Nepal’s energy future: Too much when it rains, too little rest of the time

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    KATHMANDU, March 6:

    wet_EnergyIt might be kind of hard to believe that in about four years’ time Nepal will go from round-the-year power cuts to days when Nepal Electricity Authority’s (NEA’s) big problem will too much energy.

    But that will definitely be the case as NEA projections show that power plants around the country will generate so much electricity when planned and under-construction projects come online between mid-2017 and 2019 that NEA has already started trying to come up with plans on how to deal with the surplus.

    In fact, according to NEA estimates, Nepal is going to have so much extra electricity supply — for about 20 hours a day during the rainy season Nepal will generate about 1,000 MW more energy than it can use – that NEA is right now thinking about putting the signing of new deals to buy energy on hold until it can figure a way out.

    But no one is popping open the champagne and looking forward to days very near in the future when people in Nepal will no longer have to plan their daily schedules around the latest load-shedding routine. As always there is a big but (catch).

    Nepal will have an energy surplus headache during the rainy season, but that’s it – only during the rainy season. The rest of the year the not-even-close-to-enough energy situation will persist. So much so that during the ‘dry months’, NEA expects Nepal to generate only fourth of the energy it needs.

    Currently, load-shedding stands at 84 hours per week. While it is less during other seasons, power cut is still round-the-year.

    In the last few years, the pace of new power generation projects has gone up and NEA has so far signed Power Purchase Agreements (PPAs) with about 120 projects with peak-generation capacity of about 2,000 MW which means that there will be surplus energy during the off-peak hours of the rainy season after July 2017.

    This has caused NEA officials to rethink signing new agreements with power developers fearing that energy will go wasted and NEA will incur huge losses. The last time the country had an energy surplus was when the Kaligandaki hydropower project completed in 2002. But that was only for a short time.

    NEA statistics say that figures of supply and demand will meet at a point in July 2017 after the connection of the 456 MW Upper Tamakoshi Hydropower Project (UTHP) to the national grid and the country will enter a new phase of surplus energy when it rains heavily.

    Add to that the other projects, like the Mid-Bhotekoshi (102 MW) and Rasuwagadhi (111 MW) coming into connection soon after UTHP, and Nepal will reach the day when ‘dump energy’ will reach about 1,000 MW for about 20 hours, or 20 million units, every day during the rainy season by Fiscal Year 2018 /19. Talking to Republica, NEA Spokesperson Sher Singh Bhat put the market price of the dump energy at around Rs 150 million per day.

    However during the dry months, power houses will only generate one-fourth of the energy when peak demand is forecast to hit 1,906 MW.

    “The demand forecast figures and the already signed PPAs do not allow us to sign any more PPAs with the run-of-the-river (RoR) projects until there is a reliable market and marketability of the energy to sell the surplus,” Bhat says, adding that it would be costly if NEA were to decide to purchase power thereafter.

    The seasonal imbalance of energy generation owes a lot to the fact that the planned and under-construction projects are only run-of-the-river types, which run in full capacity during the rainy season but comes down to a trickle the rest of the year.

    If NEA fails to find a market for the surplus energy, some 200 projects, with a total capacity of 10,300 MW, which are under different phase of study will suffer and new energy development work will come almost to standstill.

    NEA´s rethinking of new PPAs will also affect the promises of political parties in their election manifestos to generate 5,000 MW of energy in the next three to five years to bail the country out of its energy crisis. Their declarations lacked a time-framed electricity generation plan.

    It is high time to have a comprehensive plan for producing energy that focuses on reservoir plants for balanced energy production.

    RESERVOIR PROJECTS

    Only reservoir hydropower projects can bring changes to the current imbalance but there aren’t any such projects likely to be constructed, at least not before 2020.

    Keshav Dhwaj Adhikari, the spokesperson for the Ministry of Energy, has pointed out that the current problem is a result of over two decades of bad or non-existent planning. “The current energy crisis is because the government kept on just expecting something from the private sector and did nothing after the 1990s.”

    Successive governments took a backseat in energy production and expected the private sector to generate the needed energy after opening the doors to them in the 1990s. The immature private sector never chose to develop reservoir projects as they are comparatively expensive compared to RoR projects.

    Adhikari is of the view that the crisis won´t be resolved until the government itself makes reservoir projects on its own. The government has initiated plan for Tanahu, Nalisinggadh (400 MW) and Budhigandaki (600 MW) hydro projects. But they are not likely to come online before 2022 even if things go as planned.

    Speaking at the Nepal Economic Summit on last week, NEA Managing Director Arjun Kumar Karki said the load-shedding can not be eliminated even after those reservoir projects are done.

    With an assessment of importance of dry energy in the future, NEA has invited applications from export-oriented projects offering Rs 10.60 per unit for dry energy (from December to April) after 2020. But only five projects have applied so far. The current rate stands at Rs 8.40 for dry months and Rs 4.80 for wet energy.

    ENERGY TRADE WITH INDIA

    The leadership in the government and NEA put emphasis on the planning of importing energy to meet the demand or at least downsize the current energy cuts. The ideal way would be a Power Trade Agreement (PTA) with India to export the surplus energy during the wet season and import from them during dry months.

    The Nepali government put forward a proposal on signing a Memorandum of Understanding for a PTA with India in June 2010. However, India has not responded to the proposal yet.

    Delegates and leaders of India often reiterate that Nepal is rich in water resources and can earn by selling hydropower, but their reiteration has never been translated into reality.

    “The Indian side has always remained silent on our MoU proposal for years though they often repeat the same thing that the process is on and they are thinking about it,” Adhikari, the energy ministry spokesperson, says.

    It seems that the country will be waiting for the PTA for a long long time. The President of Independent Power Producers Association Nepal Khadga Bahadur Bisht says that no one has the answer on how to address the energy development imbalance. NEA, the government and the private sector should work hand-in-hand to find the solution, including the PTA with India, to address the current problem of seasonal imbalance and finding a market to sell energy.

    However, they are yet to develop a cross-border transmission line to exchange any energy.

    It has been years since the Muzaffarpur-Dhalkebar transmission line was initiated, but little progress has been made.

    ALTERNATIVE MARKET FOR DUMP ENERGY

    It would be wise to look for a domestic market to utilize the ‘dump power’ to save the country’s state-run power monopolist from huge losses and make it favorable for the private sector to continue electricity generation by signing PPAs with them.

    Adhikari suggests encouraging any type of industry that can use the dump energy.

    Likewise, Bisht is of the view that the country can have cold stores that consume wet energy as well as tariff differences by season to increase the consumption of dump energy.

    Source : Republica