Nepali Times
"Power can be our most valuable export"

Gyanendra Lal Pradhan, chairman of Hydro Solutions, who has been involved in development of several hydropower projects, talks to Nepali Times about why power export is the most viable outlet from the trade deficit.

Nepali Times: How can we consider exporting power when we can't even sustain domestic demand?
Gyanendra Lal Pradhan:
With 16-hours of power cut, the idea of exporting electricity may sound absurd. But in order to build capacity to export in next 5-10 years, we need to start now. The domestic demand is at about 1000 MW right now and even in next 20 years it will not surpass Nepal's hydro potential of 83,000 MW or more. Export is necessary because we will have excess power. Secondly, the opportunity cost of not investing in export projects is huge because unlike mineral reserves, electricity is a time bound resource. Once the water flows, it's a loss. Thirdly, focusing on export projects will optimise the usage of our rivers and decrease the cost per unit. For example, Upper Karnali would be constructed to produce only 300MW instead of 900MW, and the cost would be higher, if its export potential was not considered. And most importantly, electricity is the most valuable export for Nepal.

How so?
Our other exports such as manpower, garlic, herbs, and garment cannot help match the trade deficit of Rs 300 billion. Our biggest export right now is steel worth Rs 15 billion, but even this requires import of Rs 13 billion worth of raw materials. Hydro power is one area that can make significant contribution to the balance of payment without much need to import raw materials. The export does not have to be limited to India. We can also export to Bangladesh and there are more opportunities if the SAARC grid project is made possible.

But such projects will not be possible in Nepal without FDI. Will that not endanger repatriation of profits?
True, we do not have the capacity to invest in such projects and the international investors required will have vested interest in profits. But we need to look at the overall benefit to the country rather than complain about what will go into their pockets. Nepal's advantage is in hydropower and this is one area where international investors will be interested. FDI means foreign currency will enter the country. Once a project starts, local people will get employment. Local resources will be bought and used. And when it completes, government will earn in terms of tax royalty and power capacity.

What needs to be done policy-wise to ensure that the country benefits?
A special office has to be initiated under the prime minister to over see FDI projects in hydropower. We have to insert the clause to be able to buy back power when there is shortage. Policy about the benefits to the local community has to be clear. Local employment can be ensured by adding regulations that require international projects to employ local manpower. We have to have political consensus, proper dialogue and security for these projects to run. We have to take advantage of our hydro potential and make smart decisions.

Read also:
Hydrocratic dreams, RATNA SANSAR SHRESTHA

1. Arthur
More importantly you also need technical experts who understand how electricity markets work with sales of peak power from storage hydro and can provide honest advice on pricing negotations with India (even if you have to pay ridiculously high salaries or commissions to foreign companies for this independent advice).

Most importantly you also need uncorrupt officials who will take the advice instead of accepting kickbacks from Indian importers to sell the electricity (and other benefits such as flood control) as cheaply as possible for India's benefit instead of Nepal's.

2. Amrit Nakarmi
Export of hydropower seems a wishful thinking at present from the point of view of the massive shortfall of power in the country. Have we cared that the diesel consumption has doubled within 2 years from 2008 to 2010? It has increased from 300,000 KL to 600,000 KL within this period. 40% of the diesel sales now pertains to running diesel gensets. We are spending NR16 billion for imports of diesel. If we go by NOC's claims of its losing money more than NR 20 per liter, NOC or the government is subsiding the rich households, industries and the commercial buildings NR 4 billion a year. It is evident that captive gensets are producing around 500 MW. For them, the private investors must have also expended capital of around NR 25 billions apart from the above fuel costs. It seems funny that we have huge potential of hydropower but generating power from burning diesel instead.

By the way, have we considered that in 1997, for household cooking  a average family of 5 members used to spend NR 180 per month for kerosene, NR 465 for LPG, and NR 605 for electricity? Now in 2011, the scenario has completely changed. It now costs NR 1,150 for kerosene, NR 930 for LPG, and NR 790 for electricity. So electricity has become the cheapest energy form for household cooking in urban areas. If we consider this demand for household cooking, Nepal needs 500 MW extra by 2015, and 2,500 MW by 2030. 

One study shows that we require peak power of 1,500 MW in 2015 and 9,000 MW by 2030 at the Business as Usual case. If we consider about rapid commercialization, industrial growth and use of electric transport, the domestic demand can grow way above 15,000 MW by 2030. Hence, the country's focus and  energy policy should be in meeting domestic demand first, and then only it should think about exporting surplus power to the neighboring countries.

3. who cares
anti development should read this brief article from self made mr.gynandra, not that gyan bahadur or easy money looting- the other guy.

is not it amazing, to realize positive goal one has to give real details, where a,s those opposing all use are imaginary reasons.

its so hard to for honest survival where majority are dumbs or passive. 

