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Unless investments are made in hydro, Nepal will not be able to attract substantial investment in any other sector
AUG 03 –
The ongoing debates on energy in Nepal are optimistic. We must utilise this opportunity to understand the problems and prospects of the energy sector and search for solutions to overcome policy and institutional bottlenecks. Despite having several institutions dedicated to energy development and innumerable studies conducted by various governmental and donor agencies, the private and public sectors have jointly been able to generate just over 700 MW of hydro-electricity in a span of 100 years. This is an amazing case of institutional failure.
Energy for development
Multiple hours of so-called loadshedding have not only disrupted people’s lives, but also damaged Nepal’s prospects of industrialisation. Loadshedding has also added costs to small businesses, the lifeblood of any country. How long can a country go on like this? It is economically impossible to develop the country if we are unable to supply the electricity required. Without ec nomic development, a peaceful and prosperous nation will remain just a dream.
Actually, we do not even know exactly how much energy Nepal needs. Considering Nepal’s roughly 28 million population and its growth rate, the number of households not connected to the national grid and the predicted economic growth, we can only make an educated projection. And, we seem to forget that the demand for any commodity depends on its price. If reliable electricity is available at low cost, the national demand will be significantly higher than the suppressed demand projected by the Nepal Electricity Authority (NEA). A reliable energy supply will create opportunities for people to raise their economic conditions. In turn, prosperous people will use more energy, thus prompting a cycle of supply induced demand, ie, electricity also creates its own market. Therefore, we can safely assume that our internal energy demand will be quite high and to satisfy this demand, we need to invest in large hydro projects. Unfortunately, due to limited domestic potential, Nepal is forced to seek foreign investors to develop large projects.
Separating myth from reality
We must recognise the truth; unless large investments are made in the hydro sector, Nepal will not be able to attract substantial investments in any other sector of the national economy. My personal experience with international investors in the hydropower sector has not been encouraging. Unlike Nepal’s attractive geological conditions, the country’s prolonged political and economic transition tends to deter international investment.
Despite a generally accepted notion that hydropower could be the backbone of Nepal’s economy, responsible energy authorities keep reiterating that we do not have the scope for large hydro-projects—“our demand is small and energy generated during the so-called ‘wet period’ gets spilled over”. This particular belief, prevalent in the ‘power’ corridors of Nepal, completely ignores the country’s necessity for economic development and people’s aspirations for prosperity and happiness. Because of the fear of ‘spilling energy’, concerned authorities are either reluctant to sign power purchase agreements (PPAs) with independent power producers (IPPs) or create immeasurable obstacles to their endeavors. Instead of focusing on the construction of projects, IPPs are compelled to spend a lot of time and resources overcoming these artificially created obstacles. If this attitude is not changed, the slogan of ‘development through hydro-energy’ will remain meaningless.
Nepal’s political parties have yet to accord due importance to the role hydropower could play in the nation’s economy. They must form a high-level commission with energy experts to answer a few important questions: What is the country’s energy demand, based on predicted economic growth? And how will the government supply the country’s energy needs? Why cannot energy development materialise in the way we want or plan? What are the bottlenecks? Why are there such insurmountable hassles when signing a PPA? This is the only way to separate myth from reality and reveal the truepicture of the hydropower sector’s possibilities.
Cashing in
India is the natural market for the ‘extra’ energy Nepal produces Therefore, to create a legal environment for a reliable energy exchange, a Power Trade Agreement (PTA) with India is necessary. India has been experiencing remarkable economic growth for a long time. With the arrival of a development-oriented government, growth is expected to multiply, requiring a huge amount of energy to fuel this. However, India’s dependence on non-renewable sources of energy is already too high. According to some estimates, the total electricity generated from thermal sources in India is about 70 percent; from coal alone,the figure is 60 percent. As national and international pressure mounts on India to control emissions and environmental problems, their need for reliable sources of renewable energy will increase. A small portion of this demand can be fulfilled by the hydro energy generated in Nepal. Unlike the ‘demand-supply’ situation of Nepal, given its large geography, India does not have ‘wet’ and ‘dry’ periods and can consume large amounts of energy throughout the year. It is incomprehensible that we have been unable to exploit such a favourable market for energy that ostensibly gets spilled during the summer. We must understand that India is obliged to continue its growth for its survival as well as for its global aspirations and will not probably negotiate with us forever. India is already spending a lot of resources on alternative sources, eg, wind, solar and atomic energy.
Against this backdrop, the current controversy generated by a proposed PTA is unfortunate. A ‘win-win’ formula could have easily been found, as we both equally need each other in this sector. We must not get nervous just by getting a draft of an agreement, even if it is from India. Any unacceptable clauses must be replaced with new ones safeguarding our national interests. What is the problem? The high-level visit of India’s newly elected Prime Minister Narendra Modi is the most opportune time to sign an agreement beneficial to both countries.
Upendra Mahato, founding president of the Non-Resident Nepali Association, is Chairman of Tamor Sanima Energy Pvt Ltd
Source : The Kathmandu Post
