A STUDY ON HYDROPOWER DEVELOPMENT SCENARIO OF NEPAL

Abstract

The physical progress that encourages and supports the private sector in the hydropower sector was found to be satisfactory during 8th (1993-1997) and 9th periodic plan (1997 2002), after the implementation of the Hydropower Development Policy (1992). Before the 9th periodic plan, the armed conflict situation in the country was commenced and was continued for a full decade (1996-2006). Between 2001 and 2006, the armed conflict was spread across the country and the situation became more critical, due to which all sectors including hydropower were ill influenced. Hydropower development policy (2001) replaced the earlier policy, but it could not function as expected because there was a big social and political crisis with the emergency ruling as well. During the 10th plan (2002 2007), only 40.2 MW of power could be added to the system. Even after the restoration of peace in 2006, the country experienced an extended transition period due to social and political movements. Despite the various efforts by the Government to mitigate the load shedding and generate maximum hydro energy, the progress in hydropower was not found satisfactory during the 11th (2007-2010) and 12th (2010-2013) periodic plan. As the social and political environment was improving and with the Government's efforts, progress in hydropower generation improved during 13rd (2013-2016) and 14th (2016-2019) periodic plan. During this period, 146 MW and 277 MW power were added to the system, respectively. Improved social and political environment and massive investigation in infrastructure development were found supportive for hydropower generation in Nepal. The main objectives of this research are to explore the prevailing scenario of hydropower development in Nepal and to present & analyze the associated trends, and to recommend appropriate modalities for hydropower development in the changing context of the country. The study has been completed with primary and secondary data sources. The methodologies adopted are review, analysis of data, and presentation of relevant documents as well as data, results from stakeholders' survey, and preparation of plant/project map using arcmap 10.7.1. Total 108 hydropower plants are in the operation phase with 1,261.51 MW installed capacity (DoED, 2021). There is no single plant installed in province 2. A maximum of 35 plants with 435.21 MW installed capacity is operating in Bagmati province, and a maximum of 489 MW installed capacity by 33 plants are operating in Gandaki province. In Karnali province, only two plants with 8.55 MW installed capacity plants are operating, iii which shows the wide variation of hydropower development based on geographical region. In the comparison of domestic produced and imported energy, both are in increasing trend every year. However, domestic energy production increases significantly since the year 1999/2000, and imported energy increases significantly since the year 2009/2010 and then jumped up yearly since the year 2013/2014. The correlation between the energy available in both the cases internal generation and total energy available including import found positive with a linear relationship. The available data of industry registration and energy (DoI, 2020 & NEA, 2020) available between 1992/93 to 2019/20 following the equation y=1.493x+225.6 and R2=0.933. The data and analysis show that the objectives of hydropower development policy related to economic activities and industrial development were also achieved significantly. The study shows that the per MW construction cost for projects developed by the public sector is much higher than the projects developed by the private developers (IPP) regardless of project size. Per MW construction cost of completed projects by the public sector, undergoing projects by public sector and projects by the private sector (IPP) is found as 3.5749 M US$, 2.1458 M US$ and, 1.704 M US$. The figures show that the per MW project cost of the private sector is cheaper than the public sector projects. More than half of respondents of stakeholders' survey did not found not satisfactory with the development trend of hydropower in Nepal. Respondents from all categories agree with insatiability in the social and political environment as the main reason. 44% of private sector employees still pointed to the resource constraint for the hydropower development. However, Only 24.8% of respondents agreed with the resource constraint as a reason behind it. Private sector developers still looked doubtful about the environment for hydropower development in Nepal, and other category respondents looked with some hopes in comparison. Thus the study shows that there is still an uncomfortable and tedious environment for hydropower development in Nepal, which has to be improved for the rapid development of the sector. In this study, it has been identified that socio-political and infrastructure-related hurdles are more prominent than a financial problem for hydropower development in Nepal. The study shows that there is no best alternative to importing energy for solving load shedding problems immediate. Based on the average majority of the result, it can be concluded that 100 MW projects are ideal projects for Nepal. Attracting foreign direct iv investment and loans for big-sized projects is the best option by enabling the favorable policy and physical environment to ensure their investment. The study also shows that the hydropower generation strategy should focus on internal consumption, industrial and commercial development, including electricity-based transportation systems, and then only export to neighboring countries. In aggregate level, the majority of respondents recommended the large size projects (more than 500 MW installed capacity and all sized/typed projects) to be implemented by the Government or by the department and with foreign agency/investors, projects with 100 500 MW installed capacity by public companies, 25-100 MW projects by IPPs in BOOT model & by public-private-cooperative jointly and small projects having installed capacity less than 25 MW by cooperative/community. The study showed the ideal project size as 100 MW installed capacity; hence the role of the private sector (IPPs) in the BOOT model, joint of public-private-cooperative is highly prioritized and important for the country's hydropower development. Government or department may handle the big-sized projects, which are less in numbers. Results from the aggregate responses of all respondents, it has been recommended that the planning & construction of transmission infrastructure together with the transmission of electricity be managed by the federal level government. Respondents preferred the province-level Government for planning and construction of distribution infrastructure and the local level was preferred for distribution of electricity. The study recommends the shared responsibilities for electricity transmission and distribution among the three tiers of Government. The study shows that the development of infrastructure and enabling stable social & political situation with updated policy & legal is important for hydropower project development rather than providing financial relief to IPPs. With the study, it can be concluded that in the license system, license charge, its tenure may not an issue but the procedures should be reviewed and improved. Also, the licensing to be reformed with the joint issue of survey and construction license through an open competitive bidding system. It has been also recommended to prepare hydropower master plan for national and province level, implementation of IWRM approach, a tie-up of hydropower development with other infrastructure development plans, updated hydropower development policy which would encourage the consumptions of generated energy for domestic consumption exploring new sectors rather priority to export energy.