In assessing the relevance and necessity of reservoir-based projects in Nepal, the following points should be taken into primary consideration:
1. The conceptualization and construction of projects or power plants capable of storing as much floodwater as possible and utilizing it to generate electricity during the dry winter months.
2. Ensuring the required volume of electricity to make Nepal self-reliant in power by guaranteeing the availability of energy (power) in accordance with fluctuating market demand at different times within Nepal’s electricity grid.
3. The fact that solar power is becoming increasingly affordable and reliable, and that under current conditions Nepal’s electricity grid can make a significant contribution to meeting at least daytime demand with the use of minimal battery capacity—along with the ongoing improvements in this sector.
4. understanding that reservoir-based projects inherently require the construction of high dams; the definition of a “high dam” in Nepal’s present context; considerations regarding reservoir capacity; dam safety; and the potential for the regulated water released from the dam to be reused within downstream Nepali territory.
5. A transparent assessment of the potential flood control benefits in the downstream regions of neighboring countries during the monsoon season due to high dams and reservoirs, as well as the food security and other advantages that may arise from the availability of regulated water during the winter months, together with the benefits Nepal may justifiably receive from neighboring nations in return.
6. A realistic assessment of the environmental impacts that may arise from high dams, and addressing the question of how to overcome the existing policy gap of the Government of Nepal—specifically, whether the justified costs of environmental impact mitigation should be incorporated into the overall project cost and reflected in the electricity tariff, or managed through alternative mechanisms.
In light of the above-mentioned points and the Government of Nepal’s relative silence regarding reservoir-based projects, this initiative undertaken by the Electricity Regulatory Commission is not only commendable but also highly timely.
It is my view that this “Directive on the Purchase and Sale of Electricity from Reservoir-Based Hydropower Projects, 2082 (2025)” will certainly prompt the Government of Nepal to formulate and implement policy on this highly important matter.
However, on the whole, it appears that the directive has not been able to do justice to any of the above-mentioned points. On this basis, my comments and suggestions regarding the Directive on the Purchase and Sale of Electricity from Reservoir-Based Hydropower Projects, 2082 (2025) are as follows.
1. Regarding the “criteria” of reservoir projects mentioned in “A” of “D” of Section 2 (Definitions)
This definition appears to be inconsistent with the needs of Nepal’s electricity system, as the primary challenge currently facing the system is the widening gap between market demand and electricity generation. Given the present situation, where no significant change in this condition is expected for the next few decades, the definition does not seem to support bridging this gap.
The greatest challenge of Nepal’s electricity system lies in managing electricity supply during the morning and evening peak hours. The prescribed criteria effectively limit the installed capacity of power plants, thereby creating obstacles in effective peak load management.
This provision diminishes the core characteristic of reservoir-based hydropower projects—namely, their ability to be designed with peak-hour management as the central focus.
Therefore, the definition of reservoir-based projects must be aligned in a manner that supports the existing realities of Nepal’s electricity demand and supply situation, rather than working against them.
Since reservoir-based projects in the context of Nepal can be designed for seasonal regulation of floodwaters and for multiple purposes, their definition should include provisions to regulate at least 30 percent of the total river flow available during the monsoon months (with encouragement for projects that can regulate even more water).
This approach would maximize the utilization of water that would otherwise flow wastefully during the monsoon for electricity generation in the winter months, while also reducing flood risks and other water-related disasters in downstream areas of the dam.
Storing floodwater in reservoirs for use during the winter months allows reservoir-based projects to make a significant contribution not only to electricity generation but also to agricultural production through the availability of regulated water.
(To encourage this type of contribution, the government’s policy should include provisions that incentivize the Government of Nepal or other agencies to invest in such projects.)
2. Regarding Sub-clause (d), Item (aa) of Clause 2 on the requirement that a reservoir must have a minimum lifespan of 50 years: of the dam.
In “Aa” of Sub-section “D” of Section 2, it is mentioned that the age of the reservoir should be at least 50 years.
However, since the sediment data of Nepal is not completely reliable, although this criterion is appropriate, a separate clear criterion is required to implement it. Otherwise, it may become a controversial issue.
3. Regarding “E” of Sub-section “D” of Section 2
This provision encourages reservoir projects to generate electricity during the rainy season, contrary to the needs of Nepal’s electricity system.
In run-of-river and semi-reservoir projects, winter generation is currently maintained at 30%, while for reservoir-based projects it is increased to only 35%. In my view, this percentage is far too low. For reservoir-based projects, winter generation should be at least 60%, and 35% is clearly insufficient.
Addition to Sub-clause (e) of Clause 2:
The proposed addition should explicitly state the mandatory construction of a high dam. Furthermore, this directive should specify the minimum height of such a high dam.
Provisions related to dam safety must also be mandatorily included.
