In Nepal, agriculture has always been considered as the main basis of economic development which is wrong. We need to look towards countries like China and Ethiopia and see how they leaped from agriculture to other sectors such as manufacturing and services. For Nepal, hydropower is the main basis of economic revolution.
From the time of construction of the Kulekhani Hydropower Reservoir to the time of the construction of Kaligandaki Hydropower Project, there was a situation of wastage of electricity due to lack of consumption. At that time, when the per capita income was less, the capacity of the general public to consume electricity was low. Similarly, the demand for power in the industrial sector was also low as there were a few energy-intensive industries in the country. Now, there are a lot of industries in cement and steel production and we have become self-sufficient in these products.
It used to said that 83,000 MW of electricity could be generated in Nepal. However, a study conducted in collaboration with a German university has shown the commercial power generation potential of more than 100,000 MW. It has been seen that Nepal can produce 150,000 MW. This means Nepal has the potential to rank fourth in the world in electricity generation.
Even today, firewood and cow dung cakes are used for producing 65 percent of household energy consumed in Nepal. Similarly, 21-22 percent of energy comes from petroleum products, gas and coal and all these are imported. The share of hydropower in total energy is less than 4 percent.
At present, per capita electricity consumption is 262 gigawatt per hour. If all the energy could be converted into electricity, it would reach 200,000 gigawatts per hour. But electricity cannot be used for all kinds of energy needs. In some cases, we may have to use firewood. At least 40 percent of energy can be easily converted into electricity. By doing so, we have a demand of 80,000 gigawatts of electricity per hour.
Even now, Nepal Electricity has a request pending for about 500 MW of electricity from the industrial sector. Industries including Hongsi Cement are forced to run costly diesel generators to fulfill their power needs due to lack of electricity supply. The industrial sector can consume 500 MW immediately. Even after that, an additional 500 MW of electricity will be demanded from the sector. At most, the industrial sector can consume an additional 1,000 MW of electricity within the next two years. However, NEA has not been able to fulfill the power demand of industries.
There are problems like the non-construction of transmission lines in industrial areas. However, for the same reason, it would not be appropriate to export the surplus to India leaving the industries without power.
The billets used to make rods are heated in heating plants in India at a cost of 1,000 units of electricity per tonne before importing to Nepal. Then the billets are cooled and brought into the country. The raw materials to produce steel rods are heated again by spending 100 units of electricity per tonne. And the rod is made by following the necessary procedures. As a result, steel rods are expensive in Nepal.
If we can process billets in Nepal, the cost of the production will go down and steel rods will also be cheaper for consumers. By doing so, electricity worth Rs 12 billion can be consumed in one year. For this, the government needs to bring a policy and the industries should be supplied with electricity at cheaper rates.
As global climate change exacerbates, the demand for clean and renewable energy is increasing significantly. Large hedge funds abroad are looking to invest in clean energy. So, Nepali hydropower projects can easily be lucrative avenues for such investors.
It is also very easy to increase the country's gross domestic product (GDP) through hydropower. If 750 MW of electricity can be generated, Nepal’s GDP will increase by 1 percent. One example in this regard is the Upper Tamakoshi Hydroelectric Project which is expected to add 0.6 percent growth to the country's GDP.
(Pradhan is Chairman of CNI Energy Development Council and Executive Chairman of Hydro Solutions Pvt Ltd. This article is based on conversation with Pradhan.)