In recent years, there has been significant progress in the energy sector. Hydropower production, export, the promotion of green energy, and the participation of the private sector have driven the country toward energy self-sufficiency and economic prosperity.
Hydropower generation in Nepal began for the first time in 2011 with a capacity of 500 kilowatts. The Farping Hydropower Project is Nepal’s first hydropower project. At that time, the government held a monopoly over hydropower development and only a limited number of projects were constructed. By 1989, only 167 megawatts of electricity had been generated. After the first people’s movement in 1989, the country transitioned to a multiparty democracy. The Constitution of 1990 adopted a policy of liberalization. With the entry of the private sector into industry and business, the demand for electricity increased. Former Energy Secretary Devendra Karki states that hydropower development became more visible from that point onward.
The government’s efforts alone were no longer sufficient to meet the growing demand for electricity. The Electricity Act of 1992 opened the door for private sector investment in hydropower. In 1995, the first Power Purchase Agreement (PPA) was signed with Himal Hydro for the 60-megawatt Khimti Hydropower Project. This project was connected to the national transmission grid in 2000 .
According to the Independent Power Producers’ Association of Nepal (IPPAN), in 24 years, private developers have contributed 2,740 megawatts to the national transmission grid. IPPAN’s General Secretary, Balram Khatiwada, states that nearly 80 percent of the contribution in hydropower comes from the private sector. Around 700 megawatts are from government-run projects. In recent years, there has been significant progress in the energy sector. The production of hydropower, its export, the promotion of green energy, and the participation of the private sector have moved the country toward energy self-sufficiency and economic prosperity.
Significant Increase in Hydropower Production and Export
Hydropower holds the greatest potential for energy production in Nepal. According to government data, around 72,000 megawatts of electricity can be produced economically and technically. So far, approximately 3,400 megawatts of electricity has been generated. Power Purchase Agreements (PPAs) for projects with a total capacity of about 11,000 megawatts have been completed.
In order to overcome the dependency on load-shedding schedules that affected people’s daily lives, the then government declared an energy crisis in 2015 and decided to move forward with hydropower production. To bridge the gap between demand and supply, Nepal had to export electricity worth up to approximately NPR 22 billion from neighboring India. However, after the government declared the energy crisis and made an aggressive decision to increase electricity production, the production of electricity grew. Currently, surplus electricity during the rainy season is being exported to India. Since December 2024, 40 megawatts of electricity have been successfully exported to Bangladesh.
In April 2023, Nepal and India signed a long-term agreement to export 10,000 megawatts of electricity, which will establish Nepal as an energy-exporting nation in the coming decade. Private sector investment in hydropower production is approximately NPR 600 billion. Currently, 4,200 megawatts are under construction. When adding the investment for ongoing projects in the production process, IPPAN estimates the total investment to reach NPR 1.5 trillion.
If we look at the investment in completed and ongoing projects, including bank loans, equity capital, and the contribution of 4 billion people totaling approximately NPR 1.3 trillion, the majority of shares belong to the general public. Among these, projects have spent about 3 percent on local social development. Initially, hydropower projects were limited to a few districts, but now, the construction of hydropower projects has reached 70 out of the 77 districts. Energy projects are being developed at various stages in all districts except Bara, Bardiya, Bhaktapur, Dang, Dhankuta, Salyan, and Saptari.
According to the latest preliminary data from IPPAN
The construction of energy projects has not only led to the production of electricity but has also made a significant contribution to the economic and social development of Nepal’s remote and far-flung areas. To date, energy projects have constructed 3,300 kilometers of roads and 350 kilometers of road tunnels. In addition, 1,100 meters of tunnel paths have been built, along with 140 health centers, 153 schools, 95 drinking water projects, and 45 irrigation projects at the local level.
In line with the objective of meeting the needs of the local population, various schools have been provided with 200 teachers and 30 ambulances. A 1-megawatt project under construction will provide employment to nearly 300 people, while operational projects employ around 10 people each. The government has also implemented the Energy Development Roadmap and Action Plan 2024 with the aim of increasing electricity production, consumption, and export. The government’s target is to produce 28,500 megawatts of electricity over the next 10 years. Former Secretary Karki states that collaboration between the government and the private sector will be essential to implement this roadmap. “The roadmap is in place, and to prevent it from stalling, steps must be taken on time, from changing laws to creating a conducive investment environment,” Karki said.
Source: Annapurnapost – Sunita Karki
