Getting into Nepal’s Hydropower? – Few Things to Consider and Opportunity to Invest

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?
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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.

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Future of Nepal’s Electricity : Demand Forecast and Possible Issues

Looking at the current power-crisis of Nepal, it is even hard to make future energy plans without addressing present power shortage problems. However, I believe that it’s a high time that we have a long-term electricity plan by keeping the future demand growth in mind.


Nepal Electricity Authority (NEA) estimates that the electricity demand will increase steadily at the average annual growth of 9 % and peak demand will increase by 8.85% in the same period. Energy (kWh or MWh or GWh) is the total hourly electricity demand summed for each year year, whereas system peak load (kW or MW or GW) is the maximum amount of electricity demanded at any given time of the year. For the smooth supply of electricity, the utility company (NEA) has to be able to meet both total annual electricity demand and also be able to handle the peak load demand.
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Nepal Energy in the News: August 15-31

Power wastage amounts to 50m units due to lack of transmission lines (The Kathmandu Post, accessed September 4, 2013)

I have raised the issue about the consequences of lack of transmission infrastructure in Nepal.  NEA reports that the total loss due to insufficient transmission lines in 2012-13 fiscal year is worth of Rs 420 millions. The posts cites Bhuwan Chettri, chief of Load Dispatch Center (LDC), and writes that NEA’s loss was due to the delay  in construction of three power line projects, including Khimti- Dhalkebar (220kv), Suchayatar-Matathirtha-Kulekhani – 2 (132kv) and Bharatpur-Hetaunda (220kv). The delay affected power generated from hydro power projects like Kaligandaki, Marysandi, Madhya Marsyandi, Trishuli, Chilime, Indrawati and Spring Khola to connect to the national grid. The news reiterates the fact that Nepal should focus on building new transmission and distribution lines to accommodate additional generation if it seriously wants to solve the energy crisis.

Power Grid preparing road map for SAARC electricity grid (The Economic Times, accessed August 30 2013)

This is a very welcoming news indeed. An electricity grid connecting South Asian countries will not only increase reliability, but also will help to harness each SAARC nation’s capacities and resources to address growing energy needs in the region. India, Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka are part of SAARC.  The Indian State-run Power Grid is finalizing the construction of transmission line between India and Nepal for transfer of bulk power.

Other News articles:

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Nepal Energy in the News: August 1-15

Nepal Electricity Authority (NEA) posted loss of Rs 4.56 billion in 2012/13 (Republica, accessed August 15, 2013).

However, loss is half of the previous year, thanks to the tarrif hike last August. In 2011/2012, NEA’s net loss was 8.55 billion. “Presenting the NEA´s financial report at 28th anniversary on Saturday, NEA´s Managing Director Rameshwar Yadav said that the annual loss came down due to an increment in tariff revenue by 22.5 percent. … The NEA has earned Rs 26.2 billion in total and the expense went up by 12.46 percent in the fiscal year as the energy purchase volume increased while the Nepali currency weakened against the dollar. It posted a total expense of Rs 25.07 billion in the year. And the total power purchase expense amounted to Rs 13.49 billion, which accounted for 53.82 percent of the total operating expense.  ”

11 hydro projects stalled as Nepal Electricity Authority (NEA) refuses to do Power Purchasing Agreement (PPA). (Karobar daily news, accessed August 5, 2013)

NEA has not signed PPA with these projects based on its assumption that surplus electricity will be wasted during the monsoon season six years down the line and it will face annual losses of billions. Six projects are Kali Gandaki Kovang (180 MW), Budi Gandaki A (90 MW), Budi Gandaki B (207 MW), six projects under Super Six (210 MW) Projects, and Upper Trishuli 1 (216 MW).

Other News articles:

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Energy Efficiency as an Energy Resource for Nepal

Guest Author: Achyut Shrestha

In the long run, Nepal may overcome the present power crisis with the help of largely untapped natural resources – hydro power potential up to 83 GWh (Shrestha, 1968) and significant potential from wind and solar energy (Upreti et al). However, it is imperative that we also try to seek immediate solutions to mitigate the energy shortage. Energy efficiency (EE) provides an opportunity to reduce power shortages in the short run.

What is Energy Efficiency?

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Alaska’s rural electricity system and lessons for Nepal

Last week, I got an opportunity to learn about Alaska Village Electric Cooperative (AVEC) during the annual conference of US Association of Energy Economics (USAEE) in Anchorage, Alaska. AVEC is a non-profit electric utility that provides stable electricity to 55 Alaskan villages with the help of distributed generation and local grid connection. There are similarities, in terms of geographic variations and dispersed population, between Alaskan villages and Nepal’s rural parts. AVEC has been successful in providing electricity to its villages, whereas most of the rural parts on Nepal are still deprived of electricity. In this situation, is there anything that Nepal can learn from AVEC? This post highlights the works of AVEC and the ways that Nepal can learn from them.
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