Oped»
Tapping the potential
JUN 21 -
China, Canada and Brazil rank first, second and third in hydropower generation in the world. India with about 35,000 MW of installed capacity ranks seventh in hydropower generation. Nepal, though rich in hydropower potential with about 200 GW (900 terawatt hours per annum) of theoretical generation potential, has less than 700 MW of installed capacity and only generates about three thousand gigawatt hours per annum. Nepal faced blackouts of more than 16 hours a day in 2008 as electricity demand has steadily increased day-by-day due to increases in coverage as well as consumption per user.
This scenario demands rapid development of hydropower generation in Nepal. Yet, on the contrary, the development pace is very slow. The gap between demand and supply is widening with time, and electricity has become a rare commodity in Nepal. This calls for a reexamination of the electricity development plan and approach of Nepal.
Nepal was a pioneer in hydropower development in Asia with the construction of the Pharping hydropower project a century ago, but since then, Nepal has only been able to develop less than 700 MW of installed capacity—less than the installed capacity of Bhutan which started development of hydropower only recently. Considering the present electricity crisis in Nepal there is a need for a serious shift in implementation strategy and plan. The assumption of our leaders and policymakers that hydropower development, being lucrative for private investors, will be developed at a high pace has been disproved. New approaches and investment strategies are essential to increase the pace of development.
Nepal has immense hydropower potential. The high head available within a short distance along the perennial Himalayan rivers and good reservoir sites makes it a very attractive investment. The long hours of load shedding indicate a high demand for electricity. Our neighbor, India, is power hungry and the excess electricity generated can be easily exported. Consumers are also very eager to substitute other fuels with electricity. These facts make the scenario for future electricity demand very bright. Hydropower, being clean energy, offers additional advantages when compared to other sources of energy.
But yet, in spite of above mentioned advantages the development pace remains slow. Lack of access, unstable geology and a poor infrastructure de-motivates investors. Moreover, the political situation and lack of security in the country repels investors from the sector. Long procedures for getting licenses and mandatory clearances to begin work discourage investors from any venture. The present liquidity crunch has worsened the scenario and even serious investors are rethinking plans to go ahead. Though the financial analysis shows a short payback period, high risks make them very sensitive and risky. Long bureaucratic procedures and a traditional process-oriented approach are also keeping away investors. License-holding by proxy investors are also irritants for the development of the sector.
Prerequisite for any development is peace, stability and consistent policies. No matter what returns the investment will provide, no entity in the private sector will be attracted if there is risk to life and property. So, improvement in the law and order situation in the country is essential for establishing a favorable climate for private investment in the sector.
Nepal Electricity Authority (NEA) is provided the mandate of generating, transmitting and distributing electricity. The institution is in a deep financial crisis and is unable to invest in hydropower. It is also paying interest to the government at a rate higher than that provided by commercial banks for savings account holders. In the present situation when the cost and time for projects has been doubled, the government should reexamine the role and responsibility of NEA.
In such a fluid situation, the government should be responsible for taking risks and developing the sector to provide relief to its citizens. No other strategy will work in this context. The reason for the present gloomy scenario is also the result of over dependence on private sectors and suggestions from international actors. The Finance Ministry’s over-estimation for private investment and reduction of public financing is one of the major reasons for the power crisis. In the present scenario, the private sector can only be given a secondary role.
The hydropower policy of India in the ‘90s expected high accomplishment from the private sector, but the private sector failed miserably and India’s new policy limits them to a secondary role, contributing less than 20 percent of the overall hydropower development scenario.
Creation of power development funds from the royalties received from hydropower output and investment for the development of hydropower projects may be a small but effective and dependable way to aid further development of the sector. The beneficiaries of the royalties may be provided with the share in the hydropower plants developed. Cooperatives may also be encouraged for the development of small and medium-sized power plants.
For optimum benefit, a basin-wise approach can be adopted. This will reduce the cost of approach roads and transmission lines and also utilise downstream benefits. Reservoir sites at high-altitude foot hills (e.g Kaligandaki and the Kobang area near Jomsom) should be studied and developed. Such projects will convert all the cascading downstream projects into reservoir projects generating high benefits. Reservoirs at higher altitude submerge areas with low settlement which will also reduce the complexity of environment protection and resettlement issues. Huge storage at the foothills near the Tarai (e.g Karnali or Sapta Koshi) are not as beneficial as there will be huge submergence in highly populated valleys and only one hydropower project can be developed with all other downstream benefits limited to irrigation, flood control, and domestic water supply.
At present any willing and competent party is free to apply for any available site. Government institutions have no development plan to complete the long list of power projects and licenses are provided on a first-come, first-serve basis, encouraging licensing applicants to apply for projects fit for their financial and technical capacity, not for the optimum size to harness overall benefit.
Any country should create a development plan that maximises benefit for the country. For this, the government should study and prepare a long list of optimal projects to be developed along with possible applicants. The present method of issuing licenses to any party willing to develop projects at their own will is inefficient. The present licensing procedure should be replaced by a planned and controlled licensing of projects for the optimal utilization of water resources.
Developers are also facing inconveniences due to the clearance requirements of different government and non-government institutions. Clearances for environmental impact mitigation, forest clearance, security clearance and signing of power-purchase agreements consume valuable time. The NEA, being the only institution for purchase of power generated, has a major role for promotion of any project. The low rate for selling and purchasing electricity by NEA is also slowing down development in the sector.
Analyzing the present power crisis in Nepal and the pace of development in the sector it is obvious that the development approach will not work. Policymakers and planners should understand that the present strategy of depending on the private sector should be revisited and the government should allocate a greater part of the budget to develop hydropower projects to accommodate domestic needs. If these steps aren’t taken, we should prepare ourselves for long blackout hours for many years to come. Electricity has become a basic need for the entire population and this sector deserves first priority while preparing the annual budget. While developing hydropower projects, as mentioned above; roads, rural electrification, water utilization projects and agriculture will also be developed as sub-components. Development pace at present indicates that the private sector can only play a secondary role for solving the existing power crisis.
(Regmee is a water resource expert and former joint secretary at the Ministry of Water Resources)
Shital Babu Regmee
regmeesb@yahoo.com
Posted on: 2010-06-22 08:49
Headlines
Advertisements
