The arithmetic just doesn't add up: the demand for electricity will outstrip supply at peak hour this winter. There is no other way for Nepal Electricity Authority (NEA) to deal with it than load shedding.

While they may shed the load, however, it can't shed the blame. Everyone knew this was coming, yet the government and the NEA did nothing to pre-empt it by adding capacity or implementing demand side management.
By mid-December the shortfall in peak-hour power supply in the evenings will be 10 megawatt (MW). By January, the deficit will be 40 MW and could reach 54 MW by March. Even if new power plants are added, at the rate demand is increasing the power shortfall at peak hour in winter will exceed 100 MW by 2010.

"The situation is quite serious," admits Soorya Bahadur Shrestha, corporate planning director at NEA, "we are trying our best to manage supply but load shedding seems unavoidable from January and it will get worse in the coming years."

In fact, an unofficial load shedding has already started. The industrial belt between Simara and Birganj and other parts of the country are already suffering unannounced power cuts. But for political reasons, Kathmandu is being spared. Not for much longer.

In a controversial move, the government recently appointed Harishchandra Shah as the new managing director of NEA. Shah told us he has a list of measures to avert the power crisis: supplementing more than 20MW peak power to the grid from private businesses, importing more power from India, cutting off power supply to billboards, and push sales of energy-saving lights to replace incandescent bulbs.

Even if these plans work, and it looks iffy, the gap between supply and demand will be too great by mid-December. From then on power cuts at peak hour are here to stay for at least five years, experts say.

The problem isn't lack of power, it is shortfall at the evening peak hours in winter. During the rest of the day and during the monsoon the grid has more energy than it can handle. Most of it is wasted and the NEA suffers huge losses because it is power it has to buy but can't sell.

Three years ago, the Ministry of Water Resources was ready to implement time-of-day tariff to reduce demand at peak hour, but the government changed and it went into limbo. Had demand management measures been put in place, the supply deficit would be only 9MW in January. But without it, the shortfall will be 40 MW.

The only reason for this crisis is poor planning. To be sure, the conflict has delayed the Middle Marsyangdi project that was originally supposed to come online this year, adding 70 MW to the grid. The delays have doubled the cost of the German-aided project and it is still two years away from completion.

But even with Marsyangdi, energy experts feel that it is now time for Nepal to have another reservoir project to meet peak demand and to offset the monsoon-winter imbalance. Except for the two Kulekhanis, most of Nepal's power comes from run-of-the-river schemes which means their power output depends on the flow of the river. This, in turn, means they generate most power (in the monsoon) when demand is lowest and least power (in winter) when demand is highest. This year's poor monsoon has added to the woes because water level on the Kulekhani reservoir is ten metres below normal.

Apart from bungling in the power generation front, the NEA has also failed to upgrade transmission and distribution systems to send power to deficit areas. Nepal's system loss due to power poaching is 30 percent-one of the highest in the world. Even if this was halved, load shedding could have been averted.

The NEA's generation expansion plan list has more than 30 projects but construction has not even begun. The ones that have started are too small to make an impact. Kulekhani III is being mulled, but can't be completed before 2009. The Japanese are said to be working on a detailed study of the 122MW Upper Seti, another storage project but that will take even longer.

India is eyeing Upper Karnali and Budi Gandaki but strained bilateral relations after 1 February have stalled negotiations. The much-delayed West Seti dam will take ten years to build but its 600 MW is for export only.

NEA officials say they are now relying on buying more than the current 50 MW power from India which itself is bizarre given the power shortage on the north Indian grid. Transmission lines from the Nepal side are in place but there are doubts about India coming to the rescue in the present circumstances.

Private power producers like Butwal Power Company (BPC) are interested in increasing generation by 20 gigawatts at Rs 3 per unit. But NEA officials fear buying power at such a cheap rate may set a precedence and they don't want to sign a deal that would expose them to possible investigation by the corruption watchdog, CIAA.
Other private producers also want to invest but are backing off because they say NEA is not offering them the same lucrative deals as Khmiti and Bhote Kosi.