Kathmandu: Mohan Dangi, president of the Independent Power Producers’ Association, Nepal (IPPAN), has urged the government and the Electricity Regulatory Commission (ERC) to review the wheeling charges imposed for using the national electricity transmission grid.
Addressing the October edition of IPPAN’s Friday Forum, organized on Friday in collaboration with the Canadian Fund for Local Initiatives, Dangi welcomed the decision to ensure private-sector access to the transmission system. However, he said the currently prescribed charges could affect the financial viability of hydropower projects, discourage new investments, and undermine the competitiveness of Nepali electricity in international markets. He stressed that the rates should be made scientific, practical, and investment-friendly.
Dangi also said further discussions were needed among the government, the Electricity Regulatory Commission, and the private sector regarding the methodology used to calculate wheeling charges and the rates applied.
“The average annual revenue of hydropower projects is around Rs 30 million per megawatt. If a project has to pay approximately Rs 5 million per megawatt annually in transmission charges, it could significantly affect project revenues and returns on investment,” he said. “This would weaken the financial position of existing projects and discourage private-sector investment in new project development and electricity trading.”
He said wheeling charges should be reviewed by taking into account transmission capacity utilization, the financial condition of hydropower projects, and competitiveness in the regional electricity market.
Stating that the government has set a target of generating 30,000 MW of electricity within the next 10 years, Dangi said the private sector was committed to helping achieve the goal. He added that the private sector should now be allowed to expand its role beyond electricity generation to include electricity trading, transmission infrastructure, and securing markets for the power produced.
He warned that if generation capacity continues to increase while problems related to transmission and electricity trading remain unresolved, managing the market for the electricity produced will become increasingly challenging.
Dangi said the government had announced that it would sign power purchase agreements (PPAs) with hydropower projects that had applied and were waiting in the queue within 180 days. However, the process had not progressed as expected.
He said resolving issues related to PPAs, transmission infrastructure, and electricity trading would help expand private-sector investment and facilitate the achievement of national generation and export targets.
Dangi also said approximately 11 companies had applied for electricity trading licences and urged the government to expedite the licensing process.
“If the private sector is allowed to participate in electricity trading and is given investment opportunities in transmission-line construction, it will help address existing problems in the energy sector,” he said.
He added that although electricity generation was increasing every year, failure to resolve issues related to transmission infrastructure, electricity trading, and market access would make it difficult to achieve the government’s generation and export targets.
Canada Ready to Expand Cooperation in Green Energy Development
Mark Allen, Canada’s Deputy Ambassador to Nepal, said expanding cooperation between Nepal and Canada in research, technology, capacity building, and policy dialogue could contribute positively to Nepal’s green energy development, local economic prosperity, and regional energy security.
Addressing the Friday Forum virtually, Allen expressed Canada’s commitment to expanding cooperation with Nepal in green energy development, transmission infrastructure, dam safety, and climate resilience.
He emphasized that Nepal’s significant hydropower potential could attract investment if the country established stable policy arrangements and transparent regulatory processes.
Allen also noted that Canada has more than 15,000 dams and that hydropower makes a significant contribution to the country’s electricity generation.
Nepal Needs to Diversify Its Energy Mix, Says Former Energy Secretary
Dinesh Kumar Ghimire, former secretary at the Ministry of Energy, Water Resources and Irrigation and chief expert adviser to IPPAN, said the time had come for Nepal to reduce its excessive dependence on run-of-river projects and prioritize the development of peaking run-of-river, reservoir, pumped-storage, and solar energy projects.
He said increasing electricity generation alone would not be sufficient. Strengthening energy security would require a balanced generation mix, expansion of transmission and distribution infrastructure, and policies to increase domestic electricity consumption.
“Nepal’s hydropower generation is dominated by run-of-river projects. This creates electricity shortages during the dry season and surplus generation during the rainy season. Therefore, failure to develop reservoir projects and other renewable energy sources will pose challenges to the reliability of the power system and long-term energy security,” he said.
Ghimire said Nepal had long aimed to increase the share of storage-based hydropower projects to 20–25 percent, but progress had fallen short of expectations.
He also suggested developing solar energy and battery-based energy storage systems to address immediate energy needs.
Although Nepal has been earning foreign currency through electricity exports, Ghimire emphasized that domestic electricity consumption must increase to achieve long-term economic prosperity.
He cautioned against treating current electricity demand as the full extent of the country’s potential demand. According to him, inadequate transmission and distribution infrastructure, insufficient development of industrial corridors, and industries’ inability to access reliable electricity have constrained demand.
UNDP Calls for Stronger Disaster Preparedness to Protect Energy Infrastructure
Deepak KC, programme analyst at the United Nations Development Programme (UNDP), emphasized the need to strengthen early-warning systems, adopt modern technologies, and enhance cooperation with the private sector to protect hydropower projects and energy infrastructure from natural disasters, drawing lessons from the recent Bhote Koshi floods.
He said climate change was increasing the risk of glacial lake outburst floods as glaciers melt and glacial lakes expand.
KC noted that such disasters can damage settlements and communities as well as hydropower projects and transmission infrastructure, causing significant shocks to the national economy.
He called for regular monitoring of glacial lakes and river source areas, real-time data collection, effective dissemination of early warnings through sirens and mobile messages, and improved disaster preparedness among local communities.
He also highlighted the need for cross-border data sharing and joint monitoring between Nepal and China.
