A Report on an Overview of Renewable Energy Scenario and Its Share to the Total Energy Demand in...

8/14/2019 A Report on an Overview of Renewable Energy Scenario and Its Share to the Total Energy Demand in Nepal

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A Report onAn Overview of Renewable Energy Scenario and its share

to the total energy demand in Nepal.By Indra Kumar Maharjan

[email protected]

Executive Summary

Nepal is known for its difficult terrain and immense hydro potential. The country‟spopulation is about 26 million of which 84% live in rural areas. They are distributedalong hilly and difficult terrains comprising of more than 4000 villages. This makesthe distribution of the generated electrical energy more challenging anduneconomical. Only 40% of the population is said to be electrified and 33% of themare supplied through national grid and 7% gets their electrical power from

alternative energy. Electricity consumption in Nepal is among the lowest amongAsian countries both in terms of per capita and per unit of GNP. Energy is thecrucial input into the development process. The current energy system is notsustainable in particular because of the more consumption of biomass and fossilfuels. The huge demand for energy to facilitate socioeconomic development islargely fulfilled with biomass fuels.

The current energy consumption scenario shows that large portion of the energyconsumption is supplied by traditional fossil fuels. Due to which there is extraburden on the forests and threat to environmental stability of the country.Development of national grid to rural areas seems not possible till date. In this

situation, the only alternative is renewable energy technologies (RETs) like solar,micro hydro, bio gas and wind. Though RETs contribute only 0.26% in the year2004/05 of the total consumption it is projected to increase to 0.56 % in the year2005/06.

The various organisations involved in this sector have also triggered in thedevelopment of this sector with the government formulation an act.

The total energy consumption of the country is increasing rapidly each year. In theyear 1995/96, the total energy consumed was 9.25 GW which has increased to12.03 GW in the year 2005/06 by 32 % in these 10 years.

In rural areas the energy is required mostly for cooking purposes and a significantportion (65%) of the total energy consumed in rural areas is used for cooking. Sothese needs are basically fulfilled by the use of woods, coal, crop residues, animalresidues, livestock manure, animal wastes and biogas etc which can be seenclearly as the consumption of energy through traditional sources is 86.7% of thetotal energy consumption in the year 2005/06. The dependence upon traditional

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The major factor for hindering the increasing pace of renewables is the ongoingconflict in the country due to which the foreign investment has nearly come to halt.

Among the renewable energy sources also, biogas has larger share than otherenergy sources like microhydro and solar PV‟s in the total energy consumption.

Most of the renewable energy generated is consumed by residential consumersand it must be remembered that 90.28% of the total energy is consumed byresidential sector. The share of the renewables was 0.11% in 1995/96 and itincreased to 0.53% in year 2005. Similarly biogas consumption in the year 1995/96was 298 GJ increased to 1903 GJ in the year 2004/05. Energy consumed throughmicrohydro in the year 1995/96 was 21 GJ which increased to 50 GJ in 2004/05. Inthe same year, 2.0 GJ of energy was consumed through solar energy sources.

The sectoral energy consumption pattern has changed only marginally in 2004/05as compared to previous years. Of the total energy consumption in the FY

2004/05, share of residential sector was 90.28 percent, industrial sector 3.47percent, commercial sector 1.4 percent, transportation sector 3.8 percent andagriculture sector 0.8 percent whereas in the FY 2000/2001, share of residentialsector was 88.9 percent, industrial sector 4.8 percent, commercial sector 1.2percent, transportation sector 4 percent and agriculture sector 0.9 percent.

In the FY 2005/06, this energy consumption pattern is expected to remain withresidential sector comprising of was 89.26 percent, industrial sector 4.5 percent,commercial sector 1.5 percent, transportation sector 3.7 percent and agriculturesector 0.8 percent.

It can be observed that share of residential sector in the total energy consumptionis decreasing in a steady rate while other sectors have a increasing trend. With theestablishment of industries, industrial sector has maintained the third position inthe total energy consumption.

The total energy consumption in the FY 2004/05 was 11.64 GW. Out of thissubstantial portion was in residential sector in which traditional energy occupies95.8 percent and that of petroleum 2.7 percent. Of the total energy consumption inthe FY 2004/05, share of traditional alternative energy was 0.6 percent.

Till now, renewable energy sources are not used by other sectors. So it can beconcluded that the sole consumer of renewable energy sources is residentialsector. As we know residential sector accounts for 90% of total energyconsumption, renewable energy sources can be used the traditional energysources. In the year 2004/05 this sector consumed about 331 million GJ of energy.Biomass resources are the major fuels in this sector

Renewable sources like biogas and electricity from micro hydro and solar homesystems are slowly substituting the conventional fuels which are mainly used for



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cooking and lighting. The commercial sources of fuel used in urban areas arenominal. The population growth rates as well as economic situation of thehouseholds are reflected in the pattern of residential energy consumption. Theoverall growth pattern in the residential sector is about 1.2 % each year.

