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Economics of unreliable power supply: lessons from the 2006-2017 Nepal power crisis

Jevgenijs steinbuks, govinda timilsina, anna alberini.

For more than a decade between 2006 and 2017, Nepal, a small lower-middle-income country in the lap of the Himalayas, went through a chronic shortage of electricity supply. At the time of the crisis, the country had only about one gigawatt of power generation capacity for its almost 30 million population – one of the world’s lowest — despite an immense potential to generate hydroelectricity—up to 83 gigawatts. Nearly all electricity generation came from run-of-river hydropower plants. Between December and April (the dry season), only a quarter of the total capacity was available to generate electricity due to very low river discharge. The electricity load was poorly managed and underpriced, which meant the national grid was operating at a loss. These factors combined made the state electricity utility, Nepal Electricity Authority (NEA), impose load-shedding power outages for up to 14 hours a day. 

Our recent research assesses the economic impact of Nepal's power crisis of 2008-2017 and provides insights into what can be done to avoid future load-shedding crises in poor, generation capacity-constrained economies  .

Load shedding had high economic costs and greatly impeded Nepal’s economic development  

How much did this power crisis cost Nepal’s economy?  Our recent study estimates that Nepal could have lost US$11 billion value of GDP in nine years between 2008 and 2016 due to electricity load shedding—an amount almost equal to the country’s GDP in 2008 (see Figure below). On average, that foregone value would amount to more than 6% of its GDP annually during that period. Production in all sectors of the economy declined due to either lack of electricity supply or increased electricity costs due to expensive backup provisions, such as private, diesel-fired generation in the industrial sector and small battery storage devices in the residential sector. The effect of load shedding was particularly severe on the country’s investment climate. Our analysis suggests that in the absence of the load shedding, the average annual investment would have increased by 48% during the crisis period. Nepal’s international trade has also been affected: the load shedding crisis caused a 2.8% reduction in exports and a 5.4% reduction in imports. Even if firms used expensive diesel-fired backup systems to avoid load shedding, this could have saved only a tiny fraction of these economic costs. The loss of GDP with diesel-based backup would be 5.4% instead of 6% under the load shedding case. 

Figure: Impacts of load shedding on key macroeconomic variables 

Note. The Figure shows the annual average deviation from the CGE model baseline (%) during the 2008-2015 period. Source: Timilsina and Steinbuks (2021) .

Tariff reform alone wouldn’t have solved the crisis 

Underpricing of residential electricity services was one of several contributing factors to Nepal’s load-shedding crisis. The NEA was consistently operating at a loss during the crisis decade. For example, in 2016, the supply cost was 12 NR/kWh (US$0.11/kWh), and transmission and distribution loss in that year was 30%. The average revenue from all customers was only 10 NR/kWh (US$0.09/kWh). Would a standard textbook recipe of raising electricity tariffs have balanced supply and demand while generating sufficient revenues to improve the quality of supply and mitigate the consequences of the crisis? We answer this question in another recent study . This study asked a representative sample of more than 4,000 grid-connected households how much they would be prepared to pay every month—above and beyond the regular electricity bill—to avoid the outages they had experienced during the load shedding. 

The results from this hypothetical exercise are striking. The average respondent reported 20 days a month with electricity outages (both announced and announced), and a good third of sample 30 or 31 outage-days a month. Compared to their electricity expenditures, households appeared to have a high valuation of reliable electricity services. Even though one-quarter of the sample was not prepared to pay anything to avoid these outages, the average respondent’s willingness to pay (WTP) was about 123 NR ($1.11) per month or 65% of the actual average monthly bill at the time of the survey. Even so, these valuations—which are high in relative terms—are not large enough to make up for the utility’s losses. When we convert our estimates to a Value of Lost Load (i.e., the WTP per kWh lost), our preferred estimates are in the range of 5 to 15 NR/kWh (¢4.7 to ¢14/kWh), and thus bracket the marginal cost of procuring additional supply at the time of the survey (¢20 to ¢30/kWh).  

Efficient service delivery is necessary to achieve an affordable and reliable power supply  

If raising residential electricity tariffs to the residential WTP levels was insufficient, what else could be done to improve the quality of Nepal’s residential power supply quality and avoid a future load-shedding crisis? The answer is to use existing physical capacity (which has doubled since the end of the crisis) and the country’s institutional resources more efficiently. Further efforts should be made to reduce the cost of electricity service. This includes improving institutional efficiency, reducing delays in power generation and transmission projects, and lowering commercial losses, especially leakage in bill payments. Expediting implementation of cross-border transmission lines and power trade arrangements is also crucial to avoid the underutilization of available hydropower generation facilities.   

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Power-Less to Powerful

Sushil Sah/World Bank

Nepal: From Darkness to Light

• Nepal currently produces 1,260 MW of electricity. Within 10 years, the country hopes to produce up to 15,000 MW, for both in-country use and exports. This is a dramatic turnaround for a country that once struggled with constant power outages.
• Residential load shedding ended since early 2017, and there has been no industrial load shedding since early 2018. Nepal Electricity Authority (NEA), the country’s power provider, became profitable after 10 years of continuous losses, and declared profits of NRs 7.20 billion in 2017/18.
• Only a fraction of the hydropower potential, rated at 43,000 MW, has been explored. The government has announced an ambitious plan to generate 15,000 MW power in ten years.

From Darkness to Light

It is a normal day for Regina Subba, who lives in the capital city of Kathmandu in Nepal. Awakened by her alarm at 5:00 AM, she purees food for her one-year-old daughter in her food processor. She then irons her office wear, cooks breakfast on her induction stove, and puts clothes into the washing machine before grabbing a cup of coffee from her coffee machine and heading out to work.

For many, this use of electricity in daily life is taken for granted. But for Subba, it is still a luxury. “I often think back to the winter of 2015 – the bleakest period of our life. When I woke up there was a power cut, and when I came home from work, there was no light. Life came to a standstill.”

Subba’s plight was a common recurrence in Nepal, and especially the capital of Kathmandu, just a couple of years ago. Power cuts spanned a maximum of 16 hours a day, with Nepal meeting only 80% of its electricity demand from 2008-2016. A World Bank working paper estimated that this shortage of electricity supply or load shedding reduced Nepal’s Gross Domestic Product (GDP) by more than 6% during those years.

For business owners such as Biswas Dhakal , the Founder of F1Soft and ESew a, Nepal’s pioneering mobile wallet, the memory of power cuts bring to mind a stressful period. “The power cuts compromised productivity of 300 people in my organization alone - imagine how much that affected productivity of the country as a whole,” he says. The time that he should have spent in productive pursuits was spent in strategizing procurement and management of diesel, to run generators and back-up generators. “We had to ensure a digital presence 24/7, which meant our expenses in diesel shot up to NRs. 200,000 (Approx. 1700 USD) per month,” he elaborates.

But there have been recent breakthroughs in the electricity sector that have elated households and enterprises alike. Residential load shedding ended since early 2017, and there has been no industrial load shedding since early 2018 . Nepal Electricity Authority (NEA) , the country’s power provider, became profitable after 10 years of continuous losses, and declared profits of NRs 7.20 billion in 2017/18 . NEA is now embarking on an ambitious plan to connect all 77 districts to the national grid within two years.

What made this major turnaround possible?

Reforms and Results

The changes in the electricity sector can be pinpointed to reforms begun in early 1990s, that regained momentum in recent years. The 1992 Electricity Act allowed the entry of Independent Power Providers (IPPs) in the country, which resulted in an increase in electricity supply. The Electricity Tariff Fixation Commission established in 1995 was a step ahead in regulating the retail tariff rate – which was increased after a decade in 2011.

But the real gamechanger started in 2016, with the then Ministry of Energy (MoE) declaring the decade of 2016-2026 as the National Energy Crisis Reduction and Electricity Development Decade. An Emergency Action Plan was put into place to deal with the energy crisis. A new National Transmission and Grid Company, Generation Company, and Power Trading Company were also established in 2016. The Electricity Regulatory Commission Act in August 2017, and an ambitious Energy White Paper in 2018 further boosted hopes of a well-managed and forward-looking sector. Starting from 2016, increased outputs from domestic electricity generation, reduced system losses, and increased cross-border transmission capacity for electricity imports from India when needed helped eliminate nationwide load shedding.

Throughout all this, the World Bank’s strategy in the power sector was to support the Government of Nepal’s vision to spearhead improvements and increase efficiency.  In 2011, the Nepal-India Electricity Transmission and Trade Project began with an objective to help establish cross-border transmission capacity between India and Nepal. The commissioning of the 220kV Dhalkebar Substation supported under the project enabled an upgrade of the Nepal-India Dhalkebar-Mazaffapur Transmission Line from 132 kV to the 220 kV, doubling its transmission capacity.

The same year, in a notable move, the World Bank approved its first policy loan, Nepal Energy Sector Development Policy Credit (DPC) , to strengthen finances and governance of Nepal’s energy sector, to support the delivery of reliable, affordable and sustainable power to Nepali people.

The implementation of the financial structuring plan coupled with reduction of system losses, part of the prior actions of the DPC, was one of the key measures that helped turn around NEA’s financial position.

The DPC is the first of a three-part operation that aims to implement policy and institutional measures to overcome challenges to establish large export-oriented hydropower projects and bring about structural reforms. These reforms will lead to loss reduction, increase in imports and domestic generation.     

“Availability of uninterrupted electricity is a relief to consumers and the business community,” says Dhakal, “We can now ensure nonstop service delivery and maximum productivity. The stress of those power-less days has melted away.”

Most recently, the World Bank Group, through the International Finance Corporation (IFC) was among nine international lenders committing to finance the Upper Trishuli-1 Hydropower Project . Once complete, this project will increase Nepal’s domestic energy production by one third from today’s levels.

The Sector Awaits a Surge of Energy  

This powerful transformation, creating hope and optimism in Nepalis, is partly owed to NEA, which has reinvigorated itself to meet the increasing demands and improving the electricity services to 4 million customers. Under the dynamic leadership of NEA management and strong government commitment, NEA has managed to end load shedding, reduce system losses by 10 percent points from its high and stay profitable three years in a row.    

While the turnaround in this short period is impressive, there are plenty of opportunities to be explored in Nepal’s power sector. Only a fraction of the hydropower potential, rated at 43,000 MW, has been explored. Electricity consumption is mostly for residential purposes (84%), while merely 3% use hydropower as their primary energy source. The government has announced an ambitious plan to generate 15,000 MW power in ten years, which is only possible through energy sector reforms to improving the legal and regulatory environmental and enabling the vast investments needed, quadrupling the current investments.  

The good news is that it is on track—the newly established Electricity Regulatory Commission has already issued its first set of guidelines; and the preparation of a new Electricity Act is in full swing. The draft electricity bill was also opened for public comments. All the sector needs now is a fresh and sustainable surge of energy.

Read the latest diagnostic report on Nepal's energy access here .

Read the press release on the report here .

