Rolling blackouts

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    KATHMANDU:Energy deficiency that started in Nepal some seven years ago is assuming monstrous proportion thanks to hindrances at policy level and construction sites. Along with power generation, stakeholders also need to focus on expansion of transmission lines to redeem Nepal from the tentacles of darkness.

    Shedding the load

    Due to the lack of substantial addition of power to the national grid, the power crisis is looming larger and affecting almost every aspect of Nepali life, but hitting the industrial sector the hardest. “Losses rendered by load shedding to the manufacturing sector is almost 40 per cent per year, which comes to around Rs 70 billion,” says Uttam Kunwar, energy and environment head at the Federation of Nepalese Chambers

    of Commerce and Industry (FNCCI). Kunwar informs that industries in the country produce around 500 MW of electricity from diesel fuelled generators during power cuts. Whereas the power from diesel propelled generators costs around Rs 30 per unit, electricity from the national grid comes at Rs seven to nine. Prolonged power cuts are not only discouraging the manufacturing sector, but is also responsible for a significant rise in the cost of production, according to Kunwar.Eight to nine power cut hours a day in the dry season can stretch to over 15 hours as almost all the hydro projects in Nepal are based on run of the river projects. Nepal Electricity Authority (NEA) — including its own hydro power plants, power from Individual Power Producers (IPPs) and thermal plants — generates around 732 MW of electricity. Whereas the peak electricity demand forecast by NEA for the dry season is 1,108 MW, its supply dwindles significantly during that time. Power generation from hydro projects alone in the dry season stands at around 325 MW. While NEA currently imports 114 MW of electricity from India, thermal plants produce 40 MW.

    “Our current focus is on controlling load shedding by boosting the capacity of thermal plants and increasing imports from India,” says Sher Singh Bhat, director of Power Trade Department at NEA. NEA plans to generate 30 MW more power from its thermal plants and plans to import altogether 180 MW of electricity from India by January. Even if it is able to supply at least 500 MW, that still leaves an energy deficit of 600 MW for the dry season.

    Transmission trouble

    As per records of the Department of Electricity Development (DoED), it has issued construction licenses to 57 hydro projects with the total capacity of generating 1778.247 MW of electricity. These are medium scale hydro projects ranging from 13 MW to 76 MW. Bhat says that NEA has already signed power purchase agreements (PPA) with many projects with a combined capacity of 2,500 to 2,600 MW and that these projects could be completed in the next five years.

    However, despite the acute power shortage dogging the nation, construction work of power projects hardly materialise. Hydro power developers complain that they are vexed by the lengthy government procedures, instable policies, lack of infrastructures and social problems in the field, among others.

    Power developers greatly worry about lack of transmission lines, which they doubt will be set up even after the completion of their projects. Despite signing PPAs, the four projects under the Super Six hydro projects have not commenced construction owing to transmission line problems, informs Shashi Sagar Rajbhandari, CEO of Upper Solu Hydro Electricity Company.

    Some hydro projects are facing fund scarcity as banks are unwilling to float them loans since they are unable to sign PPA and also because there is no transmission line in sight, according to developers.

    Against this backdrop, attracting foreign direct investment (FDI) and actually carrying out construction work in Nepal is a far cry, according to Rajbhandari. “Besides differ-ent risks such as political instability and social problems, Nepal also shares geological risk due to its challenging terrain. Only recently, a 800 metre tunnel of Chameliya hydro project got buried under a landslide,” informs Kiran Malla, president at Nepal Hydro Power Association.

    As per its annual report, NEA suffered a net loss of Rs 8.55 billion in the fiscal year 2011-12. Weak financial health of NEA is considered to be another major stumbling block for the development of the hydro power sector. “Since NEA is financially weak, FDI seeks government guarantee which the state is unwilling to provide,” says Rajbhandari. “A new provision requiring a power project to render five per cent of its net profit to the Ministry of Forest and Soil Conservation reveals inconsistency in the state policy,” says Pradeep Gangol, executive manager at Independent Power Producers’ Association, Nepal (IPPAN). “When the power projects are required to payroyalty to the government, why should they be paying a separate amount to one of its bodies?” he questions. Independent power producers also complain that the PPA rate is incoherent with the growing inflation.

    “Though lack of transmission lines is a problem in Nepal’s hydro sector and the government is working towards addressing it, the projects that have already signed PPA with NEA need not worry. PPA was signed based on the estimates that those projects will have access to transmission lines upon their completion,” assures Sriranjan Lacoul, joint secretary at the Ministry of Energy.Power developers demand that besides creating necessary infrastructure such as roads and land acquisition, the state should focus on expanding transmission lines. “Given a good transmission line network and an appropriate policy, power developers would no longer need to sign PPA with the ailing NEA. They could negotiate with industries away from the project sites and sell them at competitive rates,” opines Gangol.

    Better options

    Electricity generated from coal is far cheaper, asserts Bishnu Prasad Neupane, an industrialist. “Whereas power generated from diesel costs about Rs 25 per unit excluding VAT, the power cost per unit from a coal plant is around Rs 12.” India relies hugely on coal plants and Indian private coal power plant companies are ready to sell electricity at Rs nine to 10, informs Neupane.

    However, Dr Rabi Sharma Aryal, the spokesperson at the Ministry of Energy, rules out coal as a source of power. “Coal is an effective source of energy in India as it is readily available there and can be transported around in trains. It is impractical in the case of Nepal since it involves a huge transportation cost and other hassles,” he says.

    Besides facilitating and expediting the construction of hydro projects including the storage type plants, the government also needs to seek other alternatives such as solar, wind and even coal power to address the acute power crisis. However, the immediate recourse is more power imports from India, which also calls for the speedy construction of cross border transmission lines. This alone could assure FDI on the market prospects of hydro power projects in Nepal. Unless immediate and concrete measures are taken, Nepalis will have to brace themselves for longer rolling blackouts in the days ahead.

    Source : The Himalayan Times (GUNESHWOR OJHA )