Hydro-powered dreamsNepal can be a pioneer in the hydropower sector if it is to consider policy consistency
The state owned power utility, Nepal Electricity Authority (NEA) was able to mitigate hours long power cuts and introduce various activities under the banner “Ujjyalo Nepal Abhiyaan”. It was able to reduce net loss and consequently improve its financial performance. Likewise, the NEA was able to manage demand and supply effectively and efficiently, as well as augment transmission and distribution facilities. The situation in the last fiscal year, i.e. FY 2016/17, improved with load curtailment restricted only to the industrial consumers, that too at the time of system peak. This positive and progressive change can be attributed to a number of Independent Power Producers (IPPs), increase in import of electricity from the southern neighbour, losses reduction and demand side management. The Khimti-Dhalkebar transmission line also played a crucial role as the imported power was transmitted to Kathmandu on a continuous basis. However, the NEA should now prioritise adopting result oriented, effective and efficient methods by advancements in technology like grid automation and smart grid/smart meter, online payment, and underground cabling, to name a few.
As per the annual report of the NEA for FY 2016/17, the total amount of the electricity generated by NEA’s hydropower plants was 2,305.17 GWh (Giga Watt hour), an increase of 8.06 percent from the previous year’s generation of 2133.4 GWh. Likewise, for the last fiscal year, the total energy import from India was 2175.04 GWh, an increase of 22.35 percent as compared to 1777.68 GWh imported the previous year. The increase in the imports can be attributed to the functioning of cross-border transmission lines and increasing demand during the dry season. The total power purchased from IPPs in the last fiscal year increased by 52.39 percent to 1777.24 GWh from 1166.24 GWh the previous year. In the review period, the total energy available in NEA’s system also increased by 23.25 percent to 6257.73 GWh amongst which the NEA’s own share was 36.84 percent. IPPs and the import from India contributed 28.40 percent and 34.76 percent respectively. Ten new projects of IPPs with a combined capacity of 116.61 MW (Mega Watt) started commissioning in FY 2016/17. The total IPP projects amounted to 60 with a combined capacity of 441.05 MW.
The financial status of the NEA in the review period showed an operating surplus. The total operating expenditure amounted to Rs45,572.09 million, an increase of 26.28 percent from the previous year’s figure of Rs36,087.53 million, mainly due to an increase in power purchase cost and high administrative expenses. However, the power utility was able to generate a total revenue of Rs50,229.48 million. As a result, the NEA was operating in a surplus of Rs4657.39 million. The net loss was below Rs1 billion (Rs978.92 million) and the nation-wide drive to reduce system losses showed a positive result. The decrease in financial losses can be mainly attributed to reduction in average rate of power imports, increment in retail tariffs, reduction in system losses, uninterrupted supply of power in major cities and partial endorsement of financial restructuring. However, the amount of losses that persist are not of an acceptable standard. The authority should come up with strategies to reduce operational costs and system losses.
Areas for reform
Considering Nepal’s Run-of-River (RoR) hydropower system, the power utility should focus on Peaking Run-of-River (PRoR) and reservoir projects, as per the generation mix defined in ‘National Energy Crisis Mitigation and Electricity Development Decade Concept/Action Plan, 2072’. A mixture of electricity imports from India and power generated by domestic solar and biomass system would be the best energy mix for the short term. The long term strategy of the NEA should be focused on power quality, reliability and energy security. There should be a sufficient supply of electricity to consumers to their satisfaction. It is crucial for the NEA to sustain itself as a business organisation with reasonable financial returns for further investment portfolios. Likewise, the power utility should also prioritise integrated resource planning including imports. Only then can the country be self-reliant on electricity. Strategies to increase self-generation and maximise sales as well as adjust the electricity tariff to cover the cost of services would help to improve the financial health of the authority. Mobilisation of additional resources would ensure additional revenue.
Distribution system augmentation is a must for a demand supply equilibrium and is an area for investment. There is a dire need of a transmission backbone of 400 KV (Kilo Volts) or above to evacuate the generated electricity form the load centres to the substations. Power trading is likely to be a challenge for NEA. The integrated Nepal Power System may experience wet energy surplus and dry energy deficit situation in the days to come. In order to overcome this, cross border trading and energy banking need to be promoted. The cross border transmission lines will enhance the power wheeling possibility across the border and also promote energy banking and import/export opportunity. Once the hydropower projects that are currently under construction start commissioning, manufacturing industries and business complexes need to be in place to tap the generated electricity. In addition, solar power and electrical energy storage battery system could be a pilot project in the coming years. If the surplus energy generated in the wet season can be stored, it can be used in the dry season when the country is likely to face energy deficit. This can help reduce import to a great extent and possibly promote export opportunities.
Moreover, the state owned power utility should be considering energy levelling by increasing domestic energy demand during off-peak hours. It should also be working towards capacity building for efficient operations and implementations of projects along with building hardware and software infrastructure to increase income and improve morale health of the organisation. Considering the federal structuring, the NEA should be establishing autonomous regional distribution offices in the respective provinces. The Ministry of Energy, in coordination with the NEA, should introduce more development action plans like ‘Nepal ko Paani Janata ko Lagaani’ and create a conducive environment to attract both domestic and foreign investments in the hydropower sector of Nepal as the demand of electricity is soaring in South Asian region. Nepal can be a pioneer in the hydropower sector if it is to consider policy consistency, institutional reformism, investment friendliness, financial restructuring and transparency.
Dhital is a graduate from the University of Delhi