• Nepal Beyond Connections: Energy Access Diagnostic Report Based on the Multi-Tier Framework
• Press Release: Nepal Energy Access Diagnostic Report

Nepal Energy Situation

• Countries Portal
• Countries Group
• All Nepal Articles
• 1 Introduction
• 2.1 Energy Consumption
• 2.2 Energy Consumption on Household Level
• 2.3 Energy Efficiency
• 2.4.1 Biomass
• 2.4.2 Biogas
• 2.4.3 Solar
• 2.5.1 Petroleum Products
• 3.1 Electricity Demand
• 3.2.1 Hydro
• 3.2.2 Solar
• 3.2.4 Opportunities of Cogeneration
• 3.3 Potential of Renewable Energy
• 3.4 Regional Disparities
• 3.5 Power Shortage & Load-Shedding
• 3.6 Demand Forecast & Outlook
• 3.7 Electricity Demand and Supply in the Household Sector
• 3.8 Rural Electrification
• 4.1.1 Nepal Electricity Authority (NEA)
• 4.1.2 Alternative Energy Promotion Center (AEPC)
• 4.1.3 Water and Energy Commission Secretariat (WECS)
• 4.2 Activities of Donors
• 5.1.1 National Energy Strategy (NES)
• 5.1.2 Biomass Energy Strategy (BEST)
• 5.1.3 Energy Efficiency Strategy (EEST)
• 5.1.4 Institutionalizing Energy Efficiency
• 5.2 Tariffs
• 6 References

Coordinates:

27.7000° N, 85.3333° E

Total Area (km²) : It includes a country's total area, including areas under inland bodies of water and some coastal waterways.

Error while fetching data from URL http://api.worldbank.org/v2/countries/NPL/indicators/AG.SRF.TOTL.K2?per_page=100&date=2000:2024&MRV=5 : $2. There was a problem during the HTTP request: 502 Bad Gateway Could not get URL http://api.worldbank.org/v2/countries/NPL/indicators/AG.SRF.TOTL.K2?per_page=100&date=2000:2024&MRV=5 after 3 tries.

Population: It is based on the de facto definition of population, which counts all residents regardless of legal status or citizenship--except for refugees not permanently settled in the country of asylum, who are generally considered part of the population of their country of origin.

Could not get URL http://api.worldbank.org/v2/countries/NPL/indicators/SP.POP.TOTL?per_page=100&date=2000:2024&MRV=5 after 3 tries. ()

Rural Population (% of total population): It refers to people living in rural areas as defined by national statistical offices. It is calculated as the difference between total population and urban population.

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GDP (current US$) : It is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources.

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GDP Per Capita (current US$) : It is gross domestic product divided by midyear population

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Access to Electricity (% of population) : It is the percentage of population with access to electricity.

Could not get URL http://api.worldbank.org/v2/countries/NPL/indicators/EG.ELC.ACCS.ZS?per_page=100&date=2000:2024&MRV=5 after 3 tries. no data

Energy Imports Net (% of energy use) : It is estimated as energy use less production, both measured in oil equivalents. A negative value indicates that the country is a net exporter. Energy use refers to use of primary energy before transformation to other end-use fuels, which is equal to indigenous production plus imports and stock changes, minus exports and fuels supplied to ships and aircraft engaged in international transport.

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Fossil Fuel Energy Consumption (% of total) : It comprises coal, oil, petroleum, and natural gas products.

Could not get URL http://api.worldbank.org/v2/countries/NPL/indicators/EG.USE.COMM.FO.ZS?per_page=100&date=2000:2024&MRV=5 after 3 tries. no data

• Introduction

Nepal has no known major oil, gas, or coal reserves, and its position in the Himalayas makes it hard to reach remote and extremely remote communities. Consequently, most Nepali citizens have historically met their energy needs with biomass, human labor, imported kerosene, and/or traditional water-powered vertical axis mills, yet per capita energy consumption is thus “startlingly low” at one-third the average for Asia as a whole and less than one-fifth the worldwide average. In 2010, Nepal’s electrification rate was only 53 percent (leaving 12.5 million people without electricity) and 76 percent depended on fuelwood for cooking (meaning 20.22 million people placed stress on Nepali forests for their fuel needs). This situation has led some experts to call the country’s energy portfolio “medieval” in the fuels it uses and “precarious” in the load shedding that occurs throughout Kathmandu, due to an imbalance between electricity supply and demand. Nepal, however, has all it needs to escape these problems. Large markets for improved cookstoves, biogas digesters, and solar lanterns exist throughout the country. Independent scientific studies have calculated that the country could meet all if its own energy needs—indeed, even the potential needs of Nepal plus many of its neighbors—if it tapped its solar resources or its hydroelectric resources (and potentially its wind resources). These efforts could be complemented with attempts to strengthen energy efficiency planning, with significant potential for transmission upgrades and retrofits and more efficient lighting practices. [1]

Energy Situation

Energy consumption.

Nepal's total energy consumption in 2010 was about 428 PJ (10,220 ktoe). New renewable energy sources (excluding large hydropower) such as biogas, micro-hydro and solar energy contributed about 0.7% to the national balance in 2008/09 altogether. Although the share is still small, it has increased by 40 % since 2005.

[1] The use of primary energy sources is distributed as follows: [2]

Between 2001 and 2009, the total energy consumption was growing at a rate of 2.4 % per year on average. Although there is a considerable lack of efficiency in energy use, Nepal accounts for relatively low CO2 emissions compared to other countries in the region. The reason is the high proportion of renewable energy sources (biomass and hydropower) in primary energy consumption. 43.6 % (2009) of Nepalese population has access to electricity; 81.0 % (2012) depend on traditional fuels (wholly or partially). [3]

Energy consumption in economic sectors (2010) [1]

Energy Consumption on Household Level

Percentage of energy types used for cooking in rural [4] and urban [4] areas

82% of population use solid fuels (charcoal, coal, cropwaste, dung and wood) as cooking energy. In rural areas this percentage goes up to 90%, whereas only 33% of the urban dwellers use solid fuels for cooking. [5] [6]

There are several activities ongoing to improve the cooking situation in Nepal.

Impact of Solid Fuel on Health

Total annual deaths attributable to solid fuel use: 7500 persons;

Percentage of national burden of diseases attributable to solid fuel use: 2,7% [7]

According to the Global Alliance for Clean Cookstoves, 85 % of the Nepali population use solid fuels for cooking (mostly wood). [1] ►Go To Top

Energy Efficiency

With about 1 TOE for every $1,000 of GDP, Nepal has the poorest energy intensity among all South Asian countries (IEA, 2012). It thus has very large energy efficiency potential, though the United Nations warns that “energy efficiency efforts in the country are still at its infancy.” The NEA currently pursues a “loss reduction” strategy of rehabilitating 27 feeders and distribution lines, and plans for solar-powered street lamps and replacing incandescent light bulbs with compact fluorescent ones have been discussed, but not fully implemented. Nepal thus has a number of barriers to energy efficiency that it must overcome, including “absence of a legal framework,” “low levels of public awareness,” and “lack of capable human resources.” In this regard, Nepal is in the process of formulating an Energy Efficiency Strategy and establishing an agency to institutionalize energy efficiency.

Renewable Energy

Biomass is by far the most important primary energy source in Nepal. Biomass comprises wood, agricultural residues and dung. 95 % of the biomass is predominantly and traditionally used for cooking and heating purposes in households.

According to estimates by WECS the national biomass balance is in deficit: From 2000 to 2005 the deforestation rate was 2.1 % which was the highest rate in the region followed by Pakistan and Sri Lanka. The estimated wood consumption in 2005 was about 17 million tons. Over-exploitation of wood resources is declared to be approximately 10 million tons. This indicates that only about 40 % of the firewood comes from the sustainable supply. However, there are clear regional differences. In the Terai region, only 19 % of consumption can re-grow sustainably, while this value reaches between 60 % and 80 % in the mountain regions. According to WECS, these figures are not certain and therefore only indicative.

Land Area Covered by Forest: 25.4%

Forest Annual Rate of Change: -1.23% (1990-2005); 0% (2005-2010) [8]

To manage and improve the biomass situation in Nepal, it is designated to include a Biomass Energy Strategy (BEST) in the National Energy Strategy Framework (NES).

The Nepali farming system is heavily dependent on livestock, with at least 1.2 million households owning cattle and buffalo, with technical biogas potential for at least one million household-size plants, 57 percent located in the Terai plains, 37 percent in the hills and 6 percent in remote hills.

According to the Alternative Energy Promotion Center, as of July 2011, 241,920 biogas plants were installed in more than 2,800 Village Development Committees and in all 75 Districts under their Biogas Support Program. In addition, 2,907 biogas plants were installed under the Gold Standard Biogas Project (GSP).

Still, other estimates of Nepali biogas utilization have calculated that potential for family-sized biogas plants, operating on agricultural residues could fuel at least another 200,000 units. [1]

Biogas Technology in Nepal

Nepal has great potential for at least four types of solar energy technology: grid-connected PV, solar water heaters, solar lanterns and solar home systems. Nepal receives 3.6 to 6.2 kWh of solar radiation per square meter per day, with roughly 300 days of sun a year, making it ideal for solar energy.

The country also has a large market for solar water heaters, with 185,000 units installed and operating as of 2009. [1]

Fossil Fuels

Petroleum products.

Petroleum is the second largest energy fuel in Nepal after firewood and accounts for 8% of primary energy consumption in Nepal. All petroleum products are imported from India. The government has signed an agreement with the British company Cairns Energy PLC for petroleum exploitations but the exploitation works have not been initiated up to now.

At the moment, the import of petroleum products is transacted exclusively between the “Nepal Oil Corporation” and the “Indian Oil Corporation”. 75 % of the imports are diesel, kerosene and gasoline. Due to the high energy demand in the country the dependence on petroleum imports is increasing. In 2006, Nepal had to spend 53 % of its foreign currency for importing petroleum products which is almost double than 2001. More than 62 % of the petroleum products are used in the transportation sector. Besides that, petroleum products constitute important energy sources for cooking purposes in households. The price rises during the last years made the import dependency more and more precarious for the economy of the country. The price instability also increased the vulnerability of households, especially of the urban poor, for which kerosene has become the principal source of cooking energy. The amount these households have to spend on kerosene has more than doubled from 2003 to 2009.

In recent years, subsidized fuels for cooking such as Liquefied Petroleum Gas (LPG) have been utilized widely not only in urban but also in rural areas. But due to price rises in international oil markets, fossil fuels have become too costly. In 2010, the Nepal Oil Corporation reports that almost 40% of high-speed diesel is used for electricity generation in captive gensets. As a result, diesel imports have therefore doubled from 2008 to 2010, creating opportunity costs of around NR 41 billion (US$ 490 million) annually. [1]

Coal accounts for 2 % of the total energy consumption and is almost exclusively consumed by the industrial sector, primarily for heating and boiling processes in brick, lime and cement production as well as in steel processing. Apart from some minor coal reserves, coal for industrial needs is imported from India. In the year 2008/09, Nepal imported about 293,000 tons of coal.

