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Snowy Mountain Engineering Corporation (SMEC) signed an agreement with the government of Nepal, however the license was revoked at the later date.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.


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.


Proposed Power Agreement between Nepal and India

There are a lot of ongoing discussions on the proposed power agreement between Governments of Nepal and India. With Nepal’s untapped hydropower resources, India’s power need, and recent changes in Indian politics, the discussions for power treaty is again back on the table. I was lucky enough to get a copy of the draft of the agreement. In this post, I discuss the important points of the agreement and few areas that need clarification.

Both countries realize the importance of meeting electricity demand for socio-economic development and the progress of people. The agreement aims to facilitate cooperation in the fields of power generation, power transfer, grid connectivity, energy efficiency, renewable energy, and power related consulting and research services. More importantly, both countries are emphasizing the importance of developing additional hydropower potential by cooperating in the construction and operation of hydropower.
Continue reading

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.

Continue reading

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.
Continue reading

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:

Continue reading

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?

Continue reading

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.
Continue reading