Powering Progress: Overcoming Obstacles to Nepal’s Hydropower Development

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Nepal possesses significant hydroelectricity potential, with an economic capacity of 42,000 MW and a theoretical capacity of 83,000 MW. Though Nepal’s installed hydroelectricity generation capacity is currently just a little more than 2,600 MW, it is exporting its surplus energy to India and hopefully soon to Bangladesh. So, the government is ambitiously planning to develop hydroelectric projects in the future. On the other hand, Nepal’s hydropower sector is extremely vulnerable to climate change. By delivering clean and green energy, hydroelectricity may make a substantial contribution to de-carbonising the South Asian economy and achieving a net-zero emission target. Green incentives should support hydroelectricity and integrate it into cross-border power trade with neighbouring countries.

Nepal’s journey of hydroelectricity began over a century ago with the establishment of its first power plant in 1911, which had a capacity of 500 KW. Despite being dormant for decades, hydropower development in Nepal saw a significant shift in 1992 with the introduction of the Hydropower Development Policy, which allowed for private sector involvement. This policy change led to a rapid acceleration in hydropower development in the country. Nepal’s electricity sector is governed by Nepal Electricity Authority (NEA) is a government organisation responsible for the generation, transmission, and distribution of electricity. The country’s total electricity generation capacity reached 2,684 MW in August 2023, with the majority coming from hydroelectric plants. NEA reports that the private sector owns hydroelectric projects generating 1,477 MW of this capacity.

In the fiscal year 2022–2023, annual energy consumption per capita reached 380 units. The country is on track to provide access to electricity for the entire population within the next two years. It is prioritising increasing internal energy consumption by expanding industries, promoting electric vehicles, supporting agricultural growth with irrigation, and encouraging the adoption of electric cooking.

Recently, the Ministry of Energy, Water Resources, and Irrigation has developed an Energy Development Road Map and Action Plan with a focus on energy security and the clean energy transition. The plan aims to generate 28,713 megawatts of electricity by 2035, with the goal of exporting 15,000 MW to neighbouring countries.

As of September 2023, the government has already awarded construction licences for a total of 8792 MW to 238 different hydroelectric projects. Additionally, the Department of Electricity Development (DoED) is currently processing applications for the construction of 109 hydropower projects with a total capacity of 11,651 MW. Therefore, it seems realistic to aim for 28,713 MW of hydroelectricity in the next 12 years, despite numerous challenges that may arise.

Cross-border power trade

Nepal is located between India and China, both competing for the top position in the world economy. Bangladesh’s economy is growing rapidly. All of these countries need a tremendous amount of electricity for their growing economies. The government is exporting its surplus energy to India and, hopefully soon, to Bangladesh. During dry seasons, when the generation of hydropower plants decreases, the government also imports electricity from India.

Nepal became the first country in South Asia to participate in the Indian Energy Exchange (IEX). According to the Power Purchase Department of NEA, the government was exporting up to 632 MW of power from hydropower projects as of November 7, 2023. However, cross-border power trade with India is a tedious task.

First, there is a lack of cross-border transmission lines with sufficient capacity. Currently, there is only one high-voltage transmission line (Dhalkebar-Muzaffarpur) between Nepal and India with a capacity of 1,000 MW, and the next transmission line (New Butwal-Gorakhpur) with 2,000 MW is under construction. It involves significant costs for the construction of these transmission lines, as well as substantial wheeling charges. It has included cross-border transmission lines with China on its list, but it may not be a practical option.

The next challenge for power export is obtaining approval for individual hydropower projects from the Designated Authority of India. In order to obtain approval from Indian authorities, detailed information about hydropower projects, including the identities of investors, is necessary. The power trade agreement between Nepal and India is only valid for a duration of one year and must be renewed annually. The government is selling 110 MW power as per the five-year agreement. It is looking forward to a long-term power trade agreement with India, which is essential for the future of hydropower development and export.

Selling hydroelectricity to the South Asian market is a Nepali dream for national prosperity. Nepal has the potential to use its hydroelectricity to produce green hydrogen fuel, but this opportunity has not yet been fully explored.

 Risks of climate change

Nepal has made minimal contributions to global warming but is among the most vulnerable countries. Nepal is experiencing rapid snow melt in the Himalayas, along with other impacts of climate change, including decreased agricultural productivity, flash floods, and landslides. Water is a raw material for hydroelectricity, as the generation of hydroelectricity depends on the availability of running surface water. The disturbance to the hydrological pattern due to climate change poses a significant risk to hydroelectric projects. Thus, the hydropower sector is extremely vulnerable to climate change. Hydroelectricity projects, especially large dam projects, have significant environmental and social impacts. Utilising impact assessment tools, as well as environmental monitoring and management, for hydroelectric projects can help minimise their environmental and social impacts. Hydropower projects are legally obligated to adopt environmentally friendly and socially accepted practices during the construction and operation of the project.

Green incentives

Hydropower has received favourable consideration recently due to its potential to mitigate climate change. Moreover, the study shows that Nepal has the potential to significantly contribute to providing environmental services to the South Asian region by delivering clean and renewable energy.

Hydroelectricity may make a substantial contribution to de-carbonising the South Asian economy and achieving a net-zero emission target. The supply of hydroelectric power from Nepal to India and Bangladesh directly contributes to the shutdown of coal-fired electricity-generating plants. The main issue in the energy transition all over the world is replacing coal-fired plants. India is the second-largest producer and consumer of coal after China. In order to achieve the objectives of the 2015 Paris Agreement on climate change, it is imperative to promptly reduce emissions and achieve net-zero emissions by the middle of the century. India has delayed its net-zero emission target to 2070.

The Nationally Determined Contributions (NDC) report of India states that the country aims to achieve 50 per cent of its energy consumption from renewables (non-fossil fuel-based energy resources) by 2030. This target is “critically insufficient” when compared to the level of reductions needed in India to be consistent with limiting warming to 1.5°C. Substantial improvement is needed in this target, and India will need international support to get onto a 1.5°C pathway. India has set a target to install 500 GW of renewable energy capacity by 2030. Nepal’s hydropower can be a valuable supplement to India’s goal of achieving 500 GW of renewable energy.

In this context, Nepal deserves climate justice from its neighbouring countries, which are competing for top positions in the global economy. From an eco-nationalist viewpoint, Nepal justifies claiming green incentives for exporting hydroelectricity, which is produced at the risk of climate change and contributes to importer countries’ efforts to de-carbonise their economies and achieve net-zero targets. Green incentives for Nepal’s hydroelectricity should be integrated into the cross-border power trade. COP28 is the right forum for advocating Nepal’s hydroelectricity and green incentives for de-carbonising the South Asian economies and addressing climate change risks.

Source: The Rising Nepal ( Milan Dahal, Netra Karki )