Future of Nepal’s Electricity: long-term policy suggestions

Main points

  • Electricity supply and demand varies at different time intervals
  • Electricity supply side is heavily based on renewable sources increasing the challenges of creating reliable electricity system
  • Demand side management programs, storage systems, trade agreements with India can be some of the long-term solutions

Let’s start with few questions: What determines the supply and demand of electricity? Does the demand remain same throughout the year? What about the supply? Is it possible, technically and economically, to generate electricity as required to serve the load? These are few questions to consider before thinking about developing a reliable and adequate electric system.

In this post, I discuss issues that Nepal’s electricity sector may face in future. One of the previous posts discusses the short-term solutions of current power shortage problems. Moreover, the recent post talks about electricity sector’s possible issues in the future.

If the demand and supply of electricity were fixed at all times, given that there is no shortage, there would not be any issues of providing electricity to the customers. However, the demand of electricity is time dependent – it varies daily, weekly, and also seasonally. Similarly, the generation of electricity, especially since most of it comes from renewable sources, is also dynamic. In Nepal’s case, where most of the electricity comes from runoff-the-river hydropower plants, the amount of electricity generated greatly depends on the amount of water available in the river. In this case, how can Nepal Electricity Authority (NEA) formulate the long term plan of building a sufficient and reliable electric system?

In the following paragraph, I will first discuss the electricity demand and supply variations in Nepal’s energy sector in more detail. Then, I will talk about the possible solutions to minimize/address the variations. Keep in mind that the main objective of NEA should be providing reliable electricity to all customers at the minimum economic cost considering the environmental and social impacts.

Variations in demand

Electric load profile is dynamic; it varies at all times – hourly, monthly, and seasonally. In hourly basis, residential customers’ usage peak during the morning and evening whereas industrial usage may peak during the day time. In Nepal, the residential customer’s load usage is larger than the industrial demand, so the overall peak demand occurs during the evening. The figure 1, taken from Hydro Nepal (Journal of Water, Energy, and Environment, January 2010, Issue 6), shows that on December 31, 2007 the national grid experiences peak demand of 720 MW at 6:15 pm.  Moreover, the figure clearly shows that the demand of electricity varies greatly within a day.


Similarly, the electricity demand also varies seasonally. Since most of the regions in Nepal have moderate temperature, my intuition is that, the electricity grid faces higher demand in winter due to the use of heaters and lights (as it gets dark early). Electric load also varies according to location due to the difference in weather. Hotter areas will have higher electricity demand during the summer whereas colder region uses more power during the winter.

Variation in electricity supply

Almost all of the Nepal’s grid connected electricity is based on the renewable sources. If there is no mechanism of storing electricity (through dams or batteries), the electricity is generated as water/sun/wind is available. Run-off-river hydropower plants generate less than 50% of their name plate capacity during the dry season. Similarly, solar radiation and wind patterns varies during the day. The variations also increases the intermittency issues – the grid should be able to handle the sudden changes of electricity generation. Considering the small size of the national grid, it may not be able to handle big solar and wind capacities unless there is an energy storage mechanisms designed at the individual plant-level.

Is there a solution?

So, we see that both electricity demand and supply vary considerably at different time scales. In this situation, how can we think about a continuous and dependable electricity system? How do we balance variations in demand and supply and at the same time use available resources effectively? We have to address this variations separately for each time-interval by finding the solutions from both demand and supply side. Most of the focus in Nepal is given in the supply side to increase generation, however demand side solutions are also effective and economically justifiable.

The following paragraphs discuss both demand and supply-side solutions at daily and seasonal basis.

Day-to-day basis

In the daily bases, demand response and energy efficiency programs can help smoothen out the differences in the demand and supply of the electricity by encouraging customers reduce their electricity during the high demand periods. We can first target industrial customers since the potential reduction in their energy bills can be huge. The demand-side management and energy efficiency programs are getting popular in developed countries due to improvements in the smart-grid technologies. One of our previous posts discusses the energy efficiency issue in detail.

The supply side solution at the daily basis can be coupling renewable generated electricity (wind/solar/run-off-river) with the storage systems (pumped hydro and grid-scale batteries) so that we can take care of the sudden changes of the electricity at the plant level.

Season-to-season basis

From the demand side, since there is less electricity supplied during the winter, government can charge higher price during the winter than summer. This might help curb some electricity demand. In fact, NEA pays higher rate to buy electricity during the winter season. So, it would make sense to charge customers a higher rate during the dry season.

Addressing the issue from supply side is somewhat challenging in Nepal’s context. It’s debatable whether we install enough generation capacity to meet the summer (high) or winter demand. As we know that, if our electricity system are capable of meeting demand during summer, we won’t have enough supply during the winter. This is currently happening in Nepal as there is more power shortage during the winter than summer. However, if Nepal builds enough capacity to meet the winter demand, then there will be excess supply (which goes to waste) during the summer. Please keep in mind that the electricity infrastructure, both plants and transmission systems, are very costly and time consuming. The ideal solution would be connecting national grids of Nepal with India which would allow trading bulk power between two countries. This way if we even have excess supply during the summer, Nepal could sell power to India requires more electricity during this time of the year.

The other supply side solution can be incentivizing power producers to build pumped storage system. The government, as of now, do not differentiate power produced from run-off-river and pumped storage system. The price structure can be based on the ‘cost-of-service’ rather than the fixed for all types of producers.


All the possible solutions that I pointed out here definitely need a careful consideration. With the recent election and changing political paradigm in Nepal, I believe it’s a high time that we make creating a sustainable electricity system as one of our main goals. We all know that energy and economy of the country are very closely related, and there is no way that we can improve our economy without adequate electricity system.


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