The hydropower business is booming in Nepal, mainly due to massive untapped resources and huge power shortages. The data from Department of Electricity Development (accessed July 2013) shows that it has issued Survey License to 674 projects totaling 20,756 MW in capacity. Whereas, 59 projects of 1357 MW capacity have obtained Construction License. Please see the table at the end of the post for detailed information. With the limited transmission capacity and lack of India-Nepal intercountry grid connection, will all these projects get built? I doubt. Then, how do you choose the right project to invest? This post discusses few points to consider in analyzing the project and intends to help potential investors choose the right one.
Things to Consider
The following paragraph considers few questions to consider while choosing hydro projects to invest.
Road: Is there road access to the project location? If not, how far is it from the highway? How much road construction is necessary? How much does it cost?
Nepal has tremendous potential for hydro-electric power generation. Nepal’s steep topography and its perennial rivers provide an ideal condition for developing large-scale hydro-electric power plants. Some of the main reasons for significant opportunities in hydropower are:
- Untapped resources: Out of total feasible hydropower potential of 42,000 MW, less than 2% of feasible power has been produced so far. In 2010, Nepal’s integrated power system has a total installed capacity of about 700 MW of which hydro-electric power’s contribution is 650 MW. The rest of the power comes from thermal plants, multi-fuel plants, and purchase from India.
- Shortage of electricity: Only 40% of Nepalese have access to electricity. Power shortage in Nepal is such acute that even the fortunate 40% of the population with access to electricity have to face massive blackouts for up to16 hours a day.
- Increasing Future Demand: There is a massive gap in the supply and demand for electricity in Nepal. In the fiscal year 2009/10, the peak demand for electricity was 812.5 MW whereas the peak deficit in the same year was about 329.5 MW. The future demand for electricity is expected to increase even more rapidly than the current rate. According to the load forecast conducted by Nepal Electricity Authority (hereafter, NEA), the energy growth for the next 10 years will be about 9.06%, whereas peak demand will increase by 8.85% in the same period. In 2020, energy demand will increase to 9562.5 GWh and peak load will be 2052 MW. So, Nepal will have to generate substantially more power in order to meet its future demand. (NEA Annual Report, 2010)
- Economic growth in India: Recent economic boom in the bordering state of Bihar and its ever increasing demand for power is also a boon for Nepal’s hydro-electric sector. This will increase possibility of selling electricity to India and increase demand for Nepali hydro-electric power as India is looking for more power options to sustain its high economic growth.
NEA Annual Report (2010). http://www.nea.org.np/anual-report.html