Electricity

The state owned Nepal Electricity Authority (NEA) is responsible for the electricity supply through the national grid. Electricity supply is limited to 43.6 % of the population (2009) [3] which lives mainly in urban areas. Only 8 % of people in rural areas have access to electricity. The low level of electrification hampers both economic development and access to information and education in rural areas.

Beside the national grid, thousands of small installations (diesel gensets, solar home systems, small island mini grids etc.) are installed in Nepal. Therefore, the NEA serves only 15 % of the total population of Nepal. For this small number of customers, average electricity supply is less than eight hours per day, with load shedding accounting for up to 16 hours during winter. In December 2008 the Nepal Government declared a “national energy crisis” and approved an Energy Crisis Management Action Plan. In January 2009, things got even worse as drought in one part of the country reduced water available for hydroelectricity generation, and floods in another part breached the embankments of the Koshi River, toppling a crucial transmission line importing power from India. Such events provoked the World Bank to declare that “Nepal is experiencing an energy crisis of unprecedented severity, caused by years of underinvestment and sharp growth in electricity demand.”90 Other recent studies have concluded that “Nepal has strikingly low levels of access and electricity consumption compared to many other developing countries.” [3]

Electricity Demand

The electricity consumption and the number of consumers increase at a rate of approximately 9 % per year, according to the Nepal Electricity Authority (NEA). Because of increasing household consumption, the evening peak demand has risen dramatically. Due to the continuously rising demand and stagnation in creating additional power generation capacities, a noticeable shortage of power supply since 2007 has been the consequence, which forced the NEA in early 2009 to cut power for up to 20 hours per day in some regions including urban centres.

The NEA as the major electricity utility faces an immense increase in electricity demand, whereas at the same time production and transmission capacities are limited. Though, ambitious development targets are announced by politics, the development of plants and transmission lines cannot keep up with economic development and its induced demand increase.

Between 2005 and 2014 (estimated figures) peak demand has more than doubled from 557 to 1200 MW. In the same period of time annual electricity production increased from 2642 GWh to 4631 GWh. Out of these, 3558 GWh have been produced domestically, while 1072 GWh have been imported from India.

Generation & Installed Capacity

Production is heavily dependent on hydropower, as nearly 93% of the total electricity will be generated by either NEA-owned or private hydropower plants in 2013 (despite high costs per unit installed due to topography and unfavorable hydrology and geology). In order to meet the growing hunger for more electricity, imports from India have become more important during the last decade. In 2011 they accounted for 18.42 % of total energy production. Whereas private and state-owned hydropower generation has doubled in the last ten years, power imports from India are 4 times higher now (from 266 GWh in 2001 to 1072 GWh in 2013). [10]

A similar picture can be drawn in terms of installed generation capacity. Currently, 733 MW out of 782 MW installed capacity is hydropower. Around 478 MW of hydropower capacity is NEA-owned, while 255 MW is privately owned and operated. Due to rising fuel prices two diesel power plants with a total installed capacity of 53.4 MW were almost abandoned within the last years. Following figure gives a comprehensive overview on the installed capacity by fuel type. [10]

One major technical barrier to fully harnessing Nepal’s hydroelectric potential is the country’s hydrology. The rugged and mountain alpine terrain endows Nepal with plentiful moving water, but the South-West monsoon delivering it is inconsistent. About 80 percent of the country’s rain occurs from June to September, the remaining 20 percent falls as snow during the dry season. This mismatch between when water is available and when it is needed year-round to generate hydroelectricity creates a complicated engineering challenge, leading severe load shedding particularly in winter, of up to 18 hours at times.

A list of installed and planned hydro power plants has been published by Federation of Nepalese Chambers of Commerce and Industry (FNCCI):

A prevalence of water with high rates of silt and lack of sufficient crews to conduct maintenance lead to an average capacity factor of hydro plant - the amount of time a dam is actually producing electricity - is around 59 %. [3]

943 medium-size solar PV units provide 1.2 MWp of electricity for the communications sector. Solar lanterns, popularly known as solar tuki, with 155,000 units in use as of 2010 constituting 737 kWp of capacity. 225,000 of solar home systems are used throughout Nepal across 2600 villages with an output of 5.36 MWp. [1]

The first wind turbine generator of 20 kW capacity (10 kW each) installed Kagbeni of Mustang Distrcit in 1989 (Within the three months of operation, blade and tower of the wind generator were broken). Other, wind turbines were installed in Chisapani of Shivapuri National Park and the Club Himalaya in Nagarkot, both of which are not functional anymore.Within the Asian Development Bank Renewable Village Program, two 5KW wind turbines in Dhaubadi village of Nawalparasi District were installed. [11]

Opportunities of Cogeneration

There are eleven sugar mills in Nepal crushing approximately three million tons of cane annually. All the mills are equipped with bagasse cogeneration plants for captive electricity and steam needs. Through updates of their captive plants. Nepal’s sugar mills could generate significant surplus power during dry season when power generation from hydropower projects is running low. Even the quickly available potential from the ‘incidental’ option at 20,750 MWh/year is more than double NEA’s current thermal generation and would require only little additional investment. The ‘high efficiency’ option could contribute as much as 18 % of hydropower generation during the dry season (up to 257,886 MWh/year ).

Potential of Renewable Energy

The potential is as follows (UNDP, 2012) [3] :

Total Installed Capacity 710 MW (mostly hydro) Technical Renewable Energy Potential 77,949 MW Annual Total Electricity Generation 3,851 GWh Annual Renewable Energy Potential 226,460 GWh

Notes: 2,100 MW of solar PV, 716 MW of wind, 42,133 MW of hydro. At a capacity factor of 17 percent, those solar facilities would generate 3,127 GWh. At a capacity factor of 30 percent, those wind farms would generate 1,882 GWh. At a capacity factor of 60 percent, those dams would generate 221,451 GWh.

Nepalese hydropower potential in detail [12] : This potential was not calculated by the cited paper. In fact it was done by Dr. Shrestha, as cited in that paper itself. This number is used bymany research papers. Could you please clarifiy why only this paper was cited and is it okay to do that?

The theoretical overall potential is 83,290 MW and the technical feasible potential is 45,610 MW from which 42,133 MW is economically to realise.

Nepalese Wind potential:

The Renewable Energy and Energy Efficiency Partnership published in 2012 Nepal has substantial wind potential in one study wth at least 200 to 300 MW of capacity possible and extreme wind speeds of 46 meters per second in some areas recorded, with the best sites in the Mustang district (though many of these sites are remote from existing roads and transmission networks). A second, more thorough assessment looked at wind resources in the Annapurna Conservation Area and estimated at least 716 MW of capacity within 10 kilometers of the NEA grid. A third study done jointly by the Department of Geology at Tribhuvan Universityand the Ministry of Physical Planning and Works found at least, 3,000 MW of technical wind potential and 448 MW of potential that could be quickly and commercially exploited. [1]

Regional Disparities

In 2008/09 consumption of electricity was almost balanced between industrial (manufacturing) sector (37.37 %) and households (45.52 %), while the commercial sector consumed only 6.6 %. [13] However, the industrialized and urban areas account for the majority of electricity demand.

Around 28 % of electricity produced in Nepal in the year 2005 was consumed in the Kathmandu Valley alone. [14] The vast majority of electricity is currently consumed in the central and eastern region. Therefore an elaborated system of transmission lines is required as few hydropower plants are situated close to areas of high demand. Middle- (70 MW), Lower-Marshyangdi (69 MW) as well as Kali-Gandaki A (144 MW) as the biggest hydropower projects are all situated in the western part of the country. At the same time, this power cannot be transmitted to the central and eastern part due to bottlenecks in the transmission network between Bharatpur – Hetauda – Dhalkebar. Especially the eastern region has become totally dependent on power imported from India. [15] Besides low generation capacity, the poor transmission network seems to be the major bottleneck in the Nepalese electricity sector.

Power Shortage & Load-Shedding

The general shortage of electricity is manifesting itself in scheduled power cuts (so-called load-shedding), which became an incremental part of power supply in Nepal within the last years. Especially during dry-season Nepal’s dependence on hydropower becomes obvious, forcing the NEA to cut power in Kathmandu up to 16 hours per day (as in April 2011). The situation has even worsened as only two hydropower plants with an installed capacity of 92 MW are storage types, while the rest are run-off river plants. [16]

Follwoing figure illustrates the growing gap between electricity demand and supply and corresponds with the appearance of load-shedding. Since 2006/07 the supply gap increased from 105 GWh to 678 GWh in 2009/10, with the temporary peak in 2008/09 with 745 GWh. Furthermore, the figure shows the seasonal fluctuations due to irregular run-off rivers. Due to glacier melt and intensive rainfall during the monsoon season, electricity supply almost matches the demand between June and October. However, during the winter (where precipitation is far less) generation capacity decreases along with diminishing run-off rivers.

Coping with load-shedding is challenging both the industrial and commercial sector. Despite preferential treatment of the industrial sector (which is partly spared from load-shedding), manufacturing suffers hard from the power crisis. Newspapers report, that manufacturing industries have to cut their production between 25 and 80 % in peak times. Small commercial businesses are similarly affected by load-shedding, as many are dependent on power and are thus forced to use generators or backup systems. [17] The long-term impact of poor power supply is observable as the share of manufacturing sector among GDP declined from 9 to 6 % since 2000/01. [18]

As the construction period for new power generation projects and new import transmission capacities is very long, a rapid improvement of energy supply cannot be expected. An emergency supply through diesel power plants is unrealistic, because of the high power generation costs associated. Therefore, the power supply crisis affects public life and especially economic development negatively. Electricity provides nearly one fourth of the total industrial energy consumption. It has to be expected that more industrial enterprises and service providers make themselves independent from the unreliable public power supply by using diesel generators. Although this costly practice allows at least profitable companies to maintain their business, it places a huge burden on the national economy as additional fuel imports will be necessary.

Demand Forecast & Outlook

According to estimations of the NEA energy demand will grow in the next 17 years with an average annual rate of 8.34 %. The current demand of 4430 GWh annually is expected to double until 2018 and exceed 17,400 GWh by 2027. Along with the growing demand it is projected that system peak load will increase with similar annual growth rates, reaching 3679 MW in 2027. [10]

These estimations require an immense increase in the exploitation of the vast hydropower resources in Nepal. Of the 42,000 MW of economically feasible hydropower resources only the relatively small share of 1.7 % is tapped. [16] Despite long term development plans targeting to reach 10,000 MW of installed capacity by 2020 (according to the 10-years hydropower development plan), current development of the sector draw a rather different picture.

Currently, projects with a total capacity of 547 MW are under construction. NEA projects account for the major share (500 MW) of it. Planned and proposed projects would furthermore increase the capacity by 1422 MW. But considering the relatively slow deployment of new projects in Nepal, it seems unlikely that until 2020 more than 7000 MW of capacity will be contributed by projects that even have not been proposed until now.

