Nepal is economically viable for hydropower generation and aims to achieve the domestic demand of power supply at a low-cost. According to the Nepal Electricity Authority (NEA), there are 88 hydropower plants in operation with a total generating capacity of 967.85 MW. Consequently, most of the hydropower plants are run of the river. Considering the fact that it is difficult to curb the population growth, the overall electricity supply should be increased to meet the targets of economic development. Data from NEA indicates that the electricity demand could reach 22/7 TWh by 2030. To meet the demands NEA and its subordinate companies are constructing several projects, Chameliya, Kulekhani-3, Upper Trishuli A, Upper Sanjen and Tanahu Hydro and many more. Thereby, it states that electricity will substitute more and other forms of energy.
Similarly, the national budget for fiscal year 2018/19 vows 2018-2028 as the ‘Energy Decade’. The budget of fiscal year 2018/19 gave emphasis to the hydroelectricity expansion with a motive to cater electricity throughout the nation. As per the budget report, the government allocates NPR 83.9 billion (USD 716 million) for the energy sector. Further, the budget administers NPR.5 billion (USD 42.7 million) to expedite the rural electrification program. The budget has focused on the development of the energy sector by executing plentiful hydropower projects and expanding transmission lines. The Electricity Demand Forecast Report (2015-2040) projects that by 2040, the industry and manufacturing sector will hold the highest demand for electricity, which are 15,320 GWh and 14,944 GWh respectively.
Despite the abundant possibility, the hydropower generation is not harnessed to the desired amplitude and various hurdles prevail in this sector.
- Social and Technical barrier. Some barriers to hydro in Nepal are social, consisting of local values, attitudes and aspirations, regulations, and price signals while other barriers are technical, involving challenges related to hydrology, dam design, and maintenance. Lack of national as well as cross border transmission lines are another chunk of technical constraints that lag the sector behind.
- Policy inconsistency. Hydropower policies in Nepal are governed by overlapping regulations and policies between various institutions. For instance, NEA doesn’t have any control over tariff due to which it incurs hefty loss every year. The tariff fixation committee needs to balance the tariff rate with the growing population of the nation. Furthermore, the tariff rate offered to the private sector was low as a result the investors chose to avoid the risk.
- Inelastic supply and demand. Managing the supply of electricity is a sturdy task because the demand and supply are highly inelastic. Nepal ’s electricity comes from the run of the river, therefore, the nation falls short due to lack of diversification of the power sources.
- Likelihood of natural catastrophe. Landslide and outbursts flood is another plump for hydropower development in the nation. Generally, hydropower stations are located at higher altitudes, that makes them susceptible to frequent landslides and flooding. Instances of increased risk of Glacial Lake Outburst Flooding have also been observed in Nepal.
- Financial constraint. Given the low savings rate, Nepal lacks enough investment to operate large scale hydropower projects on its own.
Despite the discrepancies, hydropower holds the potential for uplifting the lives of people.
Vanquishing the challenges
Nepal must find appropriate ways to accumulate a large amount of investment for hydropower production. The Public Private Partnership would be the best way to create a conducive environment for hydropower investment. One of the perfect examples for public-private partnership is the Chilime hydropower project that is also a subsidiary company of the NEA. The bulk of the share goes to NEA which is 51%, while 14% has been diffused to the general public, 25% is owned by staffs of the company whereas the locals of the region retain 10%. So, this framed a foundation for the investors to flip their money in the hydropower business.
Nepali hydropower firms should be nurtured so that they can provide energy for peak load demand of the nation. Nevertheless, this will create ample opportunity for the public to access the reservoir and invest in equity shares. Besides, producing own source of energy, this will make the nation reliant and resilient to its values and aspirations. Thereby, Nepal needs to incorporate prodigious steps to rationalize the framework of energy planning.
Increase in the Export Market: A possible benefit from Hydropower Surplus
In recent days, due to the effective management of Nepal Electricity Authority (NEA), power shortage has become a thing of the past. If the desired level of production is achieved Nepal can export its surplus energy to the neighbouring markets—expecially to India and Bangladesh. It could also change the status of trade imbalance—dominated by the import of the electronic commodities and export of the electricity.
In conclusion, due to the low saving rate, foreign financial assistance is pivotal for the development of hydropower. The international institutions includung—Japanese Bank for International Cooperation (JIBC), Asian Development Bank (ADB) and the World Bank have been investing in hydropower. Nevertheless, to harness the potential energy of 40,000 MW Nepal needs further foreign investments—especially considering the cost of 1 MW to be approximately NPR 200 Million.