This presentation is Nepal's current energy scenario which enables public to understand why Nepal is facing acute shortage of power and what are the suggestive measures for the future.

1. We take a look at the current electricity
production, demand and supply in
Nepal with suggestive measures.

2. Energy Scenario of Nepal
The current scenario of Energy in Nepal is pathetic as
the demand-supply gap is extremely wide due to
multiple reasons which hindered the development &
execution of power projects (both Hydro and
Thermal). The major hurdles came due to paralyzed
policies, government’s poor vision of Energy
Economics and the decade long Maoist insurgency
(1996-2006).

3. Energy Scenario of Nepal
The current demand stands at 1178.30 MW peak hour
demand but the installed capacity is only 1100 MW as
of FY 2012-13. The Energy deficit is the main cause of
power cuts (termed popularly “LOADSHEDDING”
among the mass). Power cuts in Wet season are t an
average of 3-4 hours daily and during Dry season, it
shoots to 12-16 hours daily.

4. Energy Scenario of NepalConsumers are industries are severely affected. Even
service oriented industries have to cut their office
hours to maintain uniformity with the market.
Manufacturing units are compelled to go for
Diesel/Fossil fuel plants to operate industries pushing
the operational costs of finished products by a
whopping 25% to 40%. Majority of industries have
been shut down and instead started trading of basic &
FMCG products. It has made the entire National
economy import oriented.

5. Peak Hour Demand and Available
EnergyYear Peak Demand
(MW)
Change in
Peak
Demand
Available
Energy
(GWh)
Change in
Available Energy
2005 557.53 2642.75
2006 603.28 ↑8.21% 2780.92 ↑5.23%
2007 648.39 ↑7.48% 3051.82 ↑9.74%
2008 721.73 ↑11.31% 3185.95 ↑4.40%
2009 812.50 ↑12.58% 3130.79 ↓1.73%
2010 885.28 ↑8.96% 3711.77 ↑18.56%
*If 10% CAGR pre-assumption consumption of energy is
considered, the peak demand for the FY2012-13 is 1178.30 MW.

6. Where does the Energy come
from?
NEA (Nepal Electricity Authority) is a Govt. of Nepal
undertaking responsible for the distribution of
electricity and controlling all other derivatives of
electricity to the consumers (both commercial &
industrial). NEA and Nepal Govt. operate both Hydro
& Thermal power projects. NEA trades and distributes
the electricity in Nepal through its grids.

7. Hydro and Thermal Energy
available for past 6 years
Year NEA Hydro (GWh) Change in
NEA Hydro
NEA Thermal
(GWh)
Change in
NEA
Thermal
2005 1522.90 13.669
2006 1568.55 ↑3.00% 16.10 ↑17.78%
2007 1747.42 ↑11.40% 13.31 ↓17.33%
2008 1793.14 ↑2.62% 9.17 ↓31.10%
2009 1839.53 ↑2.59% 9.06 ↓1.20%
2010 2108.65 ↑14.63% 13.01 ↑43.60%

8. NEA Energy Chart
0
500
1000
1500
2000
2500
2005 2006 2007 2008 2009 2010
NEA Hydro (GWh)
NEA Thermal (GWh)

9. Where does the rest of the Energy come from?
There are many private sector players in the Hydro power.
These are called Independent Power Producers (IPP). IPP
are private sector operating energy projects (both Hydro
and Thermal). Private projects go through the same stages
clearances as Govt. projects. Private projects ink PPA
(Power Purchase Agreement) with the NEA to sell their
energy. If a private project wants to sell their energy to a
third country then it can sign agreement with the
respective country. All the private projects must sell their
energy to the NEA only as NEA is the only organization in
Nepal to trade and distribute electricity. But if a private
company wants to develop a project for their own industrial
purpose then thy can develop and have to pay royalty and
hand over the energy project after 25 years of operation to
the Govt. of Nepal.

10. Where does the rest of the Energy
come from?
Water is a national resource so it is necessary to pay
royalty to the Govt. A private project can be hold up to
25 years by the company and then hand over to the
Nepal Govt. The current PPA rate for Wet Energy is
NRs. 6 ($0.06) per KWh & for Dry Energy d NRs. 4.80
($0.048) per KWh. Due to supply gap, a big share of
electricity is imported from India esp. during the dry
season.

11. Energy purchased by NEA from IPP
and India:
Year IPP (GWh) Change in IPP Indian Import
(GWh)
Change in
Indian
Import
2005 864.795 241.389
2006 930.04 ↑7.54% 266.23 ↑10.29%
2007 962.26 ↑3.46% 328.83 ↑23.51%
2008 958.42 ↓0.40% 425.22 ↑29.31%
2009 925.74 ↓3.53% 356.46 ↓16.17%
2010 951.43 ↑2.78% 638.68 ↑79.17%

12. Energy Purchased by NEA from IPP and India
0
200
400
600
800
1000
1200
2005 2006 2007 2008 2009 2010
IPP (GWh)
Indian Import (GWh)
The growth in IPP from 2005 to 2010 is only 2% CAGR. There are several hundreds
of private projects in pipeline but due to lack of investment & proper
planning, promoters have not been able to deliver projects & hence there is huge
deficit of power in Nepal. Where as, imports from India have increased significantly
to 21.50% CAGR & huge forex is invested just to pay the electricity tariff.
*Considering tariff at IRs. 4 ($0.067) per KWh then just IRs. 2555.72 million ($42.58
million) have been emptied from the forex in 2010 to pay the electricity bills to
India. Nepal’s forex reserves is Indian Currency as 72% of trade is with India.

