The long march – 100 YEARS OF HYDROPOWER




    Many of us may have missed an important centennial anniversary on May 22, 2011, which was the date hundred years ago, in 1911, when the Pharping Hydropower Station commenced operation. The power station with an installed capacity of 500 kW (0.5 MW) was built with a grant of Rs 713,000 from the British government.
    About a quarter century later, Sundarijal Power Plant came along in 1935, which was of the same size as Pharping. Another three decades lapsed until 1965 when a larger Panauti Power Station (2.4 MW) was built but serious development of hydropower started only with the Trishuli project (25 MW) in 1967. By the time democracy came in 1990, a total of 239 MW capacity hydropower facilities had been built, with the largest-size development coming on stream in 1982, when 60 MW Kulekhani project was completed.

    By the latest count, a total of 665 MW is being generated, 477 MW by public sector and the rest, 188 MW, by the private sector. Private investment in the hydropower sector began a decade ago and has contributed significantly to the national grid. Including thermal capacity of 53.2 MW and solar capacity of 100kW, the total generating capacity now available is about 720 MW, but actual availability during dry months falls under 500 MW.

    Understandably, with 30 million people, rapid urbanization, and a modernizing economy, an acute shortage of electricity has developed over the past decade. Even with very limited countrywide network of power grid, peak demand tops twice the available capacity, leading to blackouts and long hours of load-shedding.

    Addressing the shortage

    The government has responded to worsening power situation in three ways: rationing the available supply; power import from India; and increasing hydropower capacity. Rationing of power supply has been done through load-shedding and staggered blackouts that have gradually lengthened and become more widespread, as limited power supply capacity has had to be matched with rapidly increasing demand. During peak hours, demand has outstripped supply by as much as 100 percent, with scheduled blackouts in Kathmandu, for example, lasting 16 hours a day.

    Import from India has increased steadily as supply-demand mismatch has widened over the past decade and has now grown to one-fifth of total electricity sold in the country. Besides contributing to a rise in trade deficit, power import from India has created a sort of anomaly for the country which always had dreamed of exporting power to the southern neighbor, by making use of its vast hydro potential. With a rapidly growing domestic demand and difficulty faced in exploiting hydropower resources, exporting prospects have been pushed far into the future.

    Lastly, the long-run approach to addressing power shortages has been to start some large-size projects in the public sector and provide new incentives to private investors. Over the past decade, the volume of hydro-based power sold to NEA by the so-called Independent Power Producers (IPP) has risen steadily to reach 200 MW, about 40 percent of NEA’s current capacity. This is a remarkable achievement, given the uncertainties faced by private investors in committing resources for the long term.

    However, the gem of the government’s effort at addressing power supply problems over the long-term has been the commitment of vast resources to develop some medium- and large-size projects that were stalled after Arun III debacle in the early 1990s, when the main financier of the project, the World Bank, withdrew its support, primarily citing environmental concerns. Only three large projects of above-60 MW capacity—Khimti, Kaligandaki, and Mid-Marshangdi—have come on stream over the past 20 years, but all combined, they make up less than half the power than would have been contributed by the cancelled 450 MW Arun III project.

    Hydropower plants currently under construction comprise Upper Trishuli 3A and 3B (104 MW); Chimeliya (30 MW); Rahughat (27 MW); and Kulekhani III (14 MW). Additionally, negotiations for a large-size, 456 MW, Upper Tamakoshi project costing upward of US$ 1,000 million are expected to be completed soon. Combined, all the projects in the pipeline will yield 634 MW in new generating capacity, doubling the nation’s current hydro capacity (public and private) of 665 MW.

    Completion of these new projects will no doubt provide tremendous relief for an energy-starved nation, helping to reduce the stresses of daily living as well as supplying essential fuel for commercial and industrial entities that have suffered the most from energy crisis, in terms of restricted hours of operation and loss of foreign markets.

    However, looking at the financial, technical, and environmental obstacles new projects are likely to face—the same factors that have stymied hydropower development over the past two decades—these will likely delay the progress and force downsizing of those facilities. Bringing half of the planned capacity on stream—say, in the next five years—would be exceptional which, if realized, would more than match the progress made since the early 1990s in hydro capacity enhancement.

    Longer-term development

    Most of us would agree that we have no more than scratched the surface of our hydropower potential, which is estimated at 83,000 MW, of which half is considered commercially viable. Over the past two years, the government has announced plans to take advantage of this potential by tapping some promising sites with an intention of adding 10,000 MW over the next 10 years and another 15,000 MW in the following decade. A total of 10 large-size projects have been identified to help realize this long-term vision, with the first phase of development focused on Karnali-Chisapani (10,800 MW); Pancheswar (6,840 MW); Kali Gandaki (660 MW); and Budi Gandaki (600 MW). It is unclear how much these projects will cost; how they will be financed; and how the marketing will be done, the latter for the reason that full production from planned development would substantially exceed the country’s needs.
    Assuming that 1,000 MW capacity projects are developed each year for the next ten years starting, say in 2015, the combined cost of construction, transmission, and distribution will be US$ 5 million per MW, with half the sum spent in construction cost and half in other costs. Total annual investment in the power sector will thus amount to US$ 5 billion a year, about a third of current GDP. With inflation adjustment and cost overruns, per unit cost would double over the next ten years, pushing up the total cost of 10,000 MW capacity projects to at least US$ 70 billion, or an average of US$ 7 billion per year. It is inconceivable that Nepal can fund this big an investment on its own, public and private sector combined.

    Therefore, the implicit assumption underlying this sort of vision is that most, if not all, of the funding will come from extra-national sources—multilateral donor agencies and foreign investors. This presumption is both sensible and realistic and, if thought of earlier, we could have not been stuck at using 1 or 2 percent of our potential.

    Now, we must be realistic about actually getting outside help of this magnitude, for hydro or other such worthy projects. At the same time, we can be optimistic about this dream if we can work to get our own house in order, to ensure that foreign investors will not be taking undue risk in committing large amounts of resources over the long term to help develop our energy sector.

    In this optimism there is a sobering thought for all stakeholders to ponder over—how can they project an image of trust and credibility beyond national boundaries? As long as they remain uncaring of how they are viewed by outsiders, their grand vision will convince no one and will be no more than the proverbial pie-in-the-sky

    Source : Republica