About 3.5% of the total energy consumption is accounted by industrial sector andthis rate has been increasing each year. In the year 2004/05, 12.7 millions GJ ofenergy has been consumed by this sector. This sector relies mostly on fuelwoodsand agricultural residues. The main end uses in this sector are process heating,motive power, water boiling and lighting. This sector does not consume renewableenergy sources.

Consumers like school, hotels, restaurants, government and non-governmentalinstitutions etc. are categorized as commercial sector. The energy consumption inthis sector in the year 2004/05 is 5.3 millions GJ with an increase of 8% each year.Fuelwoods, LPG, kerosene and electricity are the main sources used by this

sector.Transport sector and agricultural sector also has an increasing energyconsumption trend. Transport sector is heavily dependent on imported fossil fuels.Diesel contributes 65.7% followed by petrol with 18.9%. Aviation Turbine Fuelcontributes 15% where as the share of electricity and coal is negligible. These allfacts indicate that the energy demand in the country is rising at a speedy rate andto cater the demand of energy new strategy are to be formulated and implemented.

A total number of 1588 MHPPs (Pico-hydro included) have been installed indifferent parts of country from 1962 to mid July 2005, generating 8827.5 kW ofelectrical energy. Till 2005, 11905 households (about 130kW) have installed SolarPV Home System in 67 districts. Solar program of Energy Sector AssistanceProgram (ESAP) has succeeded in installing 58,131 systems with installedcapacity of about 2 MW peak. Beside this there has been also 293 Solar Dryerused for the purpose of cooking or drying foods in 21 districts. Solar Dryer is usedfor drying up fruits or any agro products. There are 150,000 Improved CookingStove (ICS) installed in 32 mid hill districts benefiting 54731 households till July2005.

Till year 2005, 96129 people of 17478 households in 56 districts has benefitedfrom biogas support program. There are about ten biogas companies and 152,373biogas plants have been installed till July 2005. Considering the high temperaturerequirement for biogas generation and minimum number of livestock perhousehold, about 640,000 biogas plants are the potential. Small credit fund hasalso installed 829 plants in 19 districts.

The involvement of different private institutions along with donor agencies andgovernment agencies has assisted in the rapid development of RETs. With thegovernment introducing the renewable policy 2000, with provision of subsidy upto



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75% acted as a catalyst for the success. Organisations like Alternative EnergyPromotion Centre (AEPC), Rural Energy Development Project (REDP) and EnergySector Assistance Program (ESAP) with support of donor agencies like DANIDA,UNDP are playing a vital role in this sector.

The awareness among the people about the energy sources they have been usingis overwhelming and they are switching the energy sources as far as possible.Beside this many private companies have been established providing services ininstallation, maintenance and trainings in RETs. The production of local manpowerin this sector has proved to be an additional advantage.

In conclusion, it can be said that the future of RETs is promising in the comingyears. Nepal cannot remain isolated with the changing global energy consumptionpattern which shows a good prospect of RETs in replacing other types of energysources.



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Table of Contents

S no. Description Pageno.

1.0 Introduction 11.1 Background 11.2 Demographic Settings 11.3 Energy and Economy 22.0 Energy Resource Base 32.1 Traditional Energy Sources 3

2.1.1 Fuel Wood 32.1.2 Charcoal Supply 42.1.3 Agricultural Residue 42.1.4 Animal Waste 42.2 Commercial energy 4

2.2.1 Hydropower 42.2.2 Petroleum, Natural Gas and Coal 52.3 Alternate Energy Resources 6

2.3.1 Solar 62.3.2 Wind 72.3.3 Biogas 82.3.4 Micro Hydro Power Plant 83.0 Energy Consumption Scenario 93.1 Consumption Pattern 9

3.2 Total Energy Demand of the Country 103.3 Energy Consumption History of Renewables 143.3.1 Resource wise Energy Consumption of Renewables 153.3.2 Sector Wise Energy Consumption Scenario 163.4 Growth and Future Potential of the Renewable Energy

Consumption19

4.0 Institutions involved for the support of Renewable Energy 214.1 Policies and Organization 21



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4.1.1 Institutions involved in Renewable Energy Sector 224.1.2 Private Sector Institutions 23

