Starved for powerA carrot and stick approach is key to meeting energy demand
Nepal will need an installed capacity of over 10,000 MW by 2030 if its Gross Domestic Product (GDP) grows at a constant rate of 5 percent a year according to an energy demand projection by the Investment Board Nepal and National Planning Commission. It is not a lot to generate given our hydro potential. But if past records are anything to go by, chances of successfully generating adequate energy by 2030 are slim.
Nepal has miserably failed in exploiting its economically feasible hydropower capacity of approximately 40,000 MW. The total installed capacity of all electricity generating plants in Nepal is about 750 MW. Hydropower only has about 2 percent share in the energy mix of the country, which meets 85 percent of its energy needs through biomass according to a 2013 report titled Sustainable Energy for All: Rapid Gap Analysis Nepal, published by the National Planning Commission. This clearly reflects that our per capita electricity consumption is one of the lowest in the world at 175 kilowatt hour—1,000 kilowatt equals to 1 MW.
Foreign investment is crucial to developing large hydropower projects in Nepal. Even though the 1992 Electricity Act opened Nepal to private and foreign investment in hydropower, the success rate is again dismal.
The lacklustre scenario can be attributed to a number of factors: the decade-long conflict, red tape, continued political instability, unrealistic expectations of local stakeholders and shenanigans by middlemen who hoard power generation licenses for easy profiteering.
Endless delays in signing Power Purchase Agreements (PPA) between producers and Nepal Electricity Authority (NEA) have left many projects in limbo, as the process is not time-bound. Another big problem is lack of accountability, both among private developers and government agencies responsible for overseeing the process. The Hydropower Policy 2001 had envisaged creation of an energy regulating agency for the power sector (NERC) but 15 years later, the agency has still not come into existence.
As a result, Nepal’s development has been held hostage due to inadequate power, among other reasons. The government needs a two-pronged approach to overcome this. One, there should be a clear standard operating guideline that not only removes ambiguity and red tape associated with completing projects in a time-bound manner, but also penalises officials and contractors when their performance is unsatisfactory, while offering rewards for timely completion. Two, the instalment of transmission lines required for the distribution of electricity once the hydro projects are developed should be expedited.