4. Arthur
Amrit Nakarki #2, thanks for the interesting numbers for LPG etc. They certainly confirm that delay in providing adequate electricity is extremely wasteful and energy policy should focus on meeting domestic demand.

That can mean quickly building thermal power stations (eg coal) or transmission lines for importing power from India or both. The urgency cannot be met by storage hydro projects that will take many years to build.

But export policy is a different matter from energy policy.

Storage hydro peak load power may well be a major export earner for Nepal, using the same transmission lines from which baseload power is imported to Nepal. The direction changes from import at off peak times (cheap) to export at peak times (expensive).

With domestic demand at 15,000 MW only a very small proportion of that would require peak power from stored hydro (eg say 3,000 MW) with the remaining 12,000 MW being "baseload".

If  Nepal produced say 10,000 MW storage hydro it could export say 7,000 MW at peak rates to pay for importing 12,000 MW baseload as well as others imports.

The point to grasp is that stored hydro has special additional value at peak times. It is the only form of electricity that can be stored to meet peak loads. (Batteries are much more expensive).

In countries that actually have a functioning electricity grid the value of not having load shedding is the value of peak period electricity. Anybody sane pays for it through the grid rather than even more expensively through load sharing and private gensets.

(My numbers above are arbitrary examples, actual calculations should refer to energy in GWh at peak and off peak times).

5. Dan Bahadur
If wished were horses, beggars would ride them. This has been true for our nation as well. Hydro power developers and brokers are only interesed in hoarding the licenses and selling them, not developing power for the people. If the dream of developing hydro power for export could not be realized during the last 30 years, how can you expect it now. Other forms of energy like solar and others will soon have edge over hydro in terms of cost, safety and environment. Nepal has been boasting of its potential of 83,000 megawatt for almost three decades and has been able to exploit only some one thousand keeping all in the dark in the country. This has been because of the avarice and greed of our beaurocrats and the netas.

6. Arthur
Dan Bahadur #5 "If the dream of ... could not be realized during the last 30 years, how can you expect it now."

I have omitted "developing hydropower for export" from the quote above because exactly the same fatalist statement could be made about anything at all.

The world is changing and Nepal will change too. An essential change is that more and more people are rejectign this fatalist thinking and insisting on actually removing the corrupt and greedy from power.

"Other forms of energy like solar and others will soon have edge over hydro in terms of cost, safety and environment."

Solar is the most expensive form of energy, useful only in places where the grid does not reach.

There is currently no technology either available or expected in the foreseeable future that could be cheaper than hydro for stored electricity useful for peak periods (even when baseload is met by future nuclear fusion).

80GW or even 40GW may be an exaggeration of Nepal's potential hydro resource but there is no doubt at all that Nepal does have a substantial resource. This will be of great value for export. It is simply being wasted each year that development is delayed by remaining deadlocked with semi-feudal corrupt elites incapable of developing anything.

7. Danish

Arthur # 6

I completely agree with your statement that hydropower is the cheapest and safest form of energy in the world. When will that be realized in Nepal. May be after we are all dead. 30 years have passed and it will not be a surprise if another 30 years will pass without any thing happening.

 Believe it or not, with the situation in the country of having brownouts for more than 10 hours a day, that too in the night where energy most needed, I am contemplating of buying solar lamps to light up the house in Kathmandu.

When we talk of hydropower in the country, we are right now from the frying pan into the fire with only bickering going on and with only self interest and not national interest. You may say if Bhutan, a fraction of the size of Nepal, can achieve success in developing hydropower, why cannot we. The question arises on the will of the people and the political sacrifices we need to make for that to happen. Are we ready for that. Of course, not.

8. jojo
Most important: don't forget to give the 'power' and the benefits to the Nepali people so that the country can develop in a good way (education, infrastructure, healthcare...)

9. rituraj
"Potential of 83,000 MW" is pointless.
that's like saying I have 6 bullets in my left hand. If you can't load or cock the bloody gun, what's the point in potential?

10. Conte
Sure, persuasive arguements all, but what really surprises me is that no one has mentioned the ecological and agricultural implications of such a measure. Besides, can you imagine the circles that will be run in government in order to push this through? Our entire political structure must be revamped before this plan can come into fruition. Maximizing the resources is also all very well and good, but not at the cost of selling the country out to foreign investors, because they are the only way such a massive project can be undertaken. They will look to maximize THEIR profits, which leaves Nepal in the dubious position of having investors but becoming their lackeys. This means our "brain drain" problem must also be assesed. I am all for hyroelectric power in Nepal, but it must be done right the first time round, or it will descend into another cash cow for politicians and foreign interest groups while leaving our people in the dark.

(11 JAN 2013 - 17 JAN 2013)