4.1.2.1 Independent Power Producers 234.1.2.2 Utilities 244.1.2.3 Distributing Institutions 25

4.1.2.4 Private Companies (specialized in supplies/trainings andeducation) 26

4.2 Energy Policies of Government of Nepal (GoN) 265.0 Conclusion 306.0 References 31



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List of Tables

S. no. Description Page no.

3.1 Historical Trend of Energy Consumption by Fuel Type 9

3.2 Energy Consumption Pattern from year 1995/96 to 2005/06 12

3.3 Energy Consumption Pattern of Renewables 15

3.4 Sector Wise Energy Consumption Scenario 16

3.5 Resource Wise/ Sector Wise Energy Consumption Scenario inyear 2004/05

17

List of Figure

S. no. Description Page no.

3.1 Sectoral Energy Consumption by Fuel Type, 2004/05 18



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1. Introduction

1.1 Background

Nepal is known for its difficult terrain and its immense hydropower potential. Butthe use of these renewable resources is limited by the difficult landscape andterrain. The country‟s population is about 23 million of which 86% live in ruralareas. They are distributed along hilly and difficult terrains comprising of more than4000 villages (CBS, 2002). This makes the distribution of the generated electricalenergy more challenging and uneconomical. Only 40% of the population is said tobe electrified and 33% of them are supplied through national grid and 7% gets theirelectrical power from alternative energy (NEA, 2006). Electricity consumption inNepal is among the lowest among Asian countries both in terms of per capita andper unit of GNP (WECS, 2006). Energy is the crucial input into the developmentprocess. The current energy system is not sustainable in particular because of themore consumption of biomass and fossil fuels. The huge demand for energy tofacilitate socioeconomic development is largely fulfilled with biomass fuels.

Energy in Nepal is obtained largely from biomass resources, from imported fossilfuel resources, hydropower and renewable energy resources (WECS, 2006). Withthe greater and renewed approach and policy of the government with formulationof Energy Perspective Plan (1991-2017) and Renewable Energy Perspective Plan(2000-2020) emphasis on the development and importance of isolated generationin small scale as micro hydro power plants and solar PV systems in order to caterthe surging demand for energy in remote villages. A very critical and challengingissue faced by Nepal is to generate and supply cost effective, environmentallysound energy services to its rural inhabitants.

1.2 Demographic Setting

Nepal is one of smallest countries in terms of land surface area. It has land area ofonly 147,181 sq km. Likewise, it has an average width of about 200 km (north-south) and an average length of about 800 km (east-west) but it has high altitudinalvariation from south to north. The lowest place is only about 161 m above sea level(masl) and the highest is the Mount Everest at 8,848 (masl) at the eastern part ofNepal. Nepal is a land-locked country and its difficult mountainous terrain hascreated a strong barrier for the infrastructure development.

Nepal can be divided into 5 major physiographic zones, viz. Terai (< 300 masl),Siwalik (300- 1000 masl), mid-mountain (1000-3000 masl), high-mountain (3000-5000 masl) and high Himal (>5000 masl). About 23% of the area of Nepal is HighHimal, which is covered by snow and ice all the time of the year. Terai is the mainsources of agriculture production required for feeding the whole population overNepal but it occupies only about 19% of the total area. The climate of Nepal variesaccording to the physiographic regions. Nepal has tropical and sub-tropicalclimates in the Terai and Siwaliks whereas temperate, sub-alpine, alpine and arctic



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climates in the mid-mountains, high mountains and high Himals respectively (CBS,2002a. p14).

Currently, there are about 23 million people living in Nepal, out of which about 86%live in rural areas (CBS, 2002b). The population growth is still quite high despite

the enormous efforts for family planning. Currently, the population is growing byabout 2.24% per year. Overall economic development by providing basicinfrastructure services to the growing population has become one of the majorchallenges for current Nepal. Of the total population only 40% have access toelectricity.

Administratively, Nepal is divided in five developmental regions, fourteen zonesand seventy-five districts. Each district is further subdivided into Municipalities anddevelopments. At present there are 3992 Village Development Committees (VDCs)and 58 Municipalities in the country.

1.3 Energy and Economy Energy is the basic necessity for survival. It is necessary for development activitiesto promote education, health care, transportation, and infrastructure for attaining areasonable standard of living, and is also a critical factor economic developmentand employment. Till today Nepal has no other sources of energy beside theimmense water resources. It has been recognized that Nepal‟s main naturalresources is its abundant hydropower potential. The distinct topography of Nepalwith 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 which42,000 MW is economically feasible. (Warnock, J.G., (1989), pp 26-32.)

Energy plays a significant role in the economical development and technologicaladvancement of societies and plays a crucial role in human welfare. The supply ofenergy is often a majo r constraining factor in the development of a country‟seconomy. Many developing countries spent a large proportion of their developmentbudgets on energy, and, while the developed nations debate the sustainability ofthe fossil fuel sources, for many developing countries the sustainability of theseenergy sources is more immediately a question of funds with which to buy them.This is the case in Nepal.

The living of the people of the country is determined by the economy of thecountry. Energy is one of the driving factors of the economy. Basically three factorscontribute to the economic growth namely capital, labour and energy. These threecomponents determine the country‟s Gross Domestic Product (GDP). Hence todrive a country‟s economy energy supply and availability is a crucial factor. Nepalalso relies heavily on energy for implementing various developmental activities. Butthe supply of the energy has not been sufficient in the current years which have adirect impact on the economic growth of the country.



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A supply of energy in a suitable form is considered to be one of the main inputsrequired to raise the standards of living of the people in mountain areas and tominimize damage to ecosystem. Per capita consumption of-energy has to increasesignificantly in order to develop the systems and infrastructure necessary for

improvement of living conditions and increase in incomes. At home also, moreenergy consumed in a suitable form would improve the quality of life drudgery aswell as health hazards.

