• Sunday, 16 March 2025

Is it possible to add 25,000 MW power in a decade?

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Kathmandu, Mar. 16: Nepal’s hydropower production has reached 3,400 MW in 114 years since the first power plant-- the 500-kilowatt Pharping Hydropower Project was built in 1911 during the reign of Rana Prime Minister Chandra Shumsher.

Nepal Electricity Authority and its various subsidiaries, independent power producers, and foreign-funded hydel projects have contributed to the steady growth of power pool over the years.

With increasing power production, not only has the domestic consumption increased but Nepal has also begun exporting electricity to India and Bangladesh during the rainy season. 

In a significant move towards achieving sustainable energy growth, the government has recently unveiled the 'Energy Development Roadmap and Action Plan-2081', with an ambitious target of generating 28,500 MW of electricity by 2035. This target is more than eight times the current power production output. In a decade, the country needs to add a whopping 25,100 MW power to the national grid. Considering the slow progress being made in the ongoing power projects and lack of adequate amount of funds to develop new ones, many question whether the target will be met in the next ten years.

Plans are in place to export 15,000 MW and consume 13,500 MW domestically by 2035. The government roadmap envisions to export 10,000 MW of electricity to India and 5,000 MW to Bangladesh. 

According to the same plan, per capita electricity consumption in Nepal will increase to 1,500 units by 2035. The roadmap details the investment required for hydropower projects, transmission lines, distribution and substations. While the plan looks highly ambitious and holds potential for transforming Nepal’s energy sector, it may face several obstacles, which need to be addressed to materialize the goals, argue experts.

Feasibility of roadmap

Former Secretary of the Ministry of Energy, Water Resources and Irrigation Dinesh Kumar Ghimire said that the target of generating 28,500 MW electricity by 2035 and its transmission and distribution looks technically feasible and realistic. 

"The target was made based on the under-construction projects, license issued for the new hydropower projects, studies on the projects, completion of financial closure so far and the projects advanced by the government with priority," he said.

Currently, 84 hydropower projects with a total capacity of 9,019 MW are issued survey permits while 249 hydropower projects with 9,833 MW capacity have been given generation permits. 

In addition, the Department of Electricity Development has initiated a process to grant generation permits of 91 projects with a total installed capacity of 10,600 MW.

Likewise, the NEA has signed power purchase agreements for power projects with a total installed capacity of 10,301 MW. Of them, the projects have already started generating 2,496 MW commercially while projects with 3,906 MW capacity are under construction after completing financial management. However, PPAs for 3,899 MW are yet to be signed. 

With these, Nepal's total power generation, including the projects currently in operation, is expected to reach 28,713 MW by the fiscal year 2034/35.

By 2035, it is expected that Nepal’s total power generation will reach 28,713 MW, with about 5,900 MW generated from reservoir-based projects, 10,500 MW from semi-reservoir projects, and the rest from run-of-river projects. The roadmap also includes generating 5-10 per cent of the total capacity from alternative sources, such as solar energy and green hydrogen.

President of Independent Power Producers' Association, Nepal (IPPAN) Ganesh Karki said that the roadmap was a historic step of the government in the sector of hydropower development.

He said that the private sector is more excited with the introduction of the energy roadmap, which it had been demanding for a long time. However, proper implementation is more important than unveiling the roadmap, he said.

He added that the government should open the PPA first to achieve the goal as hydropower projects with a capacity to generate above 10,000 MW have already been submitted to the NEA for PPA after completing the survey work.

Similarly, hydropower projects with a capacity of 10,700 MW have applied for construction permits.

As the capacity of private sector has been enhanced financially and technically, the private sector should contribute to the construction of large-scale projects, he said.

Sandip Dev, Joint Secretary at the Ministry of Energy, Water Resources and Irrigation, said that the goal set in the Energy Development Roadmap is achievable through joint efforts of the concerned authorities, as well as political leadership.

"A roadmap for energy development and energy security has been prepared. The commitment from all political parties is the first and foremost prerequisite for implementing any plan and policy of the government. Therefore, political parties should give priority to this, and it is the responsibility of the bureaucracy to implement it," he said.

Large reservoir projects, cross-border transmission lines

Considering the needs of reservoir projects for energy security and achieving the goal of generation, consumption and trade, the government has advanced many hydropower projects, said Dev. Currently, construction process of large reservoir and semi-reservoir hydropower projects -- 1,200 MW Budhigandaki and 635 MW Dudh Koshi, 1,063 MW Upper Arun and 417 MW Nalgad -- is advancing. 

Other hydropower projects, including 900 MW Arun III have reached the completion stage. Study on the 10,800 MW Karnali Chisapani hydropower project, which is a project of strategic importance, has also started. 

The government has also started advancing hydropower projects on a bilateral venture basis. Under this, Nepal and Bangladesh have expressed their commitment to developing the 683 MW Sunkoshi 3 semi-reservoir project, Dev said.  It is stated that the construction of 6,431 circuit km of 132 kV, 4,061 circuit km of 220 kV, and 6,440 circuit km of 400 kV transmission lines will be completed by 2035, bringing the capacity of substations to 40,000 MVA.