Though, actions to upgrade generation capacity within the next ten years were taken, the current situation of load-shedding is likely to persist and may even get worse in the near future. Chamelia and Kulekhani-III with a capacity of 30 and 14 MW respectively are expected to be completed in 2011. However, the first one is situated in the Far-Western region and is thus unable to contribute to the major demand in the central and eastern part of the country. If at all, relief can be expected when the Upper Tamakoshi project is connected to the national grid. With a total capacity of 456 MW it is expected to contribute 2281.2 GWh annually. Developed as a PPP it is scheduled to start production in 2013/14. [10] Considering the estimated growth of energy demand, capacity will hardly meet peak demand even after completion of the three above mentioned projects. Especially, in the dry seasons plants will operate far below their maximum capacity, resulting in load-shedding or an immense increase of power imports from India.

As all projects that are currently under construction are run-off-river types, the Nepalese power sector will be even more dependent on seasonal fluctuations of river flows. Furthermore, it is unclear how climate change will affect water security in Nepal. Linked to many uncertainties, climate change affects run-off rivers by (a) glacier retreat and (b) changes in rainfall intensity and patterns. Projections estimate that run-off could be reduced by 14 % due to climate change, reducing both generation capacity and economically feasible hydropower potential. [19]

Limited financing: Inabilities to procure financing and foreign investment are major barriers. One assessment calculated that if you take all of the available capital in Nepali markets - this for everything, not just energy - and directed it solely at building hydropower projects, you would not even have enough for 200 MW. UNDP surveyed key lenders in the sector and noted that commercial banks and financial institutions are “generally not interested” in investing in energy. A separate evaluation commented that Nepal lacked “long-term debt financing” for energy projects and that the major lenders, the Agricultural Development Bank and National Commercial Bank, have already “maxed out” their lending for microhydro, solar PV, and biogas. A third study remarked that in Nepal, “financial institutions are not readily motivated to invest in renewable energy technologies because of the immature business models, market insecurity and implementation and usage risks.” [3]

Electricity Demand and Supply in the Household Sector

NEA provides approximately 1.5 million households with electricity. The subscriber growth rate was about 10% per year in recent years. Private households account for 43.4 % of national electricity consumption. The average daily household consumption is about 2 kWh which is used mainly for lighting. The other uses being running radios, TVs and to some extent cooking and water heating.

The electricity tariffs for households with 4 to 10 NRs / kWh (approx. 0.04 - 0.10 EUR / kWh) are low to moderate in international comparison. However, because of the high fixed monthly minimum rate households are not motivated to save electricity.

The electricity supply crises leads to cut offs that affect particularly large numbers of consumers, especially during evening peak load hours. The households are disadvantaged in two ways. They have to pay a high monthly minimum rate for an unreliable supply and moreover, they have additional expenses on lighting alternatives such as kerosene lamps, candles or battery lighting. The increasing use of electrical appliances such as refrigerators, water pumps, rice cookers and water heaters lead to power supply overload. Due to the lack of minimum standards for energy efficient appliances and a lack of labeling of the devices regarding their electricity consumption, private households can make no conscious purchase decisions with regard to operation costs of the appliances. Inefficient domestic appliances are usually cheaper than those with a higher energy-efficiency. Therefore, costumers who have no access to information about the operating costs usually buy the cheaper but inefficient appliances. As a consequence, households have to bear high operation costs, and the energy service companies have to make higher power generation capacities available.

A social norm against collecting revenue for electricity further inhibits the profitability of hydro schemes. Many believe hydroelectric facilities should serve the community for free, and that poor families should not have to pay for electricity. The problem with this view is that it creates social opposition to charging rural households for hydroelectricity. [3]

Rural Electrification

Rural electrification in Nepal is very expensive due to the topographical conditions and at the same time the purchasing power of the consumers very low. This unfortunate combination of obstacles is documented in the hard fact that 56.7 % of the Nepalese population has no access to electricity. In rural arears of Nepal, 17 million peole are without electricity. [3]

State funds are insufficient to cope with the problem at hand, therefore in 2003/04 GoN adopted a policy and created the Community Electrification Program to accelerate the electrification process. The model is that communities buy power in bulk from NEA and manage/operate the local system through village organizations called Community Rural Electrification Entities (CREE) .The price the CREEs pay for the bulk power is lower than the lowest consumer tariff. The revenue can be spend for operation and maintenance of the system.

230 communities positively responded to this initiative and have deposited 5 % (as a pre-condition to be part of the program) of the anticipated costs to the Community Rural Electrification Department of NEA. Another 188 agreements have already been signed, and additional 444 community applications have been registered. 116 communities have already got access to electricity under this arrangement (20 % local contribution, 80 % grants from GoN). Among the 230 communities having paid 5 % already, a large number will not be able to comply with their obligation to come up with the remaining 15 %. In addition, the communities usually lack the necessary management and technical skills to operate and manage the system properly.

Institutional Set-up and Actors in the Energy Sector

Public institutions.

Several ministries have mandates affecting energy policy issues and the use of energy. These are the Ministry of Energy (MoE) , the Ministry of Environment, Science & Technology (MoEST) and the Ministry of Industry. The Ministry of Forest and Soil Conservation (MoFSC) plays a role in the biomass sector and the Ministry of Housing (MoH) in the building sector. The Ministry of Commerce and Supplies is responsible for questions regarding the use of fossil fuels.

The Nepal Electricity Authority (NEA), the state-owned utility, dominates the electricity sector and is responsible for all planning, construction, and operation of electricity supply. The NEA also acts as the sole buyer of electricity from all IPPs, and it acts as the agent for all power purchase agreements for energy exchanges with India. The Ministry of Water Resources has the responsibility for all public and private activities related to hydroelectricity supply. The Nepal Oil Corporation has a monopoly to sell and distribute all petroleum products throughout the country. Apart from these three main actors, the Ministry of Energy was recently created in 2009 to “manage Nepal’s energy sector” and “develop energy resources to accelerate development,” including activities such as policy design, planning, regulation, and research. It has within it a Department of Energy Development which is supposed to ensure transparent energy regulations and facilitate private sector involvement. The Ministry of Environment enforces all environmental impact assessments, and coordinates climate change adaptation and mitigation programs. The National Development Council issues macroeconomic policy directives to the National Planning Commission for the development of annual and five-year plans. A Water and Energy Commission, Water Resources Development Council, and Environmental Protection Council all enforce regulations relating to either water resources and permitting or environmental permitting. The Department of Industry, lastly, plays a minor role and has been tasked with overseeing energy efficiency audits and efforts in the industrial sector. Though not an independent, high-level ministry, the Alternative Energy Promotion Center (AEPC), established under the Ministry of Environment, Science, and Technology, gets special mention as it is the “nodal” agency for the promotion and dissemination of all renewable energy in the country, as well as all major off-grid electrification programs. [1]

Civil unrest lasted 11 years and stopped with the formal end of the monarchy in Nepal and the establishment of the “People’s Republic of Nepal” in 2006. as of November 2011, the government was still in “crisis” without an elected Prime Minister. As a result, experts have noted that “for the past three months, the economy has come to a grinding halt, nothing is happening, no funds have been allocated to Nepal Electricity Authority or to energy.” Although the new budget published in November 2010 allocated 16.69 billion Nepalese Rupees to power generation and transmission systems, the Independent Power Producers of Nepal already stated that it is insufficient to bring any projects online. [3]

UNDP has noted that “no single institution” could “provide the horizontal alignment and necessary focus on linkages between energy poverty” and give “overall direction to a collective pro-poor energy strategy”. UNDP also documented a lack of centralized energy planning, duplication of efforts resulting from lack of coordination, and disputes between local and national institutions over energy planning. [3]

Nepal Electricity Authority (NEA)

The state-owned utility NEA was founded in 1985. Its task is the generation, transmission and distribution of electricity and the development and operation of the electricity grid. Furthermore, the NEA is co-responsible in the preparation of energy planning and in education and training of professionals in the field of power generation, transmission and distribution.

The NEA cannot decide on electricity tariffs, but depends on the decisions of the “Electricity Tariff Fixation Commission” (EFTC) . The revenues from electricity tariffs are not cost covering. The last tariff adjustment was approved in 2001. According to its own data, the total indebtedness of the NEA amounted to 7.1 billion NRs (about 700 million EUR) at the end of the financial year 2007/2008.

The NEA is affiliated with the MoE. It is headed by a Board of Directors, whose Chairman is the Minister of Energy. Further members include the Secretary of Finance, the Managing Director of the NEA, two representatives from the industrial / banking / trade and consumer protection sector as well as two energy experts.

Due to the daily power cuts, the NEA is publically criticized. It tries to bridge the gap between electricity demand and supply by importing electricity from India. Therefore, a contract for the provision of 150 MW was stipulated. However, due to technical problems during transmission this capacity currently cannot be retrieved.

Alternative Energy Promotion Center (AEPC)

The Alternative Energy Promotion Center (AEPC) was founded in 1996 to promote the development and deployment of renewable energies and alternative energy technologies in Nepal. It is a semi-autonomous institution formally attached to the Ministry of Environment. AEPC acts as an intermediary institution between the operational level NGOs / private promoters of renewable energy and the policy decision levels in relevant ministries. It`s activities include renewable energy policy formulation, planning and facilitating the implementation of the policies/plans. It also responsible for the delivery of subsidies and financial assistance for off-grid Rural Electrification and also monitoring, evaluation and quality control during the process of electrification projects. Beyond that, AEPC is responsible for the standardization, quality assurance and monitoring of RE programs

The highest body is a board with representatives from government sector, industry sector and non-governmental organizations. . An executive director leads the operational business. AEPC mainly focuses its activities on rural areas. For that purpose it operates so-called “District Energy and Environment Units” in currently 32 districts of Nepal.

AEPC receives basic funding from the Nepalese government. Moreover, it is financed to a large extend by international cooperation projects. Perhaps the most important project was the implementation of the Energy Sector Assistance Program (ESAP), mainly financed by DANIDA and NORAD. This program aimed at improving the rural energy supply (solar home systems, small hydro power plants, biogas plants, efficient stoves). ESAP managed the Rural Energy Fund, which makes the partial financing of investments in rural electrification measures possible. The German KfW participated in the promotion of SHS with a financial contribution to ESAP. Another important program is the Rural Electrification Development Programme (REDP) by UNDP and World Bank which was supporting the government in implementing the Rural Energy Policy in all districts. The Renewable Energy Project (REP), a joint effort by the European Union and the government of Nepal focused on the provision of solar energy systems in rural areas.

Currently, under the NRREP (National Rural and Renewable Energy Programme, 2012-2017) ESAP, REDP and REP were combined with the aim of having a single programme modality. AEPC is the executing agency for NRREP. The programme has three components: Central Renewable Energy Fund, Technical Support, Business Development for Renewable Energy and Productive Energy Use.

Furthermore, there are additional smaller projects focusing on improved watermills, biogas and climate change adaption strategies.

