Micro–Hydro Power Plant: A new prospect of Nepal’s Electric Power Market

Indra Kumar Maharjan
Nepal - 26/09/2004
  Energy is the basic necessity for survival. It is necessary for development activities to promote education, health care, transportation, and infrastructure for attaining a reasonable standard of living, and is also a critical factor economic development and employment. Till today Nepal had no other sources of energy beside the immense water resources. It has been recognized that Nepal’s main natural resources is its abundant hydropower potential. The distinct topography of Nepal with its high hills and more than 6,000 rivers and innumerable rivulets criss-crossing the country provides many opportunities for the development of this field. Nepal is estimated to have theoretical hydro potential of 83,000 MW of which 42,000 MW is economically feasible. (Warnock, J.G., (1989), pp 26-32.)

Electric power plays a significant role in the economical development and technological advancement of societies and it plays a crucial role in human welfare. The supply of energy is often a major constraining factor in the development of a country’s economy. Many developing countries spend a large proportion of their development budgets on energy, and, while the developed nations debate the sustainability of the fossil fuel sources, for many developing countries the sustainability of these energy sources is more immediately a question of funds with which to buy them. This is the case in Nepal.

Nepal faces an ironic situation where electricity is provided to the people in minimal amount, although the country is endowed with immense hydropower resources in the abundant river waters. Nepal’s economically exploitable hydropower potential of 44,000 MW remains virtually unexplored. Effective development is hindered by the lack of development finance, scarcity of local expertise and difficult geology and the inaccessibility of the sites where projects are located. (Malla, B.B. (2001), pp-2)

Electricity demand in Nepal has been on a rapid increase for many years. Currently, the peak load demand of Nepal is about 426 MW, which covers only 18% of the total population of this country. (NEA. (2002), pp-19) Hence nearly 82% of country‘s population, which includes almost all rural areas, is still far from electricity. The growth of consumers is also increasing rapidly with the increase in different industries and use of electrical appliances.

The scope and prospects of the micro-hydro system in Nepal is very high. The national grid, which runs along the densely populated terrain with its higher level of economic activities, cannot be a solution for northern rural hilly areas at present. These areas have very few economic activities and are sparsely populated. This makes grid-fed electricity for these areas economically unfeasible. Hence the importance of MHPP is more stressed.

Traditionally, the development of rural areas, especially the more remote mountain areas, has lagged behind the more popular urban centers, where substantial investment was made to develop adequate urban infrastructure, including the setting-up of special facilities. The rural areas did not even have basic facilities such as drinking water, sanitation, roads, schools, or health centers. Economic and employment opportunities such as industries, local processing of rural products and transportation infrastructure were practically non-existent in the past.

A supply of energy in a suitable form is considered to be one of the main inputs required to raise the standards of living of the people in mountain areas and to minimize damage to the ecosystem. Per capita consumption of-energy has to increase significantly in order to develop the systems and infrastructure necessary for the improvement of living conditions and increase in incomes. At home also, more energy consumed in a suitable form would improve the quality of life drudgery as well as health hazards.

At present, the total installed capacity of the integrated Power System is 584,557 kW, with the largest existing hydro-plant of size 144MW or smaller contributing about 85% to the total system capacity mix. (NEA. (2001), pp 19) only 15% of Nepal’s population currently has access to electricity. In terms of energy, hydropower plants contributes about 71% of the total electricity requirement within the country, 15% is contributed by purchase from India, 8% from thermal generation and 6% being purchased from IPPs.

Demands are changing and consumption of electricity has risen significantly over the past twenty years. The commissioning of Kulekhani 1 and other large hydro stations in the early 1980’s enabled rapid expansion of supply and a dramatic growth in consumption. Hydroelectricity-generation capacity in Nepal has increased approximately two hundred fold over the last thirty years. Total peak demand is expected to increase from 369 MW to 1548 MW during 2005-19, without considering any future export to India. (NEA. (2002), pp-40)

Electricity demand trends indicate that to ensure that the energy supply continues to meet the growing demand; considerable human and financial resources investment is required. At the same time, an unsustainable emphasis on large amount of energy production without due attention to investments for higher energy efficiency and rationalized use of energy may lead to greater losses of resources as well as promote environmental degradation. Hence the fulfillment of the local energy demand can be moreover taken care of by small hydropower and micro-hydro plants. These are turning into a great success in the context of Nepal. Their number has increased significantly in the past few years.

At present Nepal is having a tough time-sharing its financial resources in development projects because of the increasing expenses in security related aspects. So big projects are remote for the time being and also they are costly and have a significantly bad effect on the environment; therefore development of small and micro-hydro is increasing.

With much private involvement in the development of micro-hydro schemes and the availability of the required technical manpower in the country along with the subsidy and financial assistance provided by the HMG/N, the future of electricity market is still to increase.

It is also evident that the domestic demand for electricity will remain diminutive compared to the potential that exists. This obviously requires that Nepal seeks to use its prime resources for applications on a regional basis in South Asia. But the fact is that this potential of the country’s water goes to waste year after year.

At the same time, the role of the private sector in developing this sector is proving costly and is compelling to review the tariff of electrical power, making it highly expensive and confining its use by most of the population.