To cater the growing energy demand and trigger the economic development,Nepal is in the need of huge energy supply and to achieve it different approachshould be taken in order to change the tradition consumption pattern. Supply of theenergy to the rural place should be implemented with an integrated approach ofpromoting the renewable energy sources and isolated generation and distribution.

2. Energy Resource Base

Energy sources have been categorized under three broad types: (i) traditional (ii)commercial and (iii) alternate energy sources. Traditional energy sources includebiomass fuels particularly, agriculture residue and animal dung used in a traditionalway – direct combustion. Commercial sources of energy are fossil fuels (coal andpetroleum fuels) and electricity. Alternative or renewable energy sources includemicro hydro, solar power, wind power, biogas, briquettes etc.

The three major indigenous energy bases in the country are biomass, hydropower

and solar power. There is also some possibility of sporadic deposits of naturalgases and coal reserves still to be exploited. Biomass sector has been dominatingthe energy supply and consumption since many years and will continue todominate as exploitation of other sources of energy is still minimal.

2.1 Traditional Energy Sources

Nepal relies heavily on traditional sources of energy such as the agriculturalresidues and animal waste. The main sources of these are from the forest andshrub land. These are mostly used for cooking and heating purposes in thedomestic sector.

2.1.1 Fuel wood

Most of the rural and residential sectors of the country which contribute hugely intotal energy system use fuel wood as major source of energy. These are obtainedfrom forest area, shrub land, grassland, non cultivated inclusions, cultivated landand others. The sustainable fuel wood supply from accessible and reachable area



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of Nepal in the year 1978/79 was about 6.8 million tons as compared to 6.4 milliontons in year 2003/04 (WECS, 1988).

The supply of fuel wood has been depleting each year which has resulted in themisbalance between supply and demand. Higher consumption than sustainable

energy found in Nepal is also contributing in this.2.1.2 Charcoal Supply

Charcoal also is a form of wood fuel which is directly derived from the burning ofwood components. Charcoal is consumed by local restaurant, goldsmiths, metalcrafters and clay producers. Beside these industries also consumes charcoal. Insome cases residential sectors uses it for space heating. However charcoal supplypractices in Nepal are very limited and illegal.

2.1.3 Agricultural Residue

Agricultural residues coming directly from the agricultural crops is third largestindigenous biomass source of energy. Supply potential of agricultural residues isestimated at 19.5 million toms for the year 2003/04. This amount is equivalent to244 million GJ in terms of energy that becomes about 67% of the total energyconsumption in the same year (MOAC, 2004).

2.1.4 Animal Waste

Animal dung is a second largest source of indigenous energy but it also occupiessecond largest position in consumption terms. The total dung for fuel available inthe year 2004/05 is 509 million tons. About 24% of the total energy requirement ofthe country can be met by animal dung if used for energy purpose only.

2.2 Commercial Energy

Petroleum fuels (kerosene, LPG, motor spirit, diesel, aviation fuel and fuel oil), coaland electricity are considered as commercial energy sources.

2.2.1 Hydropower

Nepal has immense hydropower potential. This potential is used in two forms:mechanical and electrical. The mechanical application through traditional waterwheels has been used since long time back.

Hydropower is exploited about 1.5% of the potential. The electricity productionefforts in Nepal focus only on the construction of large hydroelectric power plantsto harness some of Nepal‟s gigantic hydroelectric resources. Nepal has anestimated 83,000 MW of hydroelectric potential, of which only 397.89 MW has



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been currently exploited (NEA, 2006). These hydroelectric plants are built toprovide electricity to urban areas, or to sell power to India.

Environmental problems with the dams such as inundation, siltation, negativeimpacts to river water quality, harm to riparian ecosystems, controversies over

India‟s position a s a price-determining buyer of Nepalese electricity, and the factthat these large projects rely on expensive foreign contracting firms have raisedopposition against large-scale hydroelectric projects in Nepal (Pokhrel, Murali D.).

Medium -scale hydrop ower remains the likely choice for meeting Nepal‟s urbanelectricity demand, which is growing at an annual rate of 14% to 15%. For remoteareas, the Nepal Electricity Authority (NEA) frequently uses diesel power stations.Currently the NEA has an estimated 55.66 MW of diesel power stations in regularuse. These are noisy, smelly, expensive, and further increase reliance on fossilfuel imports.

The total installed electricity generation is about 613.5 MW out of whichhydroelectric generation capacity is around 557 MW. The national grid is suppliedwith 603 MW and the remaining are an isolated system comprising 40 small/minihydro plants, about 2000 micro hydro and 1200 peltric sets serving remote areasof the country. (CADEC, 2004)

Demands are changing and consumption of electricity has risen significantly overthe past twenty years. The commissioning of Kulekhani 1 and other large hydrostations in the early 1980‟s enabled rapid expansion of supply and a dramaticgrowth in consumption. Hydroelectricity- generation capacity in Nepal has raisedapproximately two hundred fold over last thirty years. Total peak demand isexpected to increase from 369 MW to 1548 MW during 2005-19 withoutconsidering any future export to India. (NEA. (2002), pp-40)

But the challenge of providing energy to the rural areas seems impossible usingthese overburdened power sources. Because of the difficult terrain, large distancesand low population densities, many rural residents in Nepal cannot expectelectricity in the next coming 30 years.

