.

A Nepali on average (or per-capita electricity consumption) currently uses approximately 380 kWh per year, one of the lowest in the world. Per-capita electricity consumption represents usage across all sectors of the economy, including residential, commercial, institutional and industrial.

Nepal’s average residential and per-capita electricity consumption are too low for its current income levels. If it were adjusted to match global levels, domestic consumption in Nepal would be significantly higher—enough to absorb all of Nepal’s electricity exports.

The failure to supply sufficient and reliable electricity to Nepalis across the country reduces economic activity and suppresses growth.

Failure to distribute

Why is it that despite having abundant electricity, Nepal is unable to meet the demand of its own people and instead exports it to India and Bangladesh?

The reason is not a lack of domestic electricity demand. There is plenty of it—it is just constrained and hidden from view.

Transmission and distribution systems in Nepal’s rural and agricultural segments are too small, and as a result, heavily congested. They lack the capacity to deliver the electricity needed to meet the demand in these areas. These infrastructures are outdated, and in need of significant modernisation to improve their reliability, management and operations.

Unfortunately, not enough investments are being directed towards improving distribution infrastructure to supply power to Nepal’s rural areas and agricultural segments. Almost all of its investments in the power sector continue to focus on building new power plants and transmission infrastructure to export power.

The narrative that there isn’t enough domestic electricity demand is false.

The real issue is the lack of sufficient domestic transmission and distribution capacity to provide a reliable supply of electricity all over Nepal. It is this failure that has kept domestic demand suppressed.

Hence, there is no need to draw on the analogy of Buddha’s great sights to establish what is false and show how it undermines Nepal’s growth.