Nepal is diversifying its renewable energy mix

More than 30% of Nepalese have never used electricity. The other 70% live with blackouts that can extend up to 16 hours a day during the winters, or are using solar panels to light their houses.

On paper, though, Nepal should be energy rich. It has 2% of the world’s water resources and is the second most water-rich country in the world. It also has more than 300 days of sunshine in a year. Unfortunately neither hydropower nor solar power has been effectively harnessed to provide the majority of its population with electricity, much less to power industrial growth.

Nepal was an early mover on hydropower, and installed a 500 Kilowatt (KW) hydropower project in the small town of Pharping – 20 kilometres south of the Kathmandu valley – with support from Britain in 1911. This was just 29 years after the first hydropower project was installed in Wisconsin, in the US, and one year before China built its first hydropower project.

Since then, though, Nepal has only harnessed 680 MW of its estimated 40,000 MW hydropower potential capacity (actual capacity is 83,000 MW, but much of it is technically and economically not feasible to harness).

Amrit Lal Nakarmi, a professor at the Centre for Energy Studies at the Institute of Engineering, said this was because the “politicians are providing a Hobson’s choice — a situation in which there is only one real choice offered – by saying that economic prosperity is only possible by developing big hydropower projects and selling energy to neighbouring countries. But they have always ignored tapping other renewable resources like solar, wind.” As a result, the country has been able to produce only about 15 MW from solar power and about 20 KW from wind in the last two decades.

Meanwhile, while the sun shines brightly all year and the rivers flow fast, diesel filled oil tankers provide the fuel to power generators in cities that produce almost as much electricity as the hydropower plants produce. Nepal spends more than NPR 100 billion (USD 1 billion) to import petroleum products from India.

“This is a self-created mess and nobody is going to solve it,” said Dipak Gyawali, a water resources expert and former water resources minister of Nepal, “until they manage to forget the big hydropower projects, and dreams of exporting electricity.”

The problem is that such large projects require a great deal of investment. “Hydropower is the biggest source of energy now, and will be in the future as well, but with efficient and cheaper solar and other renewable technologies available, there is no need to wait to reach out to those without electricity access,” said Govinda Raj Pokharel, former vice-chair of the National Planning Commission who once headed the country’s alternative energy centre.

He also emphasised that a significant number of such people are not connected to the grid, and thus would not be able to access the electricity generated by hydropower projects, even if they came up overnight.

The current energy demand of a little over 2,000 MW is predicted to reach 10,000 MW by 2030, assuming that the current population of about 30 million reaches 40 million and industry grows. Though a few changes have been made to renewable energy policies and policymakers have agreed to diversify the country’s energy sources, bureaucrats are still not convinced that promoting renewable energy would solve the burgeoning energy crisis.

“To be honest, goats cannot plough the field, we need oxen. So the difference between a goat and an ox is like that of hydropower and other alternatives. We need to keep our eyes focussed on hydropower development but have to give a side look at alternative energy,” said Anup Kumar Upadhyay, secretary at the Ministry of Energy.

Rays of hope

Despite its hydro dominant policies, Nepal established a semi-autonomous agency called the Alternative Energy Promotion Centre (AEPC) in 1996. While celebrating its twentieth birthday in Kathmandu last week, it claimed that more than 1.5 million families have benefited from renewable energy sources to access electricity, especially in the areas where there is no connection to the national grid.

“Starting with about one thousand solar systems in individual houses in 2001, we now install more than a hundred thousand a year,” said Ram Prasad Dhital, executive director of AEPC. However the institution has failed to attract private investment in alternative energy systems as the current installations are subsidised by almost 50%, and are heavily dependent on the government.

The centre said it has realised that subsidies provided by the government alone will not lead to progress on renewable energy promotion in the country. Therefore AEPC has now started providing credit to banks, and the banks now extend loans to those who want to invest in renewable technology. The recently established Central Renewable Energy Fund (CREF) is the coordinating body.

Multiple donors and government will put money to a central basket, and the CREF will then select partner banks to channel these funds in the form of credit to businesses that are willing to invest in renewable energy, but do not have enough funds.

“The businesses will use these subsidised loans as seed money; when they pay back the loan to the central fund, it will then be used to encourage other such initiatives,” Dhital said. Multiple donors have agreed to put money into the fund and the government has announced that it will invest NPR 5 billion (USD 50 million) in the venture.

The government has stated that renewable energy is its top priority and has been trying to provide electricity to all. The current share of renewable energy sources is less than 1% of the total, and only 10% of the population receives electricity from renewables. The government has committed to increasing the share of renewables to 10% and those accessing this energy to 30% of the population by 2030.

Biggest investment is in solar energy

Giving a large boost to this initiative, the sole electricity production authority – the Nepal Electricity Authority – has agreed to buy electricity generated from the renewable resources from any private producer at a negotiated rate to distribute through its system. Until now the NEA used to purchase power only from hydropower projects.

Additionally, last year Nepal and the World Bank signed an agreement to invest USD 130 million to develop a 25 MW solar project that will eventually be connected to the national grid. It is the largest renewable energy plant planned in the country. This has pleased professor Nakarmi at the Institute of Engineering, who said a more diverse energy mix would be the only way to provide energy to all. “Otherwise electricity for all will remain only a slogan for years to come.”