Traditionally, developing on rural areas especially the more remote mountain areashas lagged behind out of the preferred urban centers, whereas substantialinvestment were made to develop adequate infrastructure in the main urbancenters, including the setting-up of special facilities. The rural areas did not evenhave basic facilities such as drinking water sanitation, roads, schools, or healthcenters. Economic and employment opportunities such as industries localprocessing of rural products and transportation infrastructure were practically non-existent in the past.

2.2.2 Petroleum, Natural Gas and Coal



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All the petroleum products consumed in Nepal are imported from India and othercountries. Till now no proven reserves of petroleum suitable for commercialexploitation have been found in Nepal. In the year 2004/05 Nepal imported about280 thousand tons from India. Kathmandu alone consumes about 40% of the

imported (WECS, 2006).2.3 Alternate Energy Resources

Most of the population lives in the rural areas where economic bases for largescale investments for harnessing hydro potentials and erecting a transmission anddistribution lines seems not possible in near future. In this case, alternative orrenewable energy technologies (RET) like solar, microhydro, wind and biogasplays a vital role in fulfilling the energy needs of these people. Likewise it alsoassists in raising socioeconomic standard of rural people by creating manyopportunities.

The extension of distribution lines is even made worse since the lines in the ruralareas have poor reliability, high line losses (27% reported as a countrywideaverage by Nepal Electricity Authority (NEA)), and have a very high cost (typically$10,000 to $30,000 per kilometer. Line extensions are often awarded as politicalfavors, leading to inefficient service area growth. Metering individual customers isprohibitively costly in rural areas, and customers are charged a flat rate (or notbilled at all), leaving no incentive to conserve electricity which leads to thediscontinuation of rural electrification by NEA. As a result rural electrification islikely to proceed at a very slow pace in the coming decades which will eventuallylead to the dependence on fossil fuels (CRE, 2005).

An estimated 50% of Nepal‟s f orests have been cut down in the past 30 years,deteriorating the fragile ecology. Rural energy consumption contributes about 87%of total consumption and residential cooking (using wood or dung) accounts for65% of rural energy consumption (PREGA, 2004).

2.3.1 Solar

Nepal, being located in favorable latitude, receives ample solar radiation of 3.6-6.2kWh/m2/day, and the sun shines for about 300 days a year. There is a viability ofthis technology in many parts of the country. Unlike hydroelectricity or wind, solarelectricity is fairly evenly distributed spatially and temporally, so every area inNepal has adequate sunlight in all seasons for a solar electric system. Onesignificant advantage of solar electricity is that it is convenient and cost effective toinstall solar electric systems on the scale of a single household. Looking thisprospect different non governmental organizations (NGO) have been involved ininstallation of solar electric systems for various community development projects inconjunction with the NEA installed three large centralized village-scale PV stationof 30-50 kW capacity in Simikot in Humla, Gamgadi in Mugu, and Tatopani in



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Sindhupalchowk (CADEC, 2005). These systems performed poorly due to poorcomponent design, and "overly elaborate and expensive centralized design andlack of proper maintenance support".

The uses of solar energy is for drying crops, clothes, fuelwood, crop residues etc.

traditionally. With the technological developments in this area it is being used forwater heating purposes in urban and tourist areas.

After the provision of subsidy by the Government of Nepal (GoN), the use of solarphotovoltaic (PV) has been increasing significantly. With the involvement ofdifferent organizations in this sector, the numbers of solar PV installed has risendramatically from 0.3kWp in the year of 1992 to 3328.42 kWp in the year 2005.(AEPC, CADEC, 2004 and Piya, 2006)

Solar electric systems in over 11905 Nepali homes (130kW) within 67 districtsprovide power for household and business lighting, and to power small DC

appliances (AEPC 2006). Solar electricity also powers water pumps that provideNepali villages in the Terai plains with drinking water in remote districts. Solarelectricity is extremely reliable because there are no moving parts in the systems.Because of its reliability, solar electricity is used to power critical applications suchas vaccine refrigerators and surgery theaters in rural clinics. According to oneestimate, over 6000 units of 50 W module PV systems are in use in different partsof the country by the Nepal Telecommunication Corporation powering remotetelephone repeaters.

