Give me more
NOV 11 - For the next two years we will not only be facing load-shedding of up to 16 hours per day during the dry season but we might also witness the bankruptcy of the Nepal Electricity Authority (NEA). The energy scenario after that looks even more dismal. Increasing demand of energy, limited means of supply and a cash-strapped NEA unable to invest either on generation or expansion of its grid will mean that energy shortfall will be one of the greatest challenges facing the country in the days ahead. The first step towards addressing this enormous challenge is a serious public debate on misconceptions surrounding the energy sector.
Take, for instance, the often quoted capacity of Nepal’s hydropower. The number 83,000 MW will immediately pop up into your head. A Russian Masters level student, who, unfortunately, was not able to travel to Nepal for his research, came up with this number. If you ask stakeholders today, some mention 40,000 MW as commercially viable; private investors on the other hand even speak of 200,000 MW. Such conflicting figures paint a completely misleading picture; in fact, the country needs a thorough study to figure out its true potential.
Another key misconception is that the country will need to sell produced electricity to India because domestic demand is low. The current power demand on the Nepali electricity grid is 885 MW. According to NEA, the annual growth in demand is 9.2 percent. However, the present demand of Nepal’s population is highly suppressed due to load-shedding, unavailability of grid or off-grid provisions. Furthermore, if economic development is to take off over the next few years, industrial growth will have to take place at a much higher rate, which would be impossible without a reliable energy supply. Therefore, investors should not underestimate the huge potential of Nepal’s domestic market.
What about all the projects in the pipeline? Unfortunately, there is another misconception on how to go about solving the energy crisis. It sounds simple: if enough capital is accumulated and put into the many good locations for hydropower, it would only take a few years of construction to get us out of the energy crisis. There is a big flaw in this line of reasoning. We need to understand that Nepal’s water resources are at a distinct disadvantage and a complete focus on production cannot avert the crisis. The water flow goes down drastically during the dry winter months—it is the lowest in January—at a time energy demand for heating and lighting purposes are at their highest. By January 2012, therefore, there is likely to be power outages for up to 16-18 hours every day. The sad fact is that currently there is only one all-season storage hydro-plant in operation, which provides 92 MW during any season. All the other hydropower plants are run-of-the-river, which means that without dams, they have to use the rivers’ flow to run turbines. During the dry season, thus, only 190 MW of the installed 545 MW installed capacity can be used. This means that including imports from India (96 MW), one storage and a small thermal plant (19 MW), the electricity deficit rises from 182 MW in the wet season (summer) to 573 MW during the dry season (winter).
Nevertheless, the present government policy is to continue building run-of-the-river plants which will not be able to catch up with the growing electricity demand during the dry season, while producing excess capacity during the wet season. The country loses doubly if it follows the current trend. When selling extra capacity in the summer months to India, the tariffs will be low for two reasons: (1) This energy will be non-confirmed, off-peak and only seasonal; (2) India has recently introduced an import tax on electricity. During the dry season, NEA will have to import high-cost peak electricity from the Indian short-term market, where prices stand at 11Nrs/kWh at delivery. This has been negatively impacting NEA’s equity.
To lure the producers NEA may need to institute different pricing mechanism during peak and off-peak hours. This would also encourage users to shift certain activities to the nighttime, thus taking pressure off the national grid. A further increase in tariffs—NEA has already proposed a 30 percent increase for anyone using above 20 units—will help make power a profitable enterprise. Independent Power Producers in Nepal should through market-oriented pricing be encouraged to accelerate their projects and target them specifically at the Nepali people, instead of looking for ventures abroad. This is, however, not possible without NEA expanding necessary transmission and distribution networks within Nepal.
Misinformation on the present energy scenario has overshadowed the likely solutions. A simple way to move forward in the short-term has to be construction of a storage plant like Budhi Gandaki (600 MW), which can operate all year round.
Unfortunately, Nepal’s energy sector tends to be driven by unnecessary nationalistic, highly political and opportunistic elements that may unite to keep us in the dark for many more years.
(The authors are researchers on energy security and poverty in Nepal)
Posted on: 2010-11-12 08:25
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Abin
Shit! The note is lost. I had better avoid extemporising. ...have been told not to blab.
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