Faced with the spectre of 20 hour power cuts this winter, Prime Minister Baburam Bhattarai called an emergency meeting of energy czars on Tuesday to figure out what to do. Bhattarai's instruction to NEA was to limit power cuts to 12 hours a day in winter, compared to 16 hours last year. The NEA and Energy Ministry have drawn up a plan to import more power from India in winter by fast-tracking a transmission line, and to get two diesel thermal plants into operation in Biratnagar and Hetauda to generate 40MW.
Energy Secretary Hari Ram Koirala told Nepali Times, "We are trying to make the best use of available resources to limit power cuts to 12 hours a day this winter." He is counting on the timely completion of the 15 km transmission line from Kusaha to Kataiya through which additional power can be imported from India in winter. He also added that Nepalis should be 'more frugal' about using power. "Close curtains for insulation instead of using heaters and make maximum use of the sun during daytime for light," he said. Nepal's electricity demand has been rising at 100MW a year and will exceed 1,100MW this year. Hydroelectric generation capacity has stagnated at 680MW for two years and in winter powerplants can generate only 400MW because of reduced waterflow.
Experts say the only viable option to meet the shortfall in the short-term is to import more power from India. But India is having its own problems with its northern grid and suffered a three-day outage few weeks ago that affected 350 million people, and the transmission lines needed to channel extra power can't be built by winter.
Still, Sher Singh Bhat of the power trade department at NEA is hopeful powercuts in winter can be limited to 12 hours: "If possible we will try to import 200MW from the Indian market and manage 40MW through thermal plants to offset the increased hours of load-shedding this winter."
NEA says the reason for the monsoon power cuts is a deficient monsoon which has reduced water flow in rivers and the below-normal storage in the Kulekhani reservoir. But experts say the real reason is the inability of governments over the past 15 years to add generation capacity that can keep up with demand.
"Relying on the power-starved North Indian grid to meet our demand is absurd," says water resource analyst Ratna Sansar Shrestha, who says Nepal should have prioritised projects for domestic consumption rather than dream of export-oriented mega dams.
Of the country's total installed capacity of 700MW, all except Kulekhani come from non-storage 'run of the river' projects. During winter, these plants generate just a third of their capacity and things get worse when winter rains fail.
NEA officials say that in the long-run there is no alternative but to build more reservoir projects like the 750MW West Seti that will store monsoon runoff to generate power for winter's peak demand.
In the next five years, NEA projects demand will rise up to 1700MW, which means we will need an installed capacity of almost 5000MW. Besides West Seti (750MW), there are five big projects (including Upper Tamakosi and Chilime) totalling 840MW that will be completed by 2017.
"Even if all these projects are done on time, total installed capacity by 2020 will be just 2,300MW which will barely keep up with the increase in demand," explains Ratna Sansar Shrestha.
The much-delayed $1.2 billion West Seti is still mired in controversy although the government has decided to award the contract to China's Three Gorges International. The 250MW Upper Trisuli backed by Korean investors and the IFC had its licence revoked, and then reinstated this week by the government under direct orders from the prime minister. Although the projects finally did get green signals, it has given other investors cold feet.
Investors for their part blame the government's inability to ensure the smooth functioning of even projects that are already underway. "The government has continued to neglect the formulation of sustainable policies for hydropower development in Nepal," says Subarna Das Shrestha, president of the Independent Power Producers' Association of Nepal (IPPAN).
Private power producers have been also lobbying for years for an investment friendly climate and to revise the buying price from them from the current Rs 4.80 per unit to Rs 5.99 per unit. Gyanendra Lal Pradhan of Hydro Solutions vents his frustration over the government's chronic inability to reconcile demand and supply: "Unless there is a fast-track policy to increase capacity, ensure security and return of investment, power supply will continue to outstrip demand and cripple Nepal's economy."
The Bhattarai government declared 2012-13 Nepal Investment Year and set up the Nepal Investment Board (NIB) to attract foreign capital to develop hydropower. Radhesh Pant of NIB says he has been pushing multiple projects of more than 500MW urgently. "Investment in hydro is our number one priority," Pant told Nepali Times, "we are working with all stakeholders to streamline the process to encourage investment in this sector." (Read box)
Following the prime minister's directive, NEA says it will overhaul two large diesel plants in Duhabi and Hetauda before winter to add 39MW to the grid even though high fuel costs will make it expensive to operate. But even NEA officials admit this is a small change compared to the 500MW shortfall. We should be lucky if we have power for even eight hours a day this winter.
About time, DEWAN RAI
Stalled for 15 years by Maoist opposition, West Seti will now be built under a Maoist government by Chinese investors
No light at the end of the tunnel, DEWAN RAI and RUBEENA MAHATO
The bad news is that the power crisis will get worse before it gets better
From light to darkness
Khadga Bahadur Bisht's book sheds light on the hundred years of hydropower development in Nepal
Trying to entice investors to put their money into hydropower in Nepal is like swimming upstream in the monsoon. Still, the newly-set up Nepal Investment Board (NIB) is preparing valiantly to make major changes in the country's hydropower policy.
"We are working with private investors, hydropower experts and all stakeholders to discuss and work on current drawbacks of the policies that have derailed hydro development in the country," says Radhesh Pant, head of NIB. "Hydro is our number one priority so we want to get things right at the policy level first."
With a Power Development Agreement (PDA) template in place, Pant is optimistic about pushing forward major hydropower investors who have so far been reluctant to come in for the last three years. The template is for hydropower projects above 500MW and is applicable to four mega hydro projects-Tamakosi 3 (880MW), Upper Karnali (900MW), Upper Marsyangdi (600 MW) and Arun 3 (900MW). The NIB will sign individual agreements that will be negotiated and tailored to fit different projects.
Investors seek government assurance through the PDA that helps avert any possible political, economic or policy uncertainties during the construction phase. Arun III and Upper Karnali's Indian investors have been taken to the Supreme Court by litigators challenging their export-oriented strategy. Pant is confident the Court will favour the projects since they have agreed to provide required power to Nepal before exports.
Investing in the future, SIDDHANT RAJ PANDEY
Foreign direct investment is essential next year and beyond to boost economy and create jobs
One window for investors
Head of Nepal Investment Board, Radhesh Pant, speaks on prospects for Nepal Investment Year 2012
You ain't seen nothing yet