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Energy Sector Made Significant Progress in 2078 but Challenges Persist

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Energy Sector Made Significant Progress in 2078 but Challenges Persist

Milan Bishwakarma

April 14: Nepal’s energy sector had not been able to achieve anything substantial in its 110-year history until the recent developments started showing some promising signs. Despite countless challenges, the energy and hydropower sector of Nepal made a significant progress in the year 2078 BS.

Stakeholders believe that achievements made in the energy sector in the review year would have long-term implications. Most notably, India has agreed to allow Nepal to trade electricity in its open market through competitive bidding. This, according to the stakeholders, is a historic achievement.

Regional market is essential to sell the electricity generated in Nepal. Nepal is already at a stage where its surplus energy gets wasted during the monsoon. In this sense, a regional market for the energy sector of Nepal is of utmost importance. In such a situation,  India not only opened its energy market to Nepal but also gave the green signal to Nepal Electricity Authority to sell 364 megawatts of electricity to India. This is a significant achievement, says Kumar Pandey, former chairman of the Independent Power Producers Association of Nepal (IPPAN).

“The energy which is to be produced in Nepal does not have a prospective market within the country. In such a situation, a regional market is vital for us,” said Pandey, adding, “India has granted Nepal permission to sell its electricity in its market. This is a significant achievement of the energy sector.”

The operation of 456-MW Upper Tama Koshi Hydropower Project is another significant achievement of the energy sector in 2078.

“Besides Upper Tama Koshi, many other hydropower projects came into operation during last year. This has made Nepal almost self-sufficient in energy. There has been a lot of progress but there is still a lot more to do,” added Pandey.

Another achievement is the resumption of Nepal-India Energy Summit which was stalled since the last two years due to Covid-19. The decisions taken during the summit has helped in the development of Nepal’s energy sector.

Prime Minister Sher Bahadur Deuba also prioritized the agenda of energy sector during his recent state visit to India. Nepal and India unveiled a common vision paper for collaboration in the energy sector during the PM’s visit. The vision paper states that the energy trade will focus on regional market that includes Bhutan, Bangladesh, India and Nepal (BBIN).

There were also some good news regarding foreign investment in the energy sector during the review year. Foreign investment in this sector was not much encouraging in the last few years but the energy sector saw commitment of Rs 1.59 billion in 2078, which is more than the commitment received in the previous year.

In 2077, foreign investors pledged to invest only Rs 5.8 million in the energy sector of Nepal.

The energy sector has had to face problems ranging from natural disasters to liquidity crisis, increase in insurance premium rate, increase in interest rate among others.

Due to the liquidity crisis in the banking system, hydropower projects seeking loans have had to pay high interest rates. The cost of project including operational cost has increased due to the increase in interest rate.

IPPAN Chairman Krishna Prasad Acharya said that the energy sector witnessed some discouraging events despite some significant achievements.

He said that the energy sector has yet to fully recover from the impact of coronavirus.

“The impact of coronavirus which started in 2076 BS is still evident till this year. As a result, many hydropower projects have not been able to start construction. Even the under-construction projects had to stall the works,” said Acharya.

“Things have improved only since February,” he added.

Another setback is the inordinate delay in granting power purchase agreement for run-over-river (ROR) projects to sell electricity. The government has been providing survey license to the private sector to undertake such projects but is reluctant to purchase electricity produced by the private sector stating that the laws allow them to purchase only a certain portion of energy produced by ROR projects.

“The government promised to allow the private sector to trade electricity and also grant permission for PPA. However, both the promises were not fulfilled,” said Acharya.

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