2.3.2 Wind

While wind power is well developed in many countries (China, USA, Europeancountries), in Nepal it is still at an experimental stage. A 30 kW wind power plantwas sponsored by the Danish Government and installed by the Nepal ElectricityAuthority in Kagbeni, Mustang, but was heavily damaged by high wind after only afew months of operation. The main obstacles for wind power in Nepal are lack ofwind data available for most areas of the country, and the absence of technicalexpertise in the country for implementing wind projects. Nevertheless, thepossibility of cost-effective wind or wind/solar PV hybrid systems is promising givenanecdotal evidence of constant high wind speeds in a number of areas, andcurrent small wind turbine technology available from the international marketplace.In the long run, the possibility exists to manufacture wind turbines here in Nepal,much in the same way that micro-hydroelectric turbines are manufactured here bya number of industries.

The wind potential of Nepal is mainly concentrated in a few valleys such asMustang, Palpa, and Khumbu. A wind potential of about 200MW has beenidentified in Jomsom – Chusang corridor.



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2.3.3 Biogas

Biogas is the mixture of gas produced by methanogenic bacteria while acting uponbiodegradable materials in an anaerobic condition. Biogas technology was firstintroduced in 1955 but widely disseminated only in 1977, after the establishment of

Biogas Company. To date, there are about 60 private biogas companies and 15biogas appliances manufacturing workshops in the country. A total of 140,519biogas plants have been installed till July 2005. Considering the high temperaturerequirement for biogas generation and minimum number of livestock perhousehold, about 1.9 million biogas plants are the potential of which 57% in teraiand 43% in hill and mountains (CRE/AEPC 2004).

Biogas Sector Partnership- Nepal (BSP-N) has been actively involved in thedevelopment of this technology. Till year 2005, 96129 people of 17478 householdsin 56 districts has benefited from this program. Small credit fund has also installed829 plants in 19 districts.

2.3.4 Micro-Hydro Power Plant (MHPP)

Hydropower plants of capacity upto 100 kW are referred to as Micro-hydropower(MH) plants in Nepal. Plants of up to this capacity have been fully de-licensed byGovernment of Nepal. This technology was introduced in Nepal in early 60s. Thereare 1541 micro-hydro plants capable of generating 8.5 MW of power alreadyinstalled in Nepal. These figures include Mill-Only Schemes or MPPUs, Peltric Setsand all other type of plants (CADEC, 2005).

There is a considerable capability in project survey / design and manufacturing / installation of Micro-hydro related parts and micro-hydro projects in Nepal. Nowthere are a number of MH manufacturing and installation companies, consultancyfirms and NGOs working in MH sector in Nepal. Hundred and seventy detailedstudies in 36 districts are carried out showing a possible output of 3758.41 kWcapacities.

Micro hydroelectric power plants are a common choice for village electrification inNepal because of their low cost, comparatively low-tech manufacturingrequirements, and economies of scale. There are an estimated 900 micro-hydroelectric installations scattered throughout 59 of Nepal‟s 75 districts, with atotal capacity of around 5 MW. Of these, 350 are traditional water wheels or"ghattas" with an added alternator for electrical output in the range of 1 to 3 kW.

Micro-hydroelectric installations are site-specific, requiring suitable creeks. Theyare also more susceptible to freezing than PV electric systems operations, and canbe destroyed by monsoon floods. But when installed and operated properly, theycan deliver power in quantities suitable for small rural industries such as agro-processing and bread baking, whereas this is not always feasible for PVinstallations due to the high cost of PV.



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There are number of companies involved in the installation of micro-hydro plantsusing local knowledge and Nepalese-manufactured turbines and controllers. Theseprojects usually takes place with community participation in order to build thecapacity to develop a managerial system, maintain the installation, collect fees

from villagers and address conflicts that arise. This is very difficult task due to thepolitical and caste division in many villages. For community hydroelectric projects,common property issues arise; social mechanisms must be put in place andenforced to ensure that system users do not take more than their fair share ofelectricity, and that community members contribute equitably to system upkeep.Furthermore, conflicts over water rights are sometimes an issue, since thehydroelectric turbines may require the diversion of irrigation water supplies.

3. Energy Consumption Scenario

3.1 Consumption Pattern

Traditional non commercial forms of energy have largely dominated the overallenergy consumption of Nepal but the trend is decreasing. The share of traditionalforms of energy to the energy consumption is estimated to about 86.7% in 2005/06as compared to 91.9% in 1995. The remaining 12.7% of energy consumed isthrough commercial source (within which electricity is in the higher side insubstituting other fuels) and 0.5% through renewables which has increased than0.1% in 1995 as shown in the table below. This trend clearly illustrates thatrenewable sources are being used by the people to satisfy the increasing energydemand (WECS, 2006)

Historical Trend of Energy Consumption by Fuel Type(In 000 GJ)

Fueltype 1995 2005 2006* Share %in 1995

Share %in 2005

Share %in 2006*

Traditional 258212 322105 329094 91.94 87.70 86.7Commercial 24784 43195 48290 11.76 11.76 12.7Renewables 319 1955 2134 0.11 0.26 0.56TOTAL 283315 367255 379518

Table: 3.1 Historical Trend of Energy Consumption by Fuel Type (In 000 GJ)Source: Energy Synopsis Report 2006, WECS (* provisional figures)



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3.2 Total Energy Demand of the Country

Energy is the basic necessity for survival. Energy is one of the most essential

factors for economic development. The per capita electricity consumption isconsidered as yardstick of economic development. Nepal is a developing countryand the pace of development is determined by the efficient use of energy. In otherwords the demands of energy, the consumption of energy, are the indicators of theeconomic growth of the country as it is directly linked with other factors ofeconomic development.

