The government has set an ambitious goal of increasing electricity capacity to 28,500 megawatts within 10 years. If this target is achieved, there is no doubt that it will bring about economic, infrastructural, social, and political transformation in the country. In a situation where the overall economy has been declining due to a lack of sufficient energy, this roadmap could become a milestone.
To achieve the target, the government (Ministry of Energy) faces both opportunities and challenges. If a strategic direction is accompanied by a practical action plan, the objectives of the roadmap seem attainable.
It is necessary to maximize the development of domestic energy production sources that can significantly contribute to the national economy, increase the country’s internal electricity consumption, harness the potential benefits of cross-border electricity trade, and ensure the planned development of the energy sector.
To implement the target set by the government, there is a compulsion to remove legal obstacles and facilitate the process. The roadmap and action plan must include revisions to existing procedures and guidelines to further encourage private sector energy promoters. The current procedures are more control-oriented than service-oriented.
The goal of the roadmap can only be achieved if the practice of using tools such as round tables, one desk solutions, and help desks for review, monitoring, and discussions of past decisions is implemented practically.
If projects ranging from one hundred to one thousand megawatts are granted licenses based on the principle of “first come, first served” in a rational manner and backed by financial resource assurance, private sector investment is likely to increase further.
Since the year 2010/2011, when Gokarna Bista was the Minister of Water Resources, private sector hydropower developers have faced injustice. The reason was the accusation that they had held on to river projects without developing them. As a result, licenses identified and obtained by the private sector were revoked. It was then decided that the projects placed in the government’s reserved basket would be opened for competition. Investments made in those projects have since gone to waste.
Those projects remain stranded as the government has failed to bring them into competition. Without even reviewing the situation, the government continues to insist on competition. Hydropower has been designated as a national priority sector because it can be managed by the private sector. However, government mechanisms seem reluctant to show enthusiasm in achieving these objectives.
Out of the ‘Super Six’ projects studied by the Department of Electricity Development under the Government of Nepal, only four have come into operation even after decades. Two projects are still not operational. Moreover, there is the bitter experience that all of these projects had to be re-studied by the developers after increasing their capacities.
Similarly, the 22-megawatt Budhiganga hydropower project, which was supposed to be built with Kuwaiti grant assistance, has been stuck for decades due to the failure to complete the tender process. There could be many such examples. In the context of the government’s declared Energy Development Roadmap and its 2023 action plan, achieving the target of generating 28,500 megawatts would be a milestone — if not, it will remain merely an ambition.
A joint high-level champion task force should be formed with the private sector. The tasks of the task force could include mobilizing and identifying financial resources, managing concessional loans, providing technical consultation, and prioritizing market development. A work schedule can be drafted with these tasks at the forefront.
For this, procedural obstacles such as delays in forest and environmental approvals, land acquisition, and local issues can be addressed by implementing streamlined procedures. The overlap of jurisdiction between relevant ministries and departments has also caused delays in the process. When one government body reverses the decision made by another, the private sector faces difficulties. This needs to be addressed through a clear direction and strategy.
Currently, the Securities Board has not permitted the issuance of shares by private sector hydropower companies, causing billions in capital to remain stagnant in the market. If the capital market were more dynamic, the general public would have had the opportunity to invest in hydropower. This delay should not continue. On the other hand, the IPO share ratings for hydropower projects that have already been completed need to be made practical. Additionally, the procedures should be amended so that no further approval is required for forest clearance, land use rights, and other related permits.
Most hydropower projects and transmission lines fail to even obtain survey permits because the Ministry of Forests and Environment does not grant study approvals. As a result, many applications end up being canceled. A majority of the areas with high hydropower potential fall within national parks.
Due to the Supreme Court’s verdict, hydropower projects located within national parks have been affected. The national park issue has led to increased interference from various non-state actors, obstructing hydropower infrastructure development. Now, Nepal must move forward by balancing development and environmental conservation.
To ensure energy security and sustainably meet the growing energy demand, the time has come to expand renewable energy sources such as solar, along with required commercial operation date (RCOD)-based planning, river flow projects, semi-reservoir, reservoir-based, seasonal reservoir, multipurpose reservoir, and pumped storage projects. Rather than solely focusing on attracting direct foreign investment, the government must actively facilitate access to concessional loans for the private sector.
For private sector investors interested in solar energy, a specific pocket area should be identified where dedicated transmission lines and substations can be constructed. Priority should be given to dry areas that are not suitable for farming, forest use, or irrigation. For example, regions such as Kavre, Ramechhap, Manthali, Khanda Devi, Khurkot, Sindhuli, and Sindhupalchok could be declared as pocket zones. These areas show the potential for developing solar farms with a capacity of up to 15,000–20,000 megawatts.
For the construction of high-voltage and low-voltage transmission lines, it is essential to adopt the concept of integrated transmission lines as much as possible through agreement and collaboration with the private sector. In a single river basin, multiple developers are often engaged in developing different hydropower projects.
Through mergers or by coordinating with a single capable investor wherever possible, transmission lines and hydropower projects within the same corridor can be developed in an integrated manner. If any developer now wishes to develop hydropower within a master plan that has remained idle for decades, it should be opened up for development.
In the report of the recently proposed High-Level Economic Reform Recommendation Commission, it is evident that hydropower energy needs to be made broader and more flexible. The Power Purchase Agreement (PPA) rate has not increased for nearly two decades. The annual escalation rate currently set at 3 percent in PPAs should be reviewed and increased to 5 percent for the entire PPA period. So far, there has been no proper evaluation of the contribution of electricity to the Gross Domestic Product (GDP), the overall economy, and the return on investment in terms of energy.
There is no fixed interest rate cap on loans taken for hydropower energy. Based on the proportion and contribution of foreign currency inflows from remittances, all migrant workers can be encouraged to invest in hydropower shares.
Similarly, for reservoir-based hydropower projects in Karnali Province that the private sector wishes to develop, a provision should be made to provide a 25 percent grant and to exempt them from obtaining IEE/EIA approval for land acquisition and land use rights. Hydropower development in Sudurpashchim and Karnali Provinces can be encouraged by offering a 20-year tax exemption. In Karnali Province, extensive investment should be made in high-voltage transmission lines and quality road infrastructure to attract private sector investment in the energy sector.
In the context of cross-border electricity trade, dialogue with India should be intensified to establish long-term electricity pricing. At the same time, greater emphasis should be placed on green energy technologies, and efforts should be made to increase the engagement of the private sectors of both countries in discussions regarding Nepal’s entitlement to carbon credits.
Source: Kantipur – Krishna Prasad Bhandari
