Energy sector in doldrums

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    KATHMANDU, Dec 31:

    trl-energyThough the gap between demand and supply continues to widen, only 30 MW generated by six small hydropower projects was added to the national grid in 2013. This shows the sorry state of the country´s energy sector.

    Nepal Electricity Authority (NEA) is currently overseeing development of six projects — Chameliya, Kulekhani III, Upper Trishuli 3A and Rahughat – and all of them are already behind schedule. The delay has led to rise in construction cost.

    Keshav Dhwaj Adhikari, spokesperson at the Ministry of Energy, said work progress of Kulekhani III and Chameliya remained at satisfactory level in 2013.

    The Upper Trishuli 3A fell into controversy because of the erroneous decision to upgrade its capacity from 60 to 90 MW. Though the board of NEA withdrew the decision to upgrade capacity, the Chinese developer is still dilly-dallying. Rahughat got behind the schedule because of the delay in appointment of consultant. This prompted the construction to seek compensation from NEA.

    Upper Tamakoshi (456 MW) is regarded as the milestone to minimize load-shedding. But the project is also six months behind schedule due to need for tunnel alignment change. It is expected to complete by December 2015.

    Hydropower projects having total installed capacity of 2000 MW are in different stages of development. NEA signed power purchase agreement, with 30 hydropower projects with total generation capacity of 710 MW, in 2013.

    According to Adhikari, several efforts, ranging from policy formulation to resource allocations for infrastructure development, were made in 2013 for hydropower development. The government allocated all time high budget of Rs 30 billion, including Rs 13 billion for transmission lines, for energy sector in 2013/14.

    Likewise, the Investment Board Nepal (IBN) has carried out preparations for differet mega projects. Discussions on Project Development Agreement (PDA) of Upper Karnali and Arun III are currently underway. Both the projects with installed capacity of 900 MW each are being developed for export purpose. Similarly, IBN finalized Power Development Agreement (PDA), a key document, in 2013 itself.

    Donor agencies and development partners also prioritized energy sector in 2013. “Our development partners like Asian Development Bank, World Bank and others have set policies prioritizing the energy sector,” added Adhikari.

    Asian Development Bank (ADB) has shown interest in transmission line projects like Butwal-Gorakhapur, Marshyangdi corridor, Kaligandaki corridor and Tamakoshi-Kathmandu.
    The government also took major decisions to develop transmission line projects like Koshi corridor (220 Kv), Solu corridor (132 kv) and Lekhanath-Modi (132 kv) with financial assistance of Exim Bank of India.

    International Finance Corporation and World Bank have also started to extend their support and investment in the hydropower sector. Recently, IFC decided to hold 10 percent equity in Upper Marshyangdi II hydropower project. It is also issuing loans worth 15 percent of the estimated cost to develop the project.

    A consortium of development partners – ADB, Japan International Cooperation Agency (JICA), the European Investment Bank, and the Abu Dhabi Fund for Development — decided to finance US$ 500 million to develop Tanahu Hydropwer Project (140 MW), a reservoir project, in 2013.

    Energy imports to reduce load-shedding and power trade with India were among the top issues in the energy sector in 2013. Nepal currently imports about 170 MW from India. It has already signed agreement to import another 50 MW from India.

    Nepal wants to sign power trade with India at the earliest. It is one of the main demands of independent power developers. However, the government has yet to put serious efforts in this direction.

    After the rise of political parties advocating open market economy in the recently held CA election, India has shown enthusiasm to sign power trade agreement and promote Indian investment in Nepal´s hydropower sector.

    Indian Minister for New and Renewable Energy Farooq Abdullah, who was in Nepal a couple of weeks ago, expressed interest to promote hydropower in Nepal and import energy produced here.

    Most of the political parties have prioritized hydropower in their party documents. Khadga Bahadur Bishta, president of Independent Power Producer´s Association, said that the parties are convinced with their demands.

    Stakeholders of energy sector believe progress will be made in power trade agreement between Nepal and Indian in 2014. They also hope the sector will receive more foreign direct investment and that the hydropower development will gain pace.

    However, economist Bishwambher Pyakuryal, expresses dissatisfaction over piecemeal foreign investments in the energy sector by a group of country specific investors backed by certain political parties. “We need to have inter-party consensus on attracting foreign investments,” Pyakuryal said. “Amendment to the land acquisition laws and a comprehensive scientific demand forecasts are the much-needed interventions in the sector.”

    Source : Republica