The main source of energy in Nepal is biomass fuels. But the shortage of biomassfuels has forced urban households and industries to switch from biomass fuels toimported fossil fuels and other commercial forms of energy. The main features ofthe energy sector are the imbalance between energy resource endowment and its

current use. There is an excessive dependence on dwindling forests to meetenergy needs, while hydropower, which has vast potential, has remained virtuallyunharnessed.

The main feature of the energy sector is the imbalance between energy resourcesendowment and its current use. There is an excessive dependence on dwindlingforests to meet energy demands, while hydropower, which has vast potential, hasremained virtually unharnessed. Water is the most important natural resources ofthe country. Our country is endowed with enormous economically exploitable andviable hydro potential assessed to be about 44000 MW. However, only 1% of thehydroelectric potential has been harnessed so far and 1% is under various stagesof development. Thus, 98% of the potential remains without any plan forexploitation. (NEA. (2002), pp-29)

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 energyconsumption is also very low in Nepal ranking second last in the South Asianregion i.e. only 0.3 Toe in the year 1998. The average per capita energyconsumption in the South Asian region is about 0.37Toe, and 1.7 Toe is theworld‟s average in the same year. The per capita consumption of Nepal in last twodecades is almost constant, where as in case of other neighboring countries likeIndia, Sri-Lanka and Pakistan; they are growing. Per capita energy consumption is

one of the indicators of the development

(WECS. (1999), pp-6). The total energyconsumption in Nepal was 8205 million toe in 2002, which translates to per capitaannual energy consumption of about 15 GJ, ranks among the lowest of the world(MOF, 2003).

Electricity supply is limited to 40% of the total population. The total energyconsumption in the year 1998/99 in Nepal is 7.6 million tons of oil equivalents (toe)and the annual average growth of energy consumption in the last 10 years has



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been about 4.6%. However growth of commercial energy consumption has beenhigh at about 8.4% per annum for the same period (WECS, 1999). Despite of lowenergy consumption level, the sustainability of the energy sector is a big challengewith the high population growth rate, excessive dependence on the forestresources, and inefficient use of these resources.

Nepal largely depends upon forests and agricultural residues for energygeneration. Indiscriminate use of which could lead to environmental degradationaffecting farmland and livelihood of human kind. Present trend of energyconsumption needs to be changed to ensure the sustainable development processof nation in long run. In this context alternative energy resources can play a majorrole. A number of schemes carried out mobilizing alternative energy sources andtechniques have shown successful outcome. The widely applied alternative energytechnologies are Micro hydropower, solar energy and Biomass energy conversiontechnology.

At present hydropower comprises of about 14% of the total commercial energyconsumption in the country. (WECS, 2006) and the role of small and micro-hydroschemes is significant in extending the electrical energy consumption to the ruralareas. Due to various factors the extension of transmission lines to the remotevillages where most of the population lives is very costly. So in these cases RETsare playing a crucial role.

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

The scope and prospects of the RETs system in Nepal is very high. The nationalgrid, which runs along the densely populated terai with its higher level of economicactivities, cannot be a solution for northern rural hilly areas at present. These areashave very few economic activities and are sparsely populated. This makes grid-fedelectricity for these areas economically unfeasible. In these circumstances RETshave performed satisfactorily in Nepal and have gained international reputation.

RETs like Micro-hydro schemes involve local people and companies in the

generation and distribution of electrical energy. And the price of electricity isdetermined on the local basis. With the approach of electricity in these remoteplaces other development activities related with the electricity are also attainable.So MHP schemes are playing the dual role i.e. selling electricity by expanding theenergy market to the remote places and contributing in the development of thesector.



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At present the whole world is switching to the alternative energy sector for fulfillingthe energy demand. With the diminishing stock of natural oil and gases, coal thebest alternative is renewable energy and Nepal has huge resources of water andmajor portion is still to be explored. So with the effective planning and developmentof this sector can change the future of nation. So the policy-making organization of

government and private sectors should work together in developing this sector andachieve maximum benefit from it.

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

At present the availability of easy financial support, manpower and technicalequipments within the nation the market for RETs schemes proves its significancewith establishment of approach of electricity to rural people.

The overview of the energy consumption pattern is shown in the table below.

Table: 3.2 Energy Consumption Pattern from year 1995/96 to 2005/06 Source: Energy Synopsis Report 2006, WECS (* provisional figures)

The total energy consumption of the country is increasing rapidly each year. In theyear 1995/96, the total energy consumed was 9.25 GW which has increased to12.03 GW in the year 2005/06 by 32 % in these 10 years.

