Hastening Hydropower Development

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    hydro_artJAN 28 – Although Nepal is one of the hydropower -producing pioneers in Asia, the pace of development of hydropower has been tardy. A country that has a megawatt (MW) capacity of installed hydropower of more than two hundred thousand has, as yet, been able to generate just 700 MW. The difference between promises and reality has become so large that people do not believe recent government claims that the speed of development will be hastened. Power Summit ’13, with the theme ‘Hastening the pace of hydropower development’, concluded on a similar note.

    Is the timely development of hydropower not possible in Nepal? What are the reasons behind the slow progress of hydropower ? What steps should be taken by the government and other stakeholders for the speedy development of hydropower ? How, indeed, should we move forward in these endeavours? These are the basic questions to be addressed.

    Let us start with the government’s side. Almost all finance ministers in the last two decades have stated publicly that hydropower is lucrative, and encouraged private investment for the sector’s development. Government financing was reduced and private promoters encouraged. This did not work. The economic and socio-political situation failed to lure investors to Nepal. We expected a result that few developing countries had achieved in the past. Two decades later, dismal performance remains characteristic. Necessarily, we have to revisit the policies and priorities of the government and take a new direction.

    The promotion of the Bhote Koshi and Khimti hydropower projects was the beginning of private investment in hydropower in Nepal. Seeing an attractive return from the projects, local promoters were attracted to hydropower , procuring survey licenses for most of the possible sites throughout the country. Local promoters neither got power-purchase rates nor other facilities provided to foreign promoters. Enthusiasm stalled, and only a few smaller projects moved forward. A new phrase

    ‘jhola ma khola’ meaning ‘river in bag’ was coined in the Nepali language to denote the lack of development occurring. Local banks did not have the capacity to finance to the extent required, while foreign investors were disinterested. Private investment in multistoried buildings and inverters meanwhile, has been greater than the investment in hydropower projects over the last decade. It is time to realise that depending totally on private promoters is not working in Nepal

    Foreign investors were attracted in the beginning due largely to agreements that favoured promoters. This happened as a result of the government’s lack of experience and negotiation skills. The agreements set bottom-line terms to attract foreign investors, though only a few invested. Internal political conflict and the threat of rebels were, to a large extent, responsible. Some attractive projects, like Upper Karnali and Arun III, awarded to foreign developers, are also in trouble due to political, financial and social factors.

    The promotion of any hydropower project requiring large investments necessitates political stability and the likelihood of an attractive return. Politicians, however, remain divided, making a favourable situation for sizeable investments, either foreign or local, elusive.

    The country is facing load-shedding of up to twelve hours daily and is desperate to make the situation better. There are only two options; import or produce more. Nepal is not in a position to import energy. So, the only option remaining is developing hydropower .

    The strategy Nepal takes should address its present situation. The history of hydropower development in the region shows that countries including South Korea, China and India have developed large-scale hydropower projects with public funding. So too can Nepal. The smooth progress in the 456 MW Upper Tamakoshi project should serve as a trendsetter for hydropower development in Nepal.

    Local promoters’ efforts should also be appreciated. Though they are unable to service all the hydropower needs of Nepal, local actors are nonetheless able to develop up to 50 MW capacity. As the experience and financing capability of the private sector becomes stronger, they will be able to develop larger projects. Foreign investors may also invest in projects of greater magnitude as the situation improves.

    The debate concerning local consumption and export is obvious; there should be no export till local demand is fulfiled. Present demands of about 1100 MW in peak hours is, perhaps, modest. If reliable electricity is available, the use of fossil fuels such as cooking gas, generator fuel etc could easily be replaced by electricity. Nepal needs electricity and has the market to support it. Excess, if there is any, could easily be exported or supplied to industries at a reasonable rate. A long term vision of replacing fossil fuel with hydroelectricity would be highly beneficial to Nepal.

    Investment in hydropower gives many returns. First is the primary use of electricity, second is enhanced industrial output, third the replacement of fossil fuel, and fourth the saving of hard currency. In advancing along the journey towards a prosperous Nepal, the government must develop hydropower as a priority. Nepal needs a shift in approaches toward developing hydropower as it is clear that the continuation of current policies will not lead us to the desired goal in time. The coming decade should be the decade of hydropower development led by public investment. All donor agencies should also join hands toward this goal. Indeed, haste without a shift in policy and priorities will lead us nowhere.

    Shital Babu Regmee
    (Regmee is a water resource expert and former joint secretary at the Ministry of Water Resources)

    Source : eKantipur