JUN 13 –
Accelerating urban and rural electricity access is one of the topmost national priorities of Nepal. However, Nepali electrification targets are largely confined to theory amidst the annually increasing number of domestic, industrial and commercial customers. The nation currently remains divided into two halves in terms of electricity access. Most of the urban areas are connected to the network and benefit from some access to electricity. The other half, mostly consisting of rural areas, is deprived of any electricity access. The lack of reliable access to electricity is the principal obstacle to attaining an export-led economic growth in Nepal. However, other Asian countries like Vietnam have been very successful in achieving universal electrification despite having a relatively large population to cater electricity to. Can the electrification experience of Vietnam provide valuable lessons to Nepal in increasing national electrification? I construe the answer to be ‘yes’.
Nepal and Vietnam share some common economic and sectoral characteristics. Both countries are agro-based and rich in water resources. The population density is also similar although Vietnam is twice the size of Nepal. The income inequality gap among the rich and the poor as determined by the GINI index is moderate for both countries. The per capita income is around 1500 US dollars even though Vietnam has four folds the population of Nepal. However, Vietnam has been able to increase its electrification rate from around 2.5 percent in 1975 to around 96 percent of households by 2009. The high level of electrification in Vietnam is comparable to the electrification success in China and Thailand even though Vietnam has lower average income than both the coutries. On the contrary, more than 61 percent of the population has no access to electricity in Nepal. How did Vietnam achieve such remarkable success in electrifying rural homes considering many economies like Nepal which have failed to do so?
Vietnam’s electrification success is deeply rooted in making electricity access a priority in both political and developmental agenda and buttressed by the national will to electrify. The country needed major infrastructure reconstruction and economic rehabilitation after the war in the 1970s. The subsequent need to electrify post-war rural areas meant that electrification programs involved connecting the rice producing areas of the Red River Delta in the north and the Mekong River Delta in the south with modern power. This brought modern industrial processes to rice production and supported local industries. The electrification of rice producing areas provided a major boost to the Vietnamese economy. The effects can be observed today as Vietnam is the second largest global exporter of rice. By the 1980s, Vietnam’s power infrastructure had recovered and the country regained its confidence to expand its network by constructing large hydropower plants in the northern highland areas. This provided a major incentive to construct high voltage transmission lines running from north to south which met the rising power demand of industries. The rise of industries gave Vietnam the much needed tax revenue to finance rural electrification along with financial assistance from international donor organisations.
By the 1990s, Vietnam’s electrification strategy focused on connecting outward districts far from provincial capitals and then gradually into the surrounding communes and villages. The establishment of Vietnam Electricity (EVN) in 1995, coupled with resulting reforms in the power sector led to a massive surge in rural electrification in Vietnam. The construction of large hydropower plants paralleled with the development of transmission and distribution system, a strong national commitment to electrification as expressed in the government’s dedicated rural electrification policies and institutions and the premium placed on electrification in Vietnamese culture were the cornerstones of Vietnam’s electrification success. Political stability also helped Vietnam in implementing the power sector reforms and meeting the electrification targets. In fact, political stability is a major factor that has helped Vietnam pursue its economic development policy and enjoy national peace and prosperity.
The Vietnamese experience provides a valuable lesson to Nepal—meeting the challenge of energy access is not a matter of technical know-how but one of making electricity access a major economic and political priority. The government, as the central planner, has a fundamental role to play in expanding electrification. This is especially so because rural electrification is not a profitable investment in pure accounting terms. So, private companies have no incentive to invest. The Nepal Electricity Authority (NEA), in its annual report, provides a pessimistic view on rural electrification and dubs its rural electrification effort as loss making. However, the Vietnamese experience shows that the long-run social benefits of electrification can outweigh the financial costs and thereby is a welfare maximising endeavour. As such, one possible way to inculcate the electricity access challenge in the political domain is to make national electrification a major political and electoral agenda across all political parties in Nepal considering the on-going political instability. This
will provide the citizens an opportunity to cast their vote on parties that best undertakes electrification. I believe that such policy can be feasible because the Nepali people are willing to pay for electricity access and avoid power outages.
The Vietnamese experience suggests that Nepal should also tap its extensive hydropower resources at a scale that is sufficient to generate electricity for the whole country. Nepal has a clear comparative advantage in hydro resources as large. Indigenous source of hydro is not a resource that all countries have. Nepal should aggressively devote more resources to hydropower production and transmission expansion with long-term vision. Meanwhile, short-term energy needs can be addressed through alternative sources such as fossil fuels based and renewable energy resources generation to some extent even though this will be costly. Developing hydropower for the future is not about putting all eggs in one basket but putting all eggs in the right basket. At least, the Maoist had a vision to generate 10000 MW of hydropower but their plan could not be executed because their policy was discontinued due to a change in government. This implies that undertaking energy sector reforms is about changing the rules of the game which can only be realised when there is stability. Nepal has no option but to strive for political stability as its a pre-requesite for economic development, peace and prosperity through planned investment in the energy sector.
By : Rabindra Nepal
Nepal is a Research Associate in Energy Economics and Policy at Heriot-Watt University, Edinburgh
Source : The Kathmandu Post