Consumption Pattern of Energy by Fuel Type(in GW)

Fuel Type1995-1996

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006*

Traditional 8.360 8.471 8.653 8.839 9.029 9.223 9.579 9.786 9.997 10.214 10.436

Commercial 0.880 0.934 1.038 1.105 1.426 1.374 1.391 1.372 1.423 1.370 1.531

Renewable 0.014 0.018 0.022 0.027 0.032 0.039 0.045 0.053 0.056 0.062 0.068

Grand total 9.254 9.422 9.714 9.971 10.487 10.636 11.015 11.211 11.476 11.646 12.034



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The total energy demand of the country is expressed as in the terms of suppresseddemand. Since the energy supply is not sufficient to fulfill the total energy requiredby the entire population, the demand is seen as equivalent to the energy that isconsumed or supplied.

In rural areas the energy is required mostly for cooking purposes and a significantportion (65%) of the total energy consumed in rural areas is used for cooking. Sothese needs are basically fulfilled by the use of woods, coal, crop residues, animalresidues, livestock manure, animal wastes and biogas etc which can be seenclearly as the consumption of energy through traditional sources is 86.7% of thetotal energy consumption in the year 2005/06. The dependence upon traditionalenergy sources is decreasing each year with the energy produced by RETs isreplacing these sources.

This increase in the demand for electrical energy cannot be fulfilled by theoutstripping supply and chronic shortages, shortfalls in generating capacity; low

plant load factors due to the aging generators and poor maintenance ofequipments at existing plants and losses of power due to poor quality transmissionlines and theft.

All these facts have led to the necessity of the development of minihydro andmicro-hydro power plants in the rural areas of Nepal. In order to address theseissues government of Nepal has formulated a policy in favor of the privateentrepreneurs and investors to encourage the investment in building and operatethese plants or sources of power. It is also providing subsidy in installation of theseplants. The result is overwhelming and the participation of the community isoutstanding.

Energy consumption in the FY 2004/2005has increased by 1.4 percent to 8616Tons of Oil Equivalents (TOE) as compared to previous year and expected toincrease by 3.34 percent to 8904 TOE in the FY 2005/2006. Similarly energyconsumption in the FY 2003/2004has increased by 2.3 percent to 8491 Tons of OilEquivalents (TOE) as compared to previous year 2002/2003 with 8294 Tons of OilEquivalents (TOE). When we divide source of energy in to two parts - traditionaland commercial- of the total energy consumption in the FY 2004/2005, traditionalenergy occupies 87.7 percent while the portion of commercial energy was 11.76percent. In the FY 2005/2006, consumption of traditional energy is expected toremain at 86.7 percent while the portion of commercial energy will remain at 12.7percent, which shows Nepalese economy still heavily relying on traditional sourceof energy.

Of the total traditional energy consumption in the FY 2004/2005, share of fuelwood was 89.0 percent, agriculture and cattle residue was 4.3 percent and 6.5percent respectively, while in the FY 2005/2006 it is expected that the consumptionof fuel wood will remain at 89.0 percent while that of agriculture and animal residuewill be 4.34 percent and 6.7 percent respectively. Similarly, of the total commercial



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energy consumption in the FY 2004/2005, the share of Petroleum was 69.5percent, Coal 14.9 percent and electricity 15 percent, while in the FY 2005/2006the share of Petroleum is expected to remain at 63.8 percent, Coal 21.3 percent,and electricity 14.8 percent.

So we are facing a very volatile energy scenario, the demand is increasing at itsmost but the supply are facing more constraints and beside hydroelectricity wehave no other means of producing electricity.

3.3 Energy Consumption History of Renewables

The capture of energy from existing flows of energy, from on-going naturalprocess, such as sunshine, wind, flowing water, biological processes, andgeothermal heat flows is termed as renewable energy.

Most renewable energy other than geothermal and tidal power, ultimately come

from the Sun. Some forms are stored solar energy such as rainfall and wind powerwhich is considered short-term solar-energy storage, whereas the energy inbiomass is accumulated over a period of months, as in straw, or through manyyears as in wood. Capturing renewable energy by plants, animals and humansdoes not permanently deplete the resource. Fossil fuels, while theoreticallyrenewable on a very long time-scale, are exploited at rates that may deplete theseresources in the near future.

Renewable energy resources may be used directly, or used to create other moreconvenient forms of energy. Examples of direct use are solar ovens, geothermalheating, and water- and windmills. Examples of indirect use which require energy

harvesting are electricity generation through wind turbines or photovoltaic cells, orproduction of fuels such as ethanol from biomass.

Renewable energy electricity systems, using solar energy (photovoltaic - PV) orfalling water (micro-hydroelectricity) have proven effective in providing modest butvery useful amounts of electricity to villagers in rural Nepal. Electricity from thesesources provides light for students to study, and villagers to engage in incomegenerating activities such as painting thangkas (religious paintings), sewingclothing, or operating shops and clinics. