West Seti Project – Opportunities and Challenges

The Investment Board Nepal (IBN) approved China’s CWE Investment Corporation, a subsidiary of Three Gorges Company on April 2015. The CWE Corp will form a joint venture with Nepal Electricity Authority (NEA) for the development of West Seti Project. The hydro-project is storage-based with a capacity of 750 MW and costs $1.6 billion. This will be the biggest foreign investment project in Nepal’s history.

The West Seti project was envisioned more than couple of decades ago with the first feasibility study conducted in 1987. There were multiple companies showing interest in the project since then. During the early years, Snowy Mountain Engineering Corporation (SMEC) signed an agreement with the government of Nepal, however the license was revoked at the later date. Government then formed another company, West Seti Hydro Limited, and conducted environmental impact assessment and resettlement action plan in 1997 and later revised in 2007.

The annual electricity production from the West Seti project will be 636 gigawatt-hours (GWh). The project will have 195 m high concrete dam, 6.7 km headrace tunnel, 620m tailrace tunnel covering 2,060 hectare by reservoir. The project will also construct 20.3 km permanent access roads and 132.5 km 400 kilovolt (kV) double-circuit transmission.

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The new developments in Nepal’s hydro sector and Three Gorges Chairman’s recent visit to Nepal provided the Seti project with renewed impetus. The project is going to generate much-needed dry season energy. As it is storage based, it can hold water during the rainy season and utilize it when most of the hydro-projects are generating at 1/3rd of their capacity during the dry season.

The West Seti project will be a great boost for Nepal. The project will be able to provide peak energy at a reasonable cost. The total cost of 750 MW West Seti project is $1.6 Billion – an average cost of $2133/kW. The average capital cost of run-of-river project in Nepal is around $2000/kW. This means that we are getting electricity from storage-based plant and the flexibility of water generation as needed at the same rate as the run-off-river project cost!

Moreover, the storage project can also be used flood control and dry season augmented flow. With the help of dam constructed for the hydro-project, the flow of water in the downstream river can be regulated.

However, there are many challenges associated with this project. First, the project is storage based which requires a large reservoir area and resettlement. Moreover, there will be loss in agriculture land. As the project will hold (store) water for the energy production, especially when the project is not operating, downstream water sharing can be challenging considering that this water is utilized for agriculture and other purposes.

The West Seti project report mentions that the project requires total land of 2,326 hectare (ha) containing 28% of cultivated land and 35% of forests. Another 678 ha will be needed to build transmission lines. The report submitted to ADB mentions that the project will impact 2,421 households directly with an estimated of 1,579 requiring resettlement. The resulting environmental, social, and anthropological impacts of the West Seti project will be huge, thus requires a careful assessment.

Moreover, next set of challenges stem from uncertainty associated with timely execution of transmission infrastructures and market availability for surplus electricity. The CWE Investment Corporation has already asked Nepal government to provide market guarantee for the electricity generated from West Seti Project. Without finding electricity market besides Nepal, it will be challenge for Nepal to utilize all electricity produced (assuming that Nepal’s power demand increases as the rate forecasted by Nepal Electricity Authority). There is a need to create viable alternate electricity market. Evacuating power to India and Bangladesh are possible options. However, we would need India’s cooperation to sell power to Bangladesh as transmission lines go through Indian territory.

The other challenge is associated with building necessary transmission infrastructures. It is not clear who responsibility it is for constructing high-powered transmission lines to evacuate power from West Seti project. The government recently asked Chinese Government for financial assistance, either in form of aid or soft loans, of $400 million to invest in hydro project and transmission lines. The project requires 400 km-long transmission lines to connect the West Seti project to the national grid.

Overall, the West Seti project is excellent from economic point of view. The project will increase Nepal’s national grid capacity substantially. It will also provide much needed dry season energy and help Nepal achieve a reliable and adequate electricity system. However, the project also has many serious challenges mainly environmental, social, and as well as building transmission infrastructures and creating a market for the surplus electricity.

 

Nepal’s Electricity Crisis: Are there any short-term solutions?

Nepal is facing severe power crisis at the moment. Even with the proper planning, it takes several years to develop necessary infrastructures for power generation and transmission. With Nepal’s never ending political turmoil, Nepal Government’s plans of reducing power shortages may take few more years than anticipated. Let’s explore some short-term plans of reducing power shortage. Besides increasing generation, are there any other ways to reduce power shortages in Nepal?

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Nepal Electricity Authority’s annual electricity purchases and sales

This post will focus on Nepal Electricity Authority’s (NEA) annual electricity purchases and sales. NEA is government regulated and sole electric utility company of Nepal. It is responsible for distribution and transmission of grid connected electricity. Although private sectors are allowed to participate in the generation sector, NEA is the major electricity producer of Nepal.

The annual total purchase amount is the sum of the electricity bought from different producers. The total electricity sale is the sum of metered electricity of all customer types. In other words, it is the source of NEA’s revenue and uses it to pay for its purchases and transmission and distribution costs.

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Nepal’s Generation Sector: Is it too hydropower-centric?

In my last post, I discussed the scope and opportunities in Nepal’s hydropower industry. I will talk about Nepal’s electricity sector in the next few blogs. Electricity sector can be divided into three main areas – generation, transmission, and distribution. This post will primarily focus on the generation part.

As mentioned in my previous blog post, the total installed capacity of Nepal’s power system  in 2010 is 700 MW; and most of it comes from hydropower. Nepal’s government allowed private investment in the generation sector through Hydropower Policy of 2005. Independent Power Producers (IPP) have actively participated in hydropower development since 2005. In 2010, the total share of IPPs was 166.81 MW, about a quarter of the total installed capacity. There are numerous projects that have received license for constructing new plants. Department of Electricity and Development[1] has already issued license for 60 such projects with the cumulative capacity of around 1400 MW! That’s more than Nepal’s installed capacity. Moreover, there are many projects that have obtained licenses for feasibility study.[2] Should we be focusing just on hydropower for electricity?
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