Water and Energy Commission Secretariat (WECS)

The Water and Energy Commission (WEC) was founded in 1975 with the aim of advancing the development of energy and water resources in Nepal in an integral way. Six years later, a permanent secretariat (WECS) was established, which is responsible for the formulation of the water and energy strategy and policy of the country as well as for the implementation of planning processes in the water and energy sectors. Originally, WECS was organizationally affiliated with the Ministry of Water Resources (MoWR), which is by now merged into the new established Ministry of Energy (MoE). The Commission consists of state secretaries of almost all ministries and representatives of the Planning Commission, the Federation of Nepalese Chamber of Commerce (FNCCI), the Nepal Engineering Association, a technical university and two experts from NGOs. Chairman is the Minister of the MoE.

The WECS has the following mandates:

• Formulation of policies and strategies in the sectors of water and energy
• Preparation of legislative proposals in these sectors
• Coordination of policy dialogue in these sectors
• Identification of energy projects
• Analysis of the portfolio of bilateral and multilateral development projects in the sectors of energy and water
• Energy planning and preparation of energy demand studies

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Activities of Donors

Energising Development (EnDev)

Please see the regularly updated web activities of EnDev in Nepal .

Micro Hydropower Debt Fund Component - EnDev Nepal

German Government

implemented by GIZ:

Nepal Energy Efficiency Programme ((NEEP), 2009 - 2017), Advisory towards energy efficiency

with three components: energy efficiency in markets (industries and public infrastructure), clean cooking (with a focus on improved cooking stoves) and policy advise on energy efficiency.

Global Sustainable Electricity Partnership (GSEP) [20]

Energy for Education Project [21]

Project activities:

• Installation of two PV systems and construction of a computer room (including computer) at the local schools in the Matela VDC of Surkhet District in western Nepal and in addition distribution of small solar home systems (clean portable lamps) to students and residents of Matela displace the use of kerosene lamps. Fees for the use of these lanterns and the computers, according to the beneficiary aibility to pay, contribute to the financing of the project.
• Beautiful Nepal Association (BNA), a local NGO, and the Malika U Ma Vi School’s Management Committee are responsible to ensure maintenance and provide supervision to quality and sustainability.
• 10-14th December, 2012, 29 technical training workshop on stand-alone photovoltaic (PV) systems, participants from all over Nepal
• 16 December 2012, groundbreaking ceremony
• 16 April 2013, inauguration ceremony, project completed.

Key objectives:

• To demonstrate the potential of solar energy as a viable power source for improving education in the region.
• To use the energy from photovoltaic system for lighting and to launch a computer program in two rural schools.
• To provide clean portable small solar home systems for students and residents of rural Matela, significantly reducing the emission of toxic gases from the current use of kerosene lamps.

Distribution of Solar Home Systems within SE4ALL initiative [22]

GSEP, in partnership with the Global BrightLight Foundation (GBLF), distributes already (status 03 February 2014) 5000 solar home systems across Nepal within the SE4ALL initiative.

Policy Framework, Laws and Regulations

Energy policy, national energy strategy (nes).

To date, there is no “National Energy Strategy” for Nepal. A draft forwarded to the parliament is not approved, yet. Up to now, the energy policy objectives are set up as a part of the general 5-Year Plans by the National Planning Commission. The energy policy of the current 3-Year Interim Plan (2007/08 – 2009/10) deals exclusively with electricity, and therefore development budgets are allocated exclusively to the development of the electricity sector. Targets for the sustainable use of energy from biomass (as the most important primary energy source) or the efficient use of commercial energy sources are not discussed. Likewise, no opportunities to understand the consumer side as the addressee of an energy policy are considered.

The objectives regarding electricity and energy in the Interim Plan are:

• creation of an environment conductive to investment in the development of hydropower
• ensure reliable and easily accessible electricity services for the majority of the people in rural areas
• completion of ongoing hydropower projects adding 105 MW generation capacity (85 MW by public sector, 20 MW by private sector)
• initiation of construction of new hydropower projects with an additional capacity of 2,115 MW with the objective to abandon the practice of load-shedding in 2013/14
• provision of electricity to additional 10 % of the population (in total, 58.5 %) in 500 additional VDCs through extension of the national grid
• expansion of per capita consumption to 100 KWh

The realization of these objectives is delayed.

The tariffs and prices for electricity and petroleum products are politically determined. They are geared to the lower limit of acquisition costs or not cost covering at all. Tariff increase has been denied to the Nepal Electricity Authority (NEA) since 2001. Therefore, the electricity sale is in deficit and has to be balanced by the state budget. In December 2011 the Nepalese Government finally decided to hike electricity prices and from 15th of January 2012 a 20% increase in power tariffs will be in effect. However, the minimum tariff of 80 NPR per 20 kWh per month will be left unchanged.

From 2008 to 2010, the “Water and Energy Commission Secretariat” (WECS) worked on a “National Energy Strategy”, in whose regard a broad consultation process was undergoing. The budget provided for this by the government was approximately 150,000 EUR. Furthermore, according to statements by the WECS, the formulation of a “National Energy Policy” shall follow after the adoption of the “National Energy Strategy”.

Biomass Energy Strategy (BEST)

In 2013 it was decided that the Alternative Energy Promotion Centre (AEPC) and the Nepal Energy Efficiency Program (NEEP) will prepare a Biomass Energy Strategy (BEST). The Strategy was ready for implementation in 2014. The baseline study therefore tried to cover a wide range of situations in both the supply and demand side of all relevant sectors.

The specific objectives of the baseline study assignment were:

• To provide a comprehensive overview on the baseline situation of the BE related sectors with respect to its diversity of supply sources and end users;
• To analyze major trends over time from earlier studies and their implications in the BE sector of Nepal;
• To analyze institutional responsibilities and challenges in the management of the BE sector;
• To estimate the potential of savings and conservation of biomass resource through the adoption of more efficient technologies;
• To identify possible strategic interventions to improve the productivity and labour efficient access to sustainable biomass energy sources and to improve the adoption and usage of efficient BE technologies
• To provide information on cross cutting issues like governance, poverty reduction, gender and social inclusion, health and climate change and suggest intervention options accordingly.

Energy Efficiency Strategy (EEST)

Since 2011 WECS is drafting an Energy Efficiency Strategy (EEST) supported by NEEP. The “efficient use of energy is a constituent of the national energy strategy of Nepal” is one of the objectives of this programme. Within this backdrop and the defined objective, WECS as an implementing agency for the component is to draft National Energy Efficiency Strategy of Nepal as a part of the “National Energy Strategy".

The approach is including the following points:

• Identify the gaps in strategy, institutions and legal/regulatory measures to develop and adopt energy efficiency measures, and technologies in Nepal;
• Bring in good practices in strategy, institutions and legal/regulatory measures from more advanced countries in the South Asian regions as well as from other regions and analyze their suitability for Nepal;
• Assessment of Energy Efficiency Potential of Nepal;
• Liaise with the relevant government agencies and undertake consultation at relevant stages to develop ownership for the outputs of this assignment.
• Review all relevant documents related to public and private expenditure for energy infrastructure, demand side management and energy efficiency for consistency. The documents may include, but not limited to :

Institutionalizing Energy Efficiency

Nepal has been implementing energy efficiency measures for about two decades in different scales and at different levels, but as of today, does not have any nodal agency for addressing the issues of energy efficiency and leading the process of promoting and improving energy efficiency. The Ministry of Energy is currently working on the drafting of such a nodal government agency for energy efficiency that shall lead the initiation of a regulatory framework and facilitate the setting of energy efficiency promoting policies.

To promote electricity based cooking, the government has waived the custom duty on induction stoves in Nepal such that 700,000 induction stoves have been imported till April 2020 in Nepal but they are mostly concentrated in urban areas. The government is also planning to remove subsidies on LPG and is subsidizign electricity i.e it offers 25% discount on the electricity bills of domestic consumers who consume up to 150 Units of electricity every month [23] . 

• ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 _ Cite error: Invalid <ref> tag; name "UNDP Country brief" defined multiple times with different content Cite error: Invalid <ref> tag; name "UNDP Country brief" defined multiple times with different content Cite error: Invalid <ref> tag; name "UNDP Country brief" defined multiple times with different content Cite error: Invalid <ref> tag; name "UNDP Country brief" defined multiple times with different content Cite error: Invalid <ref> tag; name "UNDP Country brief" defined multiple times with different content Cite error: Invalid <ref> tag; name "UNDP Country brief" defined multiple times with different content Cite error: Invalid <ref> tag; name "UNDP Country brief" defined multiple times with different content Cite error: Invalid <ref> tag; name "UNDP Country brief" defined multiple times with different content Cite error: Invalid <ref> tag; name "UNDP Country brief" defined multiple times with different content
• ↑ Renewable Energy and Energy Efficiency Partnership (REEEP) Clean Energy Information Portal, Energy Profile Nepal (Vienna: REEEP Secretariat, 2012)
• ↑ 3.0 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 _
• ↑ 4.0 4.1 WHO 2010: WHO Household Energy Database Cite error: Invalid <ref> tag; name "WHO 2010" defined multiple times with different content
• ↑ According to WHO 2010 http://apps.who.int/gho/data/?theme=country&vid=14500
• ↑ WHO (2006): Fuel for Life - Household Energy and Health
• ↑ http://rainforests.mongabay.com/deforestation/
• ↑ NEA Annual Report 2014
• ↑ 10.0 10.1 10.2 10.3 National National Electricity Authority (NEA), 2011. A Year in Review, Fiscal 2009/ 2010 . Kathmandu, Nepal. Cite error: Invalid <ref> tag; name "NEA 2011" defined multiple times with different content Cite error: Invalid <ref> tag; name "NEA 2011" defined multiple times with different content Cite error: Invalid <ref> tag; name "NEA 2011" defined multiple times with different content
• ↑ Saroj Dhakal, WindPower Nepal Pvt. Ltd., http://www.renewable-world.org/sites/default/files/Session%201%20Saroj%20Dhakal%20WindPower%20Nepal%20-%20Wind%20Energy%20in%20Nepal_0.pdf
• ↑ Surendra, K.C. et al. (2011). Current Status of Renewable Energy in Nepal: Opportunities and Challenges. Renewable and Sustainable Energy Reviews 15, pp. 4107-4117.
• ↑ Ministry of Finance (MoF), 2010. Economic Survey Fiscal Year 2009 - 2010 . Kathmandu. Nepal.
• ↑ Shrestha, Ram M. and Salony Rajbhandari, 2010. Energy and environmental implications of carbon emission reduction targets: Case of Kathmandu Valley , Nepal. in Energy Policy, Volume 38, Issue 9. September 2010, Pages 4818-4827.
• ↑ The Kathmandu Post, 2011(b). Lack of political will behind outage . published 7/4/2011. Kathmandu, Nepal.
• ↑ 16.0 16.1 Water and Energy Commission Secretariat (WECS), 2010. Energy Synopsis Report . Kathmandu, Nepal. Cite error: Invalid <ref> tag; name "WECS 2010" defined multiple times with different content
• ↑ The Kathmandu Post, 2010. Parsa-Bara industrial area crippled by Power Crisis , Sshankar Acharya. published 31/12/2010. Kathmandu, Nepal.
• ↑ The Himalayan Times, 2011. Power crisis breaks backbone of economy , Kuvera Chalise. published 8/3/2011. Kathmandu, Nepal.
• ↑ Pathak, Mahesh, 2010. Climate Change: Uncertainty for Hydropower Development in Nepal . in Hydro Nepal, Issue No. 6, p. 31 – 34, Kathmandu, Nepal.
• ↑ www.globalelectricity.org
• ↑ http://www.globalelectricity.org/en/index.jsp?p=121&f=373
• ↑ http://www.globalelectricity.org/upload/File/news_release_2014_nepal_solar_lantern_distribution.pdf
• ↑ https://theannapurnaexpress.com/news/can-induction-stoves-offset-nepals-lpg-shortage-2391
• Pages with reference errors
• CES Country

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Mitigating the current energy crisis in Nepal with renewable energy sources

Nepal has been suffering from a serious energy crisis for decades. It has severely affected its economic, social and political developments. Owing to the continuously evolving energy situation in Nepal, and the recent progress in renewable energy technologies, this study aims to provide an up to date perspective on the current energy crisis in Nepal. In particular, the current energy production and consumption profiles are reviewed, and the main factors contributing to a widening gap between the energy supply and demand are identified. These factors concern delayed and overpriced hydropower projects, outdated and insufficient energy infrastructure, transmission and distribution losses, energy theft, deficient energy management, lack of energy conservation, low efficiency of equipment, unsustainable energy pricing strategies and unsatisfying energy market regulations. Other essential factors worsening the energy crisis can be attributed to specific geographical and geopolitical problems, the strong dependence on energy imports, and inadequate exploitation of the vast amounts of renewable energy resources. The status of existing and planned large hydropower projects is summarized. The recent policies and investment initiatives of the Nepalese government to support green and sustainable energy are discussed. Furthermore, a long-term outlook on the energy situation in Nepal is outlined using the energy modeling software LEAP in order to show how to exploit the tremendous renewable energy resources in Nepal. Our findings suggest that renewable resources are crucial not only for mitigating the present energy crisis, but also to ultimately provide energy independence for Nepal by establishing reliable and secure sources of energy.

• 1 No poverty
• 2 Zero hunger
• 3 Good health and well-being
• 4 Quality education
• 5 Gender equality
• 6 Clean water and sanitation
• 7 Affordable and clean energy
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Nepal is facing an unprecedented energy crisis caused by an acute shortage of power and fuel supply. To improve energy security and stimulate economic growth, the government is accelerating the sustainable development of Nepal’s hydropower potential. This publication highlights Nepal’s energy sector performance, major development constraints, and government development plans and strategy. It outlines the future support strategy of the Asian Development Bank (ADB) whose main focus is to make the country’s energy sector a key driver of inclusive economic growth. Linked to ADB’s country partnership strategy for Nepal 2013–2017, this publication provides guidance for future investment and technical assistance operations.

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• DOI: 10.3126/INIT.V2I1.2534
• Corpus ID: 42648554

Energy Crisis and Nepal’s Potentiality

• S. Upadhaya
• Published 19 January 2010
• Economics, Engineering, Environmental Science
• The Initiation

10 Citations

Hydropower – a panacea for energy demands and economic development of nepal, energy and development: assessing the viability of hydroelectricity trade in the himalayas, role of renewable energy technologies in climate change adaptation and mitigation: a brief review from nepal, impact of renewable energy subsidy policy in rural electrification, biomass gasifier electrification projects: case study of nepal.

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Gulliver Effect in Macroeconomic Policies of Landlocked Developing Countries: A Comparative Study

Blackouts in nepal & dynamic pricing, growth and export performance of developing countries : is landlockedness destiny, techno-economic feasibility study of solar based vehicle charging station at tribhuvan international airport, landlocked developing countries : a comparative study, one reference, related papers.

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Article Contents

Introduction, 1 renewable energy in nepal, 2 renewable-energy options for nepal, 3 balancing high levels of solar electricity, 4 government policy, 5 conclusion, conflict of interest.

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100% renewable energy with pumped-hydro-energy storage in Nepal

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Sunil Prasad Lohani, Andrew Blakers, 100% renewable energy with pumped-hydro-energy storage in Nepal, Clean Energy , Volume 5, Issue 2, June 2021, Pages 243–253, https://doi.org/10.1093/ce/zkab011

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A radical transformation of the global energy system is underway. Solar photovoltaics and wind now comprise three-quarters of the global net new electricity-generation-capacity additions because they are cheap. The deep renewable electrification of energy services including transport, heating and industry will allow solar and wind to largely eliminate fossil fuels over the next few decades. This paper demonstrates that Nepal will be able to achieve energy self-sufficiency during the twenty-first century. Nepal has good solar and moderate hydroelectric potential but has negligible wind- and fossil-energy resources. The solar potential is about 100 times larger than that required to support a 100% solar-energy system in which all Nepalese citizens enjoy a similar per-person energy consumption to developed countries, without the use of fossil fuels and without the environmental degradation resulting from damming Nepal’s Himalayan rivers. Nepal has vast low-cost off-river pumped hydro-energy-storage potential, thus eliminating the need for on-river hydro storage and moderating the need for large-scale batteries. Solar, with support from hydro and battery storage, is likely to be the primary route for renewable electrification and rapid growth of the Nepalese energy system.

Energy is an essential commodity. Rapidly increasing populations and economic growth are causing global energy demand to increase, especially in emerging-market economies. Energy supply is interwoven with global warming, local pollution, national and international security, economic growth and the ability to meet basic human needs.

A radical and rapid transformation to a sustainable global energy system is underway. Solar photovoltaics (PV) and wind now comprise three-quarters of the global net new electricity-generation-capacity additions ( Fig. 1 ). Coal, oil, gas, nuclear, hydro and the other renewables comprise the balance [ 1 ]. Solar and wind energy are vast, ubiquitous, non-polluting and indefinitely sustainable, and accord well with the United Nations Sustainable Development Agenda for affordable and clean energy.

Global net new electricity-generation-capacity additions in 2020 [ 1 ]

The deep renewable electrification of energy services allows solar and wind to eliminate fossil fuels, not just from the electricity system. Renewable electrification includes conversion of land transport to electric vehicles; use of electric heat pumps for low-temperature air and water heating; powering of industrial heat with electric furnaces; and, for the chemical industry, replacement of hydrogen from fossil fuels with hydrogen from water splitting.

Many jurisdictions are committing to net-zero emissions by 2050–60 including Japan, the European Union, China, the USA and Korea. Most countries are expected to follow suit in the next few years.

Solar photovoltaics and wind energy are now the cheapest forms of electricity available in regions with good solar and wind resources, respectively, except perhaps for very favourable hydroelectric sites. A dramatic acknowledgement of the rapid pace of change in world energy markets comes from the 2020 World Energy Outlook from the International Energy Agency, which states that ‘[f]or projects with low cost financing that tap high quality resources, solar PV is now the cheapest source of electricity in history’ [ 2 ].

Fossil fuels produce three-quarters of global greenhouse gases [ 3 ]. According to the Intergovernmental Panel on Climate Change, to limit global warming to 1.5°C, rapid reductions in greenhouse-gas emissions are required [ 4 ]. Importantly, developing countries such as Nepal can bypass a fossil-fuel era and transition directly to zero-emission renewables at low cost.

Novel themes in this paper are that:

Nepal can meet all of its energy needs from solar PV by covering 1% of its area with panels, even after (i) Nepal catches up with the developed world in per-capita use of energy and (ii) all energy services are electrified, eliminating fossil fuels entirely (an increase of 70-fold in electricity production).

Identification of off-river pumped hydro as a vast, low-cost, mature storage opportunity; Nepal has 17 times more off-river pumped-hydro-energy-storage sites than it will ever need even under the zero-fossil-fuel scenario described above, thus eliminating the need for on-river hydro storage. Pumped hydro is much cheaper than batteries for overnight storage.

Damming of Nepalese Himalayan rivers is unnecessary because PV is competitive with and vastly more available than hydro and can be more readily implemented at both small and large scales.

Section 1 of this paper describes a scenario in which Nepal catches up with developed countries in terms of per-capita energy consumption. Section 2 describes the renewable-energy options for Nepal to meet this consumption and identifies solar PV as by far the most prospective. Section 3 describes methods of balancing high levels of solar PV. Section 4 summarizes policy implications and the conclusion follows.

Traditionally, energy from biomass has dominated the domestic energy supply for most people in Nepal and oil was important for motorized transport. However, electricity is becoming increasingly important. In the past, most developing countries followed a path of increasing dependence on fossil fuels as they industrialized and raised living standards for their populations. In the future, most developing countries will transition directly to solar and wind energy, and bypass a fossil-fuel era.

Nepalese people can expect to achieve a high living standard over the course of the twenty-first century. The per-capita electricity consumption in developed countries such as the European Union, Japan, China, the USA, Singapore and Australia is 5–15 megawatt-hours (MWh) per person per year. In developed countries, complete renewable electrification of all energy services and complete elimination of oil, gas and coal allow the avoidance of most greenhouse emissions. To achieve this, electricity production must double or triple to 15–30 MWh per person per year, depending substantially on the degree of participation of the country in the chemical industry [ 5 ]. Net-zero emissions in 2050 strictly require such a transformation.

Electricity demand in Nepal is rising because supply is being extended to the whole population, per-capita consumption is increasing and the population is growing. We adopt the following assumptions:

(i) that Nepal with catch up with developed countries in terms of per-capita energy consumption;

(ii) that the energy systems of Nepal are fully electrified, including transport, heating and industry, with zero fossil-fuel use; and

(iii) that the per-capita electricity consumption in the second half of the twenty-first century in Nepal will increase to 15 MWh per person per year for a population of 33 million people.

Thus, Nepal’s electricity consumption may reach in the range of 500 terawatt-hours (TWh) per year. This is referred to in this paper as the ‘500-TWh goal’. Of course, the exact number cannot be reliably predicted, but these assumptions are adopted to illustrate trends as Nepal catches up with developed countries in energy consumption. This 500-TWh goal compares with current consumption of electricity in Nepal of ~7 TWh per year [ 6 ].

2.1 Solar energy

Solar energy is by far the largest and most sustainable energy resource in Nepal. The solar resource is two orders of magnitude larger than Nepal will require to meet the 500-TWh goal.

Very rapid reductions in the price of solar PV over recent years has opened up enormous markets in developed and developing countries alike. The solar resource in Nepal is compatible with production of electricity at a cost of US$40 per MWh once the Nepalese solar industry becomes mature, falling to <US$30/MWh in 2030 [ 7 ].

The speed of development of the global solar industry, arising from rapid price reductions, is so fast that previous reports on energy options require updating.

Nepal is located at a latitude of 26–30° north latitude, with the sun shining for >300 days per year. It has relatively high insolation of an average of ~17 megajoules per m 2 per day (1.7 TWh per km 2 per year) and national average sunshine hours of 6.8 per day. This makes Nepal a country with moderately high solar potential [ 8 , 9 ]. All parts of the country are reasonably favourable for solar energy, as shown in Fig. 2 .

Global horizontal irradiation and solar photovoltaic power potential in Nepal (redder is better) [ 8 ]

A solar-energy-system conversion efficiency of 20% (utilizing solar cells with efficiency of 25% [ 10 ]) will soon become available, which corresponds to 0.2 gigawatts (GW) per km 2 . This assumes close-packing of solar modules to form a dense array. Nepal has an area of 148 000 km 2 . Thus, if Nepal were covered entirely by solar cells, it could generate 50 000 TWh per year (148 000 km 2 × 1.7 TWh per km 2 per year × 20% conversion efficiency). The nominal power capacity would be 30 000 GW.

This approximate calculation shows that Nepal can generate 100 times more solar electricity than would be needed for the 500-TWh goal of high per-capita consumption (similar to developed countries) coupled with the complete electrification of energy services and the elimination of fossil fuels. Equivalently, 1% of Nepal (1500 km 2 ) would need to be covered by solar panels.

Under our assumption of electricity consumption of 15 MWh per person per year, the area of land required for solar collectors is 44 m 2 per person with a nominal power capacity of ~9 kilowatts (kW).

Large amounts of solar PV can be accommodated on residential, commercial and industrial rooftops, building facades and in other urban areas. The global per-capita leader in rooftop solar, Australia, has 3 million rooftop solar systems with a combined capacity of ~13 GW (550 Watts (W) per person) [ 11 ]. Most of this is located on residential buildings, although other sectors are rising quickly. The amount of rooftop solar in Australia may increase to 3.7 kW per person according to the Step Change scenario of the Australian Energy Market Operator [ 12 ]. This represents 40% of the 9-kW-per-person target required to meet the 500-TWh goal for Nepal.

Solar PV systems can be located in food-growing areas (Agrivoltaics, APV) whereby widely spaced solar panels shade 10–30% of the crop or pasture but cause only a modest loss of production because the reduction in sunshine is offset by a reduction in wind speeds and evaporation rates [ 13–22 ]. Maize, wheat, millet, jute, sugarcane, tea, tobacco, coffee soybeans, beans, lentils, fruit and vegetables may all be suitable for APV in Nepal. However, rice farming appears to be incompatible, since partial shading proportionally reduces rice output. Animal husbandry (cows, buffaloes, goats, sheep, pigs, horses) is also compatible with APV. APV offers a second cash crop for farmers. Detailed research will be required to establish the trade-off between agricultural and electricity yields for each crop, and hence to determine the amount of electricity that could be provided through APV. The area of land devoted to agriculture in Nepal is ~41 000 km 2 [ 23 ]. Thus, an average shading of 3.6% of agricultural areas by APV is sufficient to meet the 500-TWh goal for Nepal.

Substantial numbers of panels may be accommodated on non-forested lower slopes of hills and mountains with a southerly aspect. Waste land can become productive through the installation of PV systems, including around the transport infrastructure. For example, the area occupied by roads in an advanced economy is a substantial fraction of the required solar PV area per person (44 m 2 ) to meet the 500-TWh goal. Some solar systems can be floated on lakes and hydroelectric reservoirs, although the area available is small compared with the 1500-km 2 target. Further work is required to quantify these opportunities.

To reach 9 kW of solar panel per person by 2065, Nepal would need to install 200 W per person per year (~6 GW per year). To put this in perspective, Australia is currently installing 250 W per person per year of new solar- and wind-energy systems ( Fig. 3 ) [ 1 ]. This is 10 times faster than the global average and 4 times faster than in the USA, China, Japan and Europe. About one-quarter of Australian electricity is now sourced from solar PV and wind, and this figure is tracking towards 50% in 2025. The state of South Australia sourced 60% of its electricity from solar PV and wind in 2020 [ 24 ] and is heading towards 100% by 2025. Plainly, rapid transition to solar and wind energy is feasible.

Deployment rate of renewables (principally solar PV and wind) in various regions in terms of Watts per person per year [ 1 ]

As the price of solar-energy systems continues to fall, solar energy becomes ever more affordable. The price of utility-scale solar systems (tens to hundreds of megawatts) in countries that have large-scale annual deployment (and have thereby achieved critical mass of people and capability) is ~US$0.7 per Watt and is likely to decline to <US$0.4 per Watt in 2030 [ 10 ]. These prices are affordable in most countries, including Nepal. However, prices for infrequent construction within a country can be much higher due to immature supply chains.

Solar PV is unique among energy technologies in that small-scale (kilowatts) and large-scale (gigawatts) installations are built using the same basic unit (a solar panel) and have similar energy costs. A roof-mounted system has low land, engineering, approval and financing costs while a large-scale system has low panel and deployment costs. Electrification can proceed both by grid extension and through house- and village-scale small solar systems with battery storage.

Small-scale solar systems for individual households or villages provide major benefits for lighting, telecommunications, water pumping, grain grinding and refrigeration. When many people in a village deploy household solar, then microgrids can form, comprising distributed solar panels and battery storage, which can gradually increase in scale and power by interconnection with other microgrids, eventually leading to widespread interconnection [ 25 , 26 ]. Larger-scale systems can power cooking, heating, industry and transport, particularly in combination with extension of the electricity grid to most citizens.

Nepal’s currently installed solar capacity is ~60 MW (2 W per person) [ 27 ]. Much of this is in the form of 1.1 million small home systems that are not grid-connected. Institutional solar PV systems up to a capacity of 2 kW have been installed in thousands of institutions such as schools, health posts and homestays. More than 10 000 solar streetlights have been installed [ 28 , 29 ].

The construction of Nepal’s largest solar-energy plant with an installed capacity of 25 MW began in April 2018 in the Nuwakot district and is now in the early stage of producing electricity [ 30 ].

An important advantage of solar is that millions of individuals can acquire and own their own rooftop solar system. These systems can connect to a battery or the grid, or both. This sidesteps institutional barriers at the national level.

To put this in perspective, Australia has a population of 25 million, only a little less than Nepal. Most people live in south-east coastal cities where the annual solar resource is similar to that of Nepal. According to the government’s Clean Energy Regulator, Australia is installing 3 GW per year of new rooftop solar systems and there is now a total of 3 million rooftop solar systems with a combined capacity of >13 GW [ 11 ]. Individuals install these systems because they compete with retail prices, which are much higher than wholesale prices.

2.2 Hydropower

Hydropower is one of the two sources of energy in Nepal that can play an important role in Nepal’s future economy. However, the hydro potential is a tiny fraction of the solar PV potential. Table 1 represents the annual energy estimate and power potential of four major river basins: Narayani, Saptakoshi, Karnali and Mahakali of Nepal. Though Saptakoshi is the largest river basin of Nepal, the Narayani river basin has the largest annual energy production of ~113 TWh and power potential of ~18 GW [ 31 ].

Annual energy and power potential of major river basins of Nepal [ 31 ]

Presently, hydropower plants with a combined capacity of 1.2 GW have been installed in Nepal. Most are run-of-river with output varying according to rainfall and provide little storage [ 32 ].

Approximately 50% of the total hydropower assets are owned by the Nepal Electricity Authority, a government agency, and the rest is owned by independent power producers. An important achievement in 2018 was the commissioning of a new Dhalkebar Muzaffarpur cross-country transmission line between Nepal and India, giving an additional boost to Nepal’s energy-trading system [ 33 ].

It is important to understand the environmental destruction usually associated with large-scale hydropower projects, particularly if they include energy storage in large reservoirs. These include displacement of people, flooding of farmland, destruction of river ecosystems, forest clearance and methane release due to the decay of a large number of plants and organic residues.

Importantly, the cost of solar energy has fallen below all but the most favourable hydroelectric systems.

2.3 Wind energy

Nepal has a low potential for the large-scale utilization of wind energy ( Fig. 4 ) [ 34 ]. Typical expected capacity factors are <20% except on the high ridges of the Himalayas, which are largely inaccessible for wind turbines. This means that wind energy will be much more expensive than solar energy.

Wind-capacity factors in Nepal (redder is better) [ 34 ]

There is potential for small turbines in some favourable locations. Various government and private organizations are taking initiatives to promote small-scale wind energy in Nepal [ 35 ]. At present, there is no ongoing wind-turbine-installation project that uses wind energy alone [ 36 ]. The Energy Sector Management Assistance Program of the World Bank has had a project since 2015 for the ground-based measurement of wind potential at 10 sites (Mustang (2); Morang; Siraha; Panchthar; Dang (2); Jumla; Ramecchap; Banke) [ 37 , 38 ]. This has allowed reliable wind-power estimation that can be used by potential wind-power developers in Nepal.

2.4 Biomass

Biomass in various forms, including wood, agricultural residue, animal dung and biogas, is an important small-scale energy source for millions of people in Nepal. However, biomass can never be a large-scale source of energy. The primary reason is that the conversion of solar energy into biomass and then into useful energy occurs with very low efficiency—orders of magnitude lower than via solar PV. This means that a great deal of land is required to supply energy services, and this competes directly with food and timber production and with environmental values.

Electricity can readily replace biomass and fossil fuels for heating, cooking and lighting. Importantly, electricity eliminates indoor air pollution. Use of biomass may decline over the next several decades, as has occurred in most other countries as their economies have developed.

Nepal produces a large amount of organic solid waste, manure and sewage sludge along with various types of organic industrial waste. This waste needs to be managed properly to protect the environment. Landfilling is not an environmentally friendly option. Anaerobic digestion of these wastes is an environmentally beneficial and energy-efficient waste-management option to recover biogas (about 60% methane) and digestate sludge as a by-product that is used as an organic fertilizer. This helps Nepal to replace chemical fertilizer and biogas can be used for cooking, heating and industrial applications.

Balancing high levels of variable solar energy over every hour of every year is straightforward. Storage via batteries and pumped hydro allows the daily solar cycle to be accommodated. Sharing power over large areas via high-power-transmission lines spanning Nepal from east to west allows the smoothing-out of local weather and demand variability.

Australia is installing variable solar and wind faster per capita than any other country. Australia only derives ~6% of its electricity from hydro, and hence lacks the smoothing ability of hydroelectric generation backed by large dams. In response, Australia is deploying multiple gigawatts of new off-river pumped hydro, gigawatt-scale batteries and new gigawatt-scale transmission [ 39 ]. Large-scale demand management is also being deployed through pricing structures to encourage the transference of consumption to times of excess renewable-energy availability.

3.1 Pumped-hydro-energy storage (PHES)

PHES entails pumping water from a lower to an upper reservoir when excess solar energy is available and allowing the water to run down through a turbine at a later time to recover the energy [ 40 ]. Typical round-trip efficiency is 80%.

PHES comprises ~95% of global electricity-storage power (~170 GW) and a higher fraction of storage energy [ 41 ]. Most existing pumped-hydro systems are associated with river-based hydroelectric projects with large reservoirs. This generally entails flooding large areas of land.

PHES systems can be located away from rivers. Since most of the land surface of Earth is not adjacent to a river, a vastly larger number of potential sites are available for off-river (closed-loop) PHES compared with river-based PHES. Off-river PHES comprises a pair of reservoirs (20–500 hectares (Ha)), separated by a few kilometres, but at different altitudes (200–1200 m altitude difference or ‘head’) and connected by a pipe or tunnel ( Fig. 5 ). Water is pumped uphill on sunny/windy days and energy is recovered by allowing the stored water to flow back through the turbine. The water oscillates indefinitely between the two reservoirs.

Google Earth synthetic image of a gigawatt-rated off-river PHES system [ 40 ] at Presenzano in Italy, showing the two reservoirs (upper right and lower left) with a head of 500 ms (vertical scale is exaggerated)

For example, a pair of 100-Ha reservoirs with a head of 600 m, an average depth of 20 m, a usable fraction of water of 90% and a round-trip efficiency of 80% (accounting for losses) can store 18 gigalitres of water with an energy potential of 24 GWh, which means that it could operate at a power of 1 GW for 24 hours. These reservoirs are very small compared with river-based hydros. Water requirements (initial fill and evaporation minus rainfall) are very small compared with a comparable coal-fired power station (cooling tower). It amounts to a few square metres of land per person for the 500-TWh goal, which is much less than the land needed for the associated solar PV systems and very much less than the land alienated by an equivalent river-based system.

Nepal has enormous potential for off-river PHES. The Global Pumped Hydro Storage Atlas [ 42 , 43 ] identifies ~2800 good sites in Nepal with combined storage capacity of 50 TWh ( Fig. 6 ). To put this in perspective, the amount of storage typically required to balance 100% renewable energy in an advanced economy is ~1 day of energy use [ 44 ]. For the 500-TWh goal, this amounts to ~1.5 TWh.

Hundreds of 50-GWh off-river pumped-hydro sites in Nepal [ 42 , 43 ]

Seasonal variation in solar-energy supply in Nepal is moderate, fluctuating from 75% of the mean in winter to 125% in spring [ 9 ]. This means that significant seasonal storage may be required. A simple analysis of data in [ 9 ] suggests an upper bound in seasonal storage of 50 TWh, which could be accommodated with off-river pumped-hydro storage [ 40 ]. In practice, far lower storage would be needed.

The amount of storage needed is a trade-off between the cost of the storage and the cost of providing additional solar generation to cover winter. The latter implies substantial excess solar electricity in summer. Because the cost of solar-energy systems continues to fall, the economic optimum is likely to favour the overbuilding of solar rather than the deployment of large amounts of seasonal storage.

Interconnection with neighbouring countries to the north and south, where large wind-energy resources are located, could substantially reduce the need for seasonal storage. Excess summer solar generation can be used for underground seasonal thermal storage and can be exported to neighbouring countries.

3.2 Batteries

Batteries have a typical round-trip efficiency of ~90% for battery chemistries based on lithium [ 45 ]. Batteries are being deployed at the gigawatt scale around the world to support rising levels of wind and solar. For storage-time periods of seconds to hours, batteries have an economic advantage. For several hours, overnight and seasonal storage, pumped hydro is much cheaper. Batteries and pumped hydro are complementary storage technologies.

3.3 Hydrogen

Hydrogen production in Nepal is unlikely to be significant. Hydrogen or hydrogen-rich chemicals such as ammonia could be used to store and transport energy in Nepal. However, this is unlikely to occur because the efficiency is very low compared with those of batteries, pumped hydro and thermal storage, which unavoidably translates into high costs.

Hydrogen can be sustainably produced using renewable electricity to electrolyse water. Hydrogen is difficult to store. Options include liquefaction at very low temperatures and conversion to a more tractable chemical such as ammonia. Conversion of hydrogen energy to a useful form such as electricity or motive power is a low-efficiency process. Typically, the round-trip efficiency of electricity–hydrogen–electricity is 20–30% [ 46 ] compared with 80–90% for batteries or pumped hydro. Basic physical constraints mean that hydrogen storage can never have a high round-trip efficiency. This is a large economic barrier to the use of hydrogen as an energy-storage medium.

It is difficult to see how hydrogen could compete with batteries for short-term storage because batteries react in milliseconds to grid disturbances and have a 90% round-trip efficiency. It is difficult to see how hydrogen could compete with pumped-hydro storage for overnight and longer storage because pumped-hydro storage has an 80% round-trip efficiency and is mature and already low-cost.

Electric vehicles are being produced at the multi-million scale per year. In contrast, hydrogen-powered vehicles have a miniscule market share. The enormous advantage of incumbency means that electric vehicles are likely to dominate land transport in the future, which eliminates the automotive market for hydrogen. This includes heavy vehicles and long-distance transport. For example, the Tesla electric semi with a 35-tonne load has an expected range of ≤800 km (similar to the width of Nepal) [ 47 ].

Hydrogen is needed in the chemical industry for the synthesis of materials such as fertilizers, explosives, plastics, synthetic jet fuels and the reduction of iron oxide. Nepal is unlikely to play a significant part in the international hydrogen chemical industry because other countries have far better wind and solar resources and land availability, and will be able to produce hydrogen much more cheaply.

Government energy roadmaps in many countries are being overtaken and rendered obsolete by a sustained rapid decline in the cost of solar energy and sustained rapid growth in solar-energy deployment. New solar-energy-generation capacity is being deployed about twice as fast as the net new coal-, gas-, oil-, nuclear- and hydro-generation capacity combined. In leading countries such as Australia, solar and wind comprise 99% of the new generation capacity [ 1 ].

The demonstrated pathway to high levels of solar deployment in countries with leading per-capita deployment rates such as Australia and Germany is two-fold: deployment of millions of small residential rooftop solar systems of a few kilowatts each and the parallel development of multiple 10- to 500-MW solar farms. The experience gained is synergistic, since there is much in common between the markets.

Early deployment is relatively expensive because of the initial lack of skill and supply chains coupled with the perceived risk due to inexperience with solar technology. However, it is important to look beyond the initial high prices to understand the low and falling cost of solar energy in a mature market that has gained critical mass.

Government and international support for a few hundred megawatts of rooftop solar and solar farms in Nepal will help to overcome the initial hurdle, leading to rapidly increasing solar infrastructure and deployment skill, and a rapidly declining solar-electricity price.

Government can leave the development of solar farms and solar rooftop systems to the private sector. However, there is an important government role in facilitating adequate transmission and storage. In particular, government has an important role in selecting and facilitating the construction of several off-river PHES systems as and when they become necessary.

The federal, provincial and local governments of Nepal have been working for some time in coordination with energy-sector stakeholders of Nepal to promote clean and sustainable energy. The Ministry of Energy, Water Resources and Irrigation is the line ministry having the primary jurisdiction and authority to plan, develop and implement national energy policy and strategy. To ensure the promotion and development of sustainable energy, Nepal joined the UN Secretary General’s Sustainable Energy for All (SE4ALL) initiative in 2012, targeting the provision of clean energy to all by 2030.

Concerning legislation, Part 4 of Article 51 of the Consitution of Nepal (2015) states that the government will adopt policies regarding the protection, promotion and use of natural resources to guarantee appropriate, affordable and sustainable energy to citizens. Nepal has established various relevant strategies and guidelines for the promotion and development of renewable energy. Some of these relevant to large-scale renewable-energy promotion include the White Paper on Energy, Water and Irrigation- Present Situation and Future Prospect 2018 and the Guidelines for Development of Alternative Electricity Connected to Grid 2018. These have elements that seek to support the large-scale promotion of renewable-energy technologies in Nepal. More specifically:

The White Paper on Energy, Water, and Irrigation: Present Situation and Future Prospect, released by the Ministry of Energy and Water Resources and Irrigation in 2018, sets targets of increasing household electricity usage to 700 kWh within 5 years and 1500 kWh within 10 years, and to have electric cookstoves in all households by 2030. It also aims to promote a renewable-energy mix mainly from solar, wind and biomass to reduce dependence on a single energy source and to improve energy security.

As per the Guidelines for Development of Alternative Electricity Connected to Grid 2018, published on 8 February, people can feed electricity generated from solar, wind and biogas plants into the national grid and get paid a fixed amount of money per kilowatt hour of energy. The generation licence will have a validity of 25 years and the Nepal Electricity Authority will pay producers US$62/MWh (1 USD = NRs 116 (exchange rate in February 2021)) [ 48 ].

This is an attractive price once the solar PV industry is mature enough to enable low costs. These policies and responses will require extensive modification once the low prices available from a mature solar industry in Nepal become available.

Nepal has good solar resources by world standards and moderate hydro resources, but negligible wind- and fossil-energy resources. The solar-energy resource is two orders of magnitude larger than the hydro resource. Solar energy is likely to be competitive with new hydro in Nepal. Government energy roadmaps made earlier than 2020 are largely outdated by the rapid progression of solar.

Solar collectors equivalent to ~1% of Nepal’s land area are required to allow Nepalese citizens to have the same per-capita energy consumption as those in developed countries and with zero fossil-fuel utilization. This includes the electrification of transport, heating and industry. These panels can be accommodated on rooftops, in conjunction with agriculture and on lakes and unproductive land.

Since most existing Nepalese hydro is run-of-river, substantial new storage is required to support a solar-based energy system. Nepal has enormous potential for the deployment of off-river PHES systems, which have a much lower environmental and social impact than river-based hydro storage.

The economic advantage of solar PV over fossil and hydro energy in a mature and competitive market is compelling. However, several factors can impede the rapid deployment of solar PV. Perhaps the most important is the relatively high cost of solar until the critical mass of skilled people and supply chains is obtained—then costs will fall rapidly towards international norms. Another important barrier can be unnecessary regulatory constraints on private citizens and companies feeding solar electricity into the grid, often based on spurious and thoroughly outdated technical arguments.

The government of Nepal can unlock the potential of solar PV by providing support for several tens of thousands of rooftop solar systems and several 10- to 100-MW solar farms in order to establish supply chains and a critical mass of knowledge. This support can be in the form of advantageous feed-in tariffs to unlock private capital. International experience shows that, once a private market is well established, prices for solar electricity fall rapidly. The main ongoing role for government is to facilitate the provision of adequate transmission and storage capacity. The private sector could provide the capital for this infrastructure through a regulated return-on-capital investment.

This study is at a ‘bird’s-eye’ level and does not delve into the detail of the best way to establish a vibrant solar market in Nepal. Future studies could identify the amount of solar electricity that could be harvested from Nepal’s rooftops; undertake analysis of the best sites for solar farms, off-river pumped-hydro sites and transmission corridors; conduct hour-by-hour studies over many years to determine the amount of storage needed to support high levels of solar electricity; investigate agrivoltaics in Nepal in detail; and identify social, regulatory and economic factors that will enhance or impede the rapid deployment of solar energy in Nepal.

None declared.

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Energy Crisis and Nepal’s Potentiality

2010, The Initiation

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