ADB_book_18 April.qxp - Himalayan Document Centre - icimod

Table 6.5: Hydropower PotentialRiver BasinTheoreticalPotentialEconomicallyFeasibleGW % GW %Sapta Koshi 22.35 27 10.86 26Sapta Gandaki(Narayani)20.65 25 5.27 13Karnali and Mahakali 36.18 43 25.10 60Southern Rivers 4.11 5 0.88 2Total 83.29 100 42.13 100GW = giga wattSource: WECS (1995); USAID -SARI (2002)Table 6.6: Summary of Hydroelectric DevelopmentOpportunitiesCategoryNumber ofProjectsIdentifiedTotalCapacity(MW)TotalGenerationPotential(GWh/y)10–100 MW(medium)157 6,200 38,000100–300 MW(medium)47 7,815 42,056300–1,000MW (large)20 9,437 45,723> 1,000 MW(large)5 19,463 50,985Total 229 42,915 176,764GWh/y = gigawatt -hour per year , MW = megawattSource: WECS (2002)contribution of hydroelectricity to the overall energyproduction has so far been very small—only about1% of the total energy need is met by hydropower.Power produced by the hydroelectric plantsconnected to the national grid mainly supplyelectricity to urban areas and their peripheries. At theend of the Ninth Plan (1997–2002), the national gridsupplied electricity to an estimated 33% of Nepal’spopulation, and an additional 7% had access toelectricity generated from alternative energy sourceslike micro-hydro and solar (NPC 2002). A large part ofthe rural population is deprived of electricity.Some of the factors contributing to the low levelof hydropower development are lack ofinfrastructure and capital, high cost of technology,political instability, lower load factor due to lowproductive end-use of electricity, and high technicaland non-technical losses. Despite its huge potentialand acknowledged importance in nationaldevelopment, hydropower development has beenlacking. The main concerns related to hydropowerdevelopment in Nepal include the following.High TariffNepal’s electricity tariff is comparatively high. In2004, the average tariff in Nepal was NRs 6.7 perkilowatt-hour (kWh) ($0.091 per kWh), among thehighest in the developing countries of Asia. Themarginal rate for domestic energy consumptionabove 250 kWh/month is NRs 9.9 per kWh (US$0.134cents per kWh), which is equivalent to or higher thanthe tariff in many developed countries (NEA 2005).The reasons for the high tariff include highproduction costs, high transmission and distributionlosses due to technical losses and theft, inefficiencyin management, and non-payment (or payment inarrears) from public sector customers. Further, theNepal Electricity Authority (NEA) has beenpurchasing power from independent powerproducers at rates higher than its own currentaverage cost of production. Power purchaseagreements between independent power producersand NEA are on a ‘’take or pay” basis that requiresNEA to pay for all energy produced in all seasonswhether it is utilized or not, and the power purchaseagreements are based on US dollar rates. The tariff ischarged based on cost of production and with theintention of recovering costs, although Nepalreceived significant foreign finance as soft loans andgrants. All of these factors result in high tariffs.The cost of hydropower development in Nepalis high (typically NRs 5 per KWh for run-of-riverplants), which is generally attributed to the fragile,unstable geology of hydropower sites (as well asremoteness of the sites which require building costlyroads and infrastructure for access as part of theproject cost), limited manufacturing capabilityrelated to hydropower plants (or grant or loanconditions tied to purchasing equipment from thecountry providing the grant), extensive employmentof high-cost international contractors andconsultants, and heavy reliance on bilateral andmultilateral financing(WECS 2002, WECS 2004,USAID-SARI, 2002).Slow DevelopmentAlthough the first hydroelectric power plant in thecountry was established in 1911 at Pharping, by 2003Nepal’s total installed capacity had reached only 546MW (about 1.3% of the feasible potential), whichincludes 144 MW hydropower produced by the eightindependent power producers. In addition tohydropower, six thermal power plants owned by theNEA produce 57 MW. Thus total installed capacity inthe country available in the integrated nationalpower system is 603 MW.NEA’s monopoly until 1992 is cited as a reasonfor the slow development of hydropower in Nepal.Recent policies adopted following restoration of themultiparty system allow private sector developmentof hydropower, and since then several projects havebeen constructed by domestic and international68 Environment Assessment of Nepal : Emerging Issues and Challenges