Under the cross-border connectivity, the first cross-border Dhalkebar-Muzaffarpur 400 kV transmission line, which is currently in operation, will be expanded to increase the import and export of electricity from 800 MW to 1,000 MW. 

Similarly, the detailed project report of the 220 kV double-circuit transmission line between Chameliya (Nepal) and Jauljibi (India) will be prepared by March 2025 and the Nepal Electricity Authority and the India Power Grid will complete the construction of the Nepal section of the transmission line by December 2027.

Similarly, to strengthen electricity trade, the 400 kV Inaruwa (Duhabi)-Purnia (Bihar) and Dodhara (Lamki)-Bareli (Uttar Pradesh) cross-border transmission lines, 400 kV Nijgadh (Bara)-Motihari (Bihar) line, the Kohalpur-Lucknow (Uttar Pradesh) line have been extended. After the construction of the agreed transmission lines, Nepal can export 16,000-18000 MW of electricity to India and Bangladesh.

Financing challenges

While the viability of proposed hydropower projects in Nepal remains technically realistic, the real challenge lies in their financial management.

According to Ghimire, substantial financial investment is crucial. Managing the estimated USD 46.5 billion (approximately Rs. 6,400 billion) needed for generating, transmitting and distributing 28,500 MW of power is not an easy task.

"It is not feasible to manage such huge investments solely through existing financial resources like national budget and revenue. To address this, a special financing mechanism, both from domestic and international sources, is required. The government must explore new avenues to secure the required capital," he said.

As per the roadmap, it is estimated that approximately US$ 18 billion can be managed from internal sources and US$2 billion will be managed through climate financing due to green energy production. 

The government will prioritise the energy sector and allocate $500 million annually through the budget, amounting to a total of US$ 6 billion by 2035. As about 1 billion US dollars in investment can be managed annually by issuing financial instruments such as Power Bonds and Debentures through entities such HIDCL and 

NIFRA and others to attract foreign employed and non-resident Nepalis to invest in the energy sector, a potential resource of about USD 12 billion could be available.

Similarly, it appears that an additional USD 8.5 billion can be managed through foreign investment, grants, and loans.

Ghimire called the Ministry of Finance to introduce new financial tools such as green bonds to attract investment into the hydropower sector as developers are already showing interest in green bonds, which would support financing of clean energy projects. 

Additionally, the government should focus on securing green climate finance, which will further assist in financing renewable energy projects, he added.

Nepal’s electricity market is well-secured, with neighbouring countries like India and Bangladesh serving as major consumers of green energy produced in the country. This market assurance makes the hydropower sector an attractive investment opportunity for both domestic and international investors, said IPPAN President Karki.

Public-private partnerships could be an effective model to mobilise the necessary capital and expertise, he added, emphasising the need for policy reforms to facilitate investments to fully capitalise on this potential and attract investment.

He stressed the importance of facilitating Initial Public Offerings (IPOs) and issuing rights shares in hydropower projects to help meet financial requirements. 

To support the roadmap’s implementation, Karki proposed that banks and financial institutions increase their lending to the energy sector by 2 per cent each year, reaching 20 per cent of total lending in 10 years. 

Nepal has been placed on the grey list by FATF, which may discourage investors from investing in 

Nepal, he said. However, this alone should not be a barrier to investment as Nepal has huge potential for renewable energy.

Stating that such huge amounts of resources cannot be managed by government and private sector of the country alone, Joint Secretary Dev said that the government should create conducive environment for foreign investors to invest in Nepal by facilitating in FDI inflows.

He said that the government has taken initiatives to attract private sector for investing in transmission lines along with generation.

Timely policy reforms

Many hydropower projects require land located in forest areas, creating conflicts with environmental regulations and local communities. This has posed a challenge to achieve the country’s energy development goals. So, the successful implementation of the Energy Development Roadmap depends heavily on policy reforms. 

Existing laws and regulations related to hydropower development need to be revised, especially regarding forest land acquisition, licensing procedures, and environmental clearances, said Karki.

Besides, the government should move ahead by declaring a decade as the ‘energy emergency’ to harness energy potential, he said.

The roadmap has been introduced with 81-point action plans, including proposals to amend existing policies, resolve the problems seen in forest and land acquisition. So, the concerned government departments and agencies should work from their respective sides to materialise the roadmap, he added. 

The lengthy procedures for obtaining licenses and approvals are other bottlenecks, he admitted. 

Dev emphasised that the government has recognised these issues and has already set clear goals for energy development by addressing each one of them. 

To address these challenges, the Ministry of Energy, Water Resources, and Irrigation has formed a 'Roadmap Implementation Committee' under the leadership of the Ministry’s Secretary, he said. The committee comprises officials from various ministries, including the National Planning Commission, Investment Board of Nepal, Managing Director of NEA, and departments working in the energy sector. This committee will be responsible for ensuring the timely implementation of the Energy Development Roadmap -2081, he said.

The upcoming Electricity Bill, which includes high-priority measures for reservoir hydropower projects, is expected to further bolster the sector. 

By encouraging private investment, the Bill will provide much-needed support for Nepal's ambitious electricity generation, transmission, and distribution targets.

“We want to ask the government to introduce a private sector-friendly Electricity Act by incorporating the suggestions of the private sector on the proposed ‘Electricity Bill’ to materialise the roadmap,” Karki said. 

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