4. Regarding “Peak Period” mentioned in Sub-clause (n) of Clause 2 (Definitions):
Currently, Nepal’s electricity power system experiences peak hours from 6:00 AM to 9:00 AM in the morning and from 6:00 PM to 9:30 PM in the evening, totaling approximately 6.5 hours of peak demand.
In this draft, the “Peak Period” is mentioned as 6:00 PM to 11:00 PM, but the actual purpose of this timing is unclear.
Therefore, the definition of the peak period should be based on the existing peak hours in Nepal’s power system. Such an ambiguous provision only discourages project investors and does not demonstrate practical usefulness.
Currently, the Nepal Electricity Authority provides the highest tariff in PPAs for “peaking run-of-river” hydropower projects that are capable of providing continuous peak generation for 6 hours daily.
However, in Nepal’s current power system, there is no single continuous 6-hour peak period; peak hours occur in the morning and evening, totaling only about 6 to 6.5 hours daily. Therefore, the Nepal Electricity Authority’s existing provision should also be adjusted to reflect this reality.
Such a provision appears to favor a particular investor, unnecessarily discouraging other investors and is not investment-friendly.
5. Regarding Sub-clause (f) of Clause 2 (Definitions):
Regarding the “Normative Annual Plant Availability Factor” mentioned in Sub-clause (f):
This provision may reduce the attractiveness of reservoir-based projects, contrary to their primary purpose.
The main objective of reservoir-based projects is to manage peak hours during the winter months and to enable designs that can supply electricity primarily in winter. However, this standard discourages such specialized reservoir-based projects.
While this standard may be appropriate for run-of-river hydropower projects or coal-based power plants in India, it is counterproductive for reservoir-based projects used in Nepal.
In the context of Nepal, a reservoir-based project is like a “racehorse”—not always needed, but available to deliver the expected results during short periods of critical demand.
This provision creates a compulsion to operate reservoir-based projects even during the monsoon season, when electricity generation in Nepal is already abundant.
Therefore, this clause should be repealed.
6. Regarding the 180-day provision in Clause 3(2):
Why is a 180-day period specified in Clause 3(2)? If it were reduced to 60 days, what loss would the government incur?
Such provisions should not be used to discourage investors. Since the Nepal Electricity Authority is both a government agency and the system operator, this arrangement does not appear justified and may even raise suspicions of hidden motives.
7. Suggestions regarding transparency of the directive:
Before Clause 4 of the directive, the rates to be paid by electricity purchasers should be clearly and transparently specified in accordance with Clause 38.
Opaque provisions encourage corruption. Therefore, the entire arrangement for rate review should be completely repealed.
8. Regarding the provision on “Discretionary Testing”:
In Sub-clauses (1) and (5) of Clause 8, and Clause 16(1) of the directive, the term “discretionary” is used in reference to “discretionary testing.” What exactly does the term “discretionary” mean in this context?
Does the use of this term imply that discretionary action cannot occur in places other than where it is explicitly mentioned?
I am not confident that this arrangement is fully immune to the risk of corruption.
13. Single-Part and Two-Part Methods
The single-part and two-part methods specified in Clause 27 are confusing and inconsistent.
14. Lack of Seasonal and TOD Rates
Clause 28 provides for seasonal rates, but the absence of Time-of-Day (TOD) rates makes this provision inadequate.
15. Problems in Calculating Monsoon Energy Rates
In Clause 3, the calculation of monsoon energy rates divides by the normative annual plant availability factor. This rate prioritizes energy generation during the monsoon season, ignoring the actual demand of Nepal’s power system. Such a method may only be suitable for run-of-river or semi-reservoir projects, not for reservoir-based projects.
16. Provisions Related to Foreign Investment
Clause 31’s two-part method mentions foreign investment, but this appears to apply only to FDI-based projects. Investors who build projects in Nepal for domestic consumption often either return to their home countries after completing a project or show little interest in investing in another project. In Nepal’s current context, this assumption seems unrealistic.
17. Rate-Setting under Clause 38.1
Clause 38.1 sets the maximum monsoon rate at NPR 8.45 per unit for six months. For run-of-river and semi-reservoir projects, the monsoon rate is set at NPR 4.80 per unit, showing that this provision favors monsoon energy production for reservoir-based projects.
However, comparing Nepal’s current energy demand and generation capacity, nearly half of the potential monsoon energy goes unutilized, which proves this provision is flawed.
On the other hand, the average rate for winter energy over six months is set at only NPR 14.80 per unit. This rate is inadequate for peak-time supply.
Analysis of the cost and energy generation of the Kulekhani reservoir-based project, completed in 1983 (2040 BS) and currently operational, clearly shows that this rate is unsuitable.
Conclusion
For the reasons outlined above, this directive is open to revision.
Jalasarokar