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Off-grid prosperity

JAN 23 -

In September last year, I was in Kharbang Bazar, Dagatundada VDC in Baglung—several hours’ drive from the district headquarters on a muddy seasonal road—to witness the transformational changes ushered in by a basic service that many of us may take for granted: access to modern energy.

The catalysing effect of modern energy in the form of a 75 kilowatts (kW) micro hydro plant on the development of this village is self-evident. Noodle and soap factories have flourished; school dropout rates have decreased because kids have time to study at night under the light and, in fact, enrollment in the public school has increased because it provides modern computer education; quality of health services have improved because vaccines can be stored in refrigerators, x-ray and pathological laboratory facilities are now available within the village; and the level of public awareness has risen with the introduction of local community radios and access to computers and the internet. A milk vendor does not have to worry about his unsold milk spoiling any more. He or she can preserve it in a chilling vat. Women do not need to wake up at four in the morning to mill rice and flour in traditional labour-intensive mills.

Access to energy can have positive knock-on effects on efforts to reduce poverty and spawn economic growth. While big hydro projects, which require huge investments and take years to complete, are indispensable for large-scale industrial growth, mini- and micro-hydro plants are crucial in bridging the gap between urban and rural areas—supporting livelihood opportunities and the growth of small-scale industries.

Although almost 70 percent of the total population of Nepal has access to electricity, the rural-urban divide is stark. While nearly 96 percent of people in urban areas have access to electricity, the figure for rural areas stands at around only 63 percent, according to the Nepal Living Standard Survey 2011. The amount of per capita electricity consumption in the country is a different matter altogether: it is one of the lowest in the world at just 93 kWh per year, in spite of the fact that Nepal has huge potential in hydropower.

But thanks to the abundance of renewable sources of energy in the country, including thousands of rivers and streams, an increasing proportion of electricity access is coming from off-grid sources that directly benefit the rural population.

Till date, around 12 percent of the Nepali population has access to electricity through renewable energy sources, mainly micro-hydro and solar home systems, according to the government’s Alternative Energy Promotion Centre (AEPC). AEPC’s data also shows that more than 1.5 million households benefit from various renewable energy technologies for cooking, lighting and other uses.

In light of the growing importance of small-scale renewable sources of energy in meeting the country’s energy deficit, the Government of Nepal has commendably decided to mark this week (20 -26 January) as Renewable Energy week  to promote the use and development of renewable forms of energy.

Despite making considerable headway in promoting the use of renewable energy, a major weakness in the sector is that it has failed to attract significant private investment so far. The reason: private investors do not see micro-hydro or small-scale solar photovoltaic systems as profitable either because they would generate more energy than would be consumed at the local level or less than enough to supply energy to macro and micro enterprises. There is no dearth of resources in the private sector in Nepal and the right kind of incentive can redirect billions of rupees worth of savings in banks to not just big hydro but mini- and micro-hydro projects as well.

Existing renewable energy policies have been successful in encouraging communities in and around the more accessible areas of the country to install renewable energy sources. Yet they have not been able to significantly benefit those living in the remote and very remote areas. Due to the high initial cost of renewable energy technologies, low income of households, low capacity of the institutions involved in the delivery of renewable energy services at the local level, and the absence of private sector investment, the success seen in places like Kharbang has not been replicated widely.

There have been many policy innovations over the last few years in the energy sector that could turn the tide. The concept of mini- or local grid can solve the problem of profitability to a large extent and ensure sustainability of micro-hydro projects. Moreover, it will also help improve the quality and reliability of electricity supplied to rural villages so that small industries can be smoothly powered. Further, under the mini-grid system, power can be exchanged among the micro-hydro plants in the local and national grids.

UNDP, in collaboration with the government and the World Bank, has pioneered the development of mini-grid in Nepal. A mini-grid consists of a number of micro-hydro plants located in vicinity, connected to a local distribution network. With a total capacity of 107 kW, Nepal’s first mini-grid of its kind was set up last year connecting the micro-hydro plants in Rangkhani, Paiyuthanthap, Sarkuwa and Damek VDCs in Baglung. If this can be replicated in other districts, the benefits will be huge. UNDP’s approach has been to put the community at the centre of the planning, installing, and operating processes of these micro-hydro plants. This has proved far more sustainable than the traditional top-down approach adopted in larger rural electrification projects.

Beyond Nepal, the international development community is beginning to converge around the idea of access to sustainable energy as the centrepiece of the post-2015 development agenda with the UN Secretary General’s Sustainable Energy for All (SE4ALL) initiative.  

As we are celebrating the benefits of renewable energy in Nepal this week, we should take this opportunity to brainstorm how to create innovative policies and encourage private sector investment. Clearing the existing policy hurdles in creating mini-grids seems like a reasonable thing to do.  Both the public and private sector must use this opportunity to foster greater clarity and focus on harnessing Nepal’s renewable potential, thereby creating more opportunities for prosperity, especially in areas that are remote and off-grid.

Noda is UNDP Country Director

Posted on: 2013-01-24 09:13


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