13. LOASHEDDING
The most popular term and the most common excuse in
recent years. NEA and IPPs have their own hydro projects
but still 3-4 hours daily power outage in Wet season and up
to 12-16 hours daily in the Dry season. Almost all the
projects are run-of-river projects. During the wet
season, the energy produced is almost equivalent to the
installed capacity but in the dry season, the energy
production is only about 25% to 30% of the installed
capacity which is why the power situation in the winter
becomes critical. Since, the projects are run-of-river, the
water flow and level decreases significantly during the
winter so does electricity production.

14. Solution to Power Crisis
Nepal was declared a Energy crisis state in early 2008 by
the then Govt. There are many smaller run-of-river
projects coming up. Majority of them have received
clearances and even concluded PPA with the Govt. but
due to lack of funds, the projects have not been carried
out smoothly. The investment size of a hydro power is
behemoth and up to $2 million per MW generation
from detailed survey study to project completion and
electricity genertaion.

15. Solution to Power Crisis
The Govt. has identified few storage projects ranging
from 400 MW to 900 MW. Few have been awarded as
well. West Seti 786 MW to Three Gorges (China) and
Upper Karnali 900 MW to GMR (India). These
projects have already signed PPA with the Indian Govt.
These projects were awarded to the respective
companies under BOOT model. There are other few in
pipeline with negotiations on relevant issues. Upper
Tamakoshi 415 MW is a project to look after where the
South Koreans have invested majority and is to be in
operation by mid 2016 after several delays.

16. Hindrances in Smaller Projects
 Many projects are not viable due to accessibility and
connectivity.
 Project cost gets hyped due to building of
infrastructures.
 Locals create problems demanding free energy and
free share.
 Once the deadline misses, the project cost gets hyped.
 Investment is a major issue. The commercial banks
can hardly lend the 70% of a 2 MW project ($4
million). Banks are not lenient to lend on long term
projects.

17. Major Power Projects
There are several measures taken by the recent Govt. to
lure investment into big projects. GMR’s 900 MW
Upper Karnali and Three Gorges’s 786 MW West Seti
are some projects where Govt. has taken bold steps in
benefit of both the promoters and the country. For
storage projects over 500 MW, the country’s
Investment Board (www.investmentboard.gov.np)
looks after the project where the entire Environment
clearances are permitted by this board upon the
approval from their panel and huge incentives on tax
are approved on the benefit of the promoters.

18. What the Govt. can do?
With all the past mistakes, the Govt. should learn to be
lenient to adopt policies which will allow the investors
to develop projects hassle free & reap maximum
benefit in the shortest time-frame possible. Nepal
could become energy surplus in the next 15 years with
proper execution of some 15 major projects. The Govt.
is calculating the Energy economics & should come up
with some few measures:

19. What the Govt. can do?
 The Govt. should approve the feasible projects to
investors with a flexible timeframe.
 The approved projects must come under Govt.’s pre-
assumption energy demand at a certain timeframe.
Say, like 6000 MW by 2031.
 India is a country which could consume as we supply.
India’s current production stands at 185,000 MW and
thermal power has 68% share. Hydro power is cleaner
and cheaper in the long run.

20. Resolution of Current Energy
Scenario:
 First, we require huge investments (esp. foreign investment) in
the small run-of-river projects so that we cold generate extra
1000-1200 MW by 2018-19. There will be deficit in winter only
which can be solved by power wheeling with India and exchange
for dry-wet and vice-versa.
 Secondly, the Govt. must repair & build new transmission lines
as soon as possible to prevent dissipation of energy from grid &
transmission lines.
 Setting up and allowing foreign players to set up Captive Power
Plant (CPP) at strategic locations. This will solve industrial
demand by almost 90%.
Biratnagar, Kalaiya, Birganj, Bhairahwaha & Nepalganj are ideal
places. A 50 MW CPP coal-based will decrease power cuts by
nearly 50-60% in the coming 5 years.

21. Alternative Energy
Alternative Energy implementation & projects are needed to
be promoted by the Govt. These projects require REM
(Renewable Energy Mechanism) procedure to sell their
energy. The Govt. must be lenient to introduce an
investment friendly REM as Nepal has a great potential in
Wind Energy. Mustang & Manang have cut rate speed to
run turbines ranging from 250 KW to 1500 KW. Around
30,000 MW could be harnessed in these districts alone.
Infrastructure & accessibility to these districts have to be
built first. Clearances like Avian Clearance & EIA schemes
for wind project need to be defined so that investors would
be confident before committing to such projects.

22. GEETA INVESTMENT SERVICES
AVDESH MANDAL
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