KC said UNDP, in collaboration with the Government of Nepal, was implementing a project to lower the water levels of four high-risk glacial lakes, strengthen early-warning systems, and improve the safety of vulnerable communities.
He emphasized the need for long-term cooperation among the government, private sector, and local communities, with risk assessments given mandatory priority from the survey stage through the operation of hydropower projects.
Wheeling Charges Under Open Access Can Be Reviewed: ERC Chair Dhital
Ram Prasad Dhital, chairperson of the Electricity Regulatory Commission (ERC), said transmission charges prescribed under the open-access framework could be reviewed as necessary.
Addressing the Friday Forum, Dhital said the existing methodology for determining transmission charges was a simplified model adopted for the initial stage. He explained that once sufficient data became available, a more scientific methodology could be introduced based on the volume of electricity transmitted, transmission distance, and the actual cost of the system.
He clarified that the objective of open access was to promote competition in the electricity market and make electricity available to consumers at lower prices. Accordingly, transmission rates could be adjusted as needed.
Dhital acknowledged the need to clarify the basis and process used to determine the transmission charge of 57 paisa per unit for using the national electricity transmission grid. He said the commission was prepared to improve the methodology based on suggestions received through further discussions with stakeholders.
“The commission determined the transmission charges based on the audited financial statements of the Nepal Electricity Authority and the available data,” he said.
He also noted that identifying the actual cost of the transmission system was challenging because the Nepal Electricity Authority’s generation, transmission, distribution, and trading operations are integrated.
Dhital said the commission was preparing to introduce a separate tariff methodology based on megawatts and kilometres for radial transmission lines, where electricity flows in one direction.
He said open access would provide the private sector with opportunities to enter electricity trading and expressed confidence that competition in the market would help lower electricity prices.
Dhital added that the commission was positive about establishing the necessary legal arrangements for private-sector electricity trading and expanding opportunities within the existing legal framework.
He also stressed the need to increase private-sector participation in transmission infrastructure development. Given the private sector’s significant contribution to hydropower development, he said investment and participation opportunities should now be expanded in transmission and electricity trading as well.
Discussing damage to hydropower projects caused by natural disasters, including the Bhote Koshi floods, Dhital said a regulatory framework was needed to support disaster-resilient infrastructure and financial recovery after damage occurs.
He said the commission was studying options for managing such losses, including risk-based project classification, insurance, relief funds, and provisions related to the duration of power purchase agreements.
Government, Private Sector and Technology Must Work Together to Reduce Hydropower Risks
Stakeholders have emphasized the need for cooperation among the government, private sector, and technical experts to reduce risks arising from climate change, floods, landslides, and other natural disasters affecting hydropower projects.
Participants in a panel discussion at the Friday Forum stressed the importance of conducting scientific risk assessments during project studies, design, and construction, as well as updating existing study guidelines to reflect changing conditions.
They said the government should provide policy and financial support to prevent the private sector from bearing the entire financial burden when disasters damage hydropower projects or transmission infrastructure.
They also noted that geographic information systems (GIS), satellite imagery, drone technology, and cross-border early-warning systems could be used to identify and mitigate risks.
Government Calls for Thorough Risk Assessment Before Project Approval
Gokarna Pantha, joint secretary at the Ministry of Energy, Water Resources and Irrigation, said potential risks must be thoroughly assessed during hydropower project studies.
He said the government should exercise particular caution before granting permission for projects in highly hazardous locations. Predictable risks should also be incorporated into project costs and planning.
Pantha said it was inappropriate for the private sector alone to bear the risks arising from major natural disasters.
Project Study Guidelines Need Review
Jibachh Mandal, director general of the Department of Electricity Development, said the guidelines governing hydropower project studies needed to be reviewed to determine whether they remained appropriate under current conditions.
Emphasizing the importance of the quality of consultants conducting project studies and the reports they prepare, Mandal said both the government and private sector had responsibilities in risk mitigation.
He said project risks should not be assessed solely in terms of the construction site but should instead be considered in relation to the entire project, investors, banks, local communities, the government, and the insurance sector.
IPPAN Calls for Government Support After Natural Disasters
Balram Khatiwada, vice-president of IPPAN, said it was unjustifiable for the private sector alone to bear the full burden of risks arising from natural disasters affecting hydropower projects.
He pointed out that project assessments rely on data from the Department of Hydrology and Meteorology and are studied and verified by the relevant government agencies. Therefore, he stressed that the government should also assume responsibility when disasters occur.
Khatiwada said damage to transmission lines could prevent hydropower projects from operating, leaving developers without revenue while they continue to pay interest on their loans.
He called for policy provisions to support post-disaster recovery, including tax relief, customs-duty concessions, and financial incentives.
KU Expert Highlights the Role of Modern Technology in Risk Reduction
Reshma Shrestha, associate professor at Kathmandu University, said modern technologies such as geographic information systems, satellite imagery, and drones should be used to identify and mitigate risks to hydropower projects.
She emphasized the need to assess watershed areas, geographical features, geological conditions, glacial lakes, and potential impacts on downstream areas throughout a project’s entire life cycle.
Shrestha said glacial lake outburst floods, sediment and debris flows, and large volumes of water could cause severe damage to hydropower projects.
She also stressed the importance of effective data sharing and early-warning systems between Nepal and neighbouring countries to improve preparedness and reduce disaster-related risks.
Urjasanchar