Still there are many problems related to the electrical power market. The pace of development in hydropower industry is slow in comparison with the growing demand of electrical power. The involvement of private power producers (IPPs) is proving costly and the cost of electrical energy is increasing. Overall, only 18% of the total population has access to electrical power. Even in this there is a great disparity between urban (with 90% access) and rural (with 5% access) areas. The rate of increment of domestic consumers is 1.4% in 1993-2001 while the annual electricity bill has increased by 400%. The high electricity tariff is already choking the demand. (Malla, B.B. (2001), pp-3). Inefficient use of electrical energy is adding to the growing demand. So effective energy conservation and demand management is a necessity. The country has a variety of sites, ranging from major rivers, which can generate thousands of megawatts to the very steep, small streams of the high mountain areas, more suitable to generate in the smaller and micro or mini range capacity. (Karki, Shankar. (2002), pp-1) There is a lack of policy for the development of hydropower industry, which is the main source of energy of our country. The lack of coordination between different institutions working in this field adds to the previously presented issue. There is a need of improving energy efficiency by taking positive action regarding subsidy and tariffs. There are great prospects to expand the market of electricity in the South Asian region by exporting power to the neighboring countries. The trend shows that the need of rural people is greatly fulfilled by small and micro-hydro schemes and a major portion of rural people are attracted to it. But the lack of clear-cut policy, huge system losses and inefficient technical assistance is causing the development rate to be slow. The main feature of the energy sector is the imbalance between energy resources endowment and its current use. There is an excessive dependence on dwindling forests to meet energy demands.

The energy consumption trend in Nepal is found to be one of the lowest in its region. The largest consumption is in households i.e. 91%. Per capita energy consumption is also very low in Nepal, ranking second last in the South Asian region i.e. only 0.3 Toe in the year 1998. The average per capita energy consumption in the South Asian region is about 0.37Toe, and 1.7 Toe is the world’s average in the same year. The per capita consumption of Nepal in last two decades is almost constant, whereas in the case of other neighboring countries like India, Sri-Lanka and Pakistan they are growing. Per capita energy consumption is one of the indicators of the development. (WECS. (1999), pp-6)

Electricity supply has a limited access to 18% of the total population. The total energy consumption in the year 1998/99 in Nepal is the equivalent of 7.6 million tons of oil and the annual average growth of energy consumption in the last 10 years has been about 4.6%. However growth of commercial energy consumption has been high, at about 8.4% per annum for the same period. (WECS, 1999) Despite low energy consumption level, the sustainability of the energy sector is a big challenge with the high population growth rate, excessive dependence on the forest resources, and inefficient use of these resources.

Nepal largely depends upon forests and agricultural reserves for generating electrical power. Indiscriminate use of these could lead to environmental degradation, affecting farmland and livelihood of humankind. The current trend in energy consumption needs to be changed to ensure the sustainable development process of the nation in the long run. In this context alternative energy resources can play a major role. A number of schemes carried out mobilizing alternative energy sources and techniques have had successful outcomes. The widely applied alternative energy technologies are Micro hydropower, solar energy and Biomass energy conversion technology.

At present hydropower comprises about 10% of the total commercial energy consumption in the country. And the role of small and micro-hydro schemes is significant in extending the electrical energy consumption to the rural areas. Due to various factors, the extension of transmission lines to the remote villages where most of the population lives is very costly. So in these cases micro-hydro schemes are playing a crucial role.

In Nepal, small water turbines are a traditional technology. Even today, there is an estimated 25,000 water powered Pani Ghattas operating in remote districts. Micro-hydro has the potential to provide both mechanical and electrical power for rural development in the remote hillsides of the country, where extension of the national grid is not feasible.

The scope and prospects of the micro-hydro system in Nepal is very high. The national grid, which runs along the densely populated terrain with its higher level of economic activities, cannot be a solution for northern rural hilly areas at present. These areas have very few economic activities and are sparsely populated. This makes grid-fed electricity for these areas economically unfeasible. Under these circumstances MHPP have performed satisfactorily in Nepal and have gained international reputation.

Micro-hydro schemes involve local people and companies in the generation and distribution of electrical power. And the price of electricity is determined on a local basis. With the imminent appearance of electricity in these remote places, other development activities related to electricity are also attainable. So MHP schemes are playing the dual role i.e. selling electricity by expanding the energy market to the remote places and contributing to the development of these areas.

At present the whole world is switching to the alternative energy sector for fulfilling the energy demand. With the diminishing stock of natural oil, methane and coal, the best alternative is renewable energy and Nepal has huge resources of water and a major portion is still to be explored. So with the effective planning and development of this sector can change the future of nation. So the policy-making organizations of the government and the private sector should work together in developing this sector and achieve maximum benefit from it.

Realizing this fact, the involvement of private organizations like REDP, CADEC and many others along with government organizations like AEPC, RADC are also paying a crucial role in developing Micro-hydro schemes. Beside this, donor agencies like DANIDA, GTZ, WB, ADB are also lending their financial and technical assistance to this sector. With the implementation of subsidy policy, the scenario is more positive than before. And this is attracting local people to take initiatives in developing and commissioning MH schemes.

At present the availability of financial support, manpower and technical equipment within the nation, the market for MH schemes proves its significance, getting electricity to rural people. The simple and low cost is a technical and financial advantage made more viable for a poor country of Nepal’s geography.

REFERENCES:

AEPC. (2000). An Introduction to Alternative Energy Technology in Nepal. Ministry of science and Technology. HMG/N. Kathmandu: Alternative Energy Promotion Centre.

AEPC/ESAP (2001) Micro-hydro Data of Nepal, 1962- Mid –July 2001. Kathmandu: Alternative Energy Promotion Centre/Energy Sector Assistance Programme.

AEPC/ESAP (2002) Micro-hydro Data of Nepal, 1962- Mid –July 2002. Kathmandu: Alternative Energy Promotion Centre/Energy Sector Assistance Programme.

NEA. (2001). “Nepal Electricity Authority: A Year in Review.” Kathmandu: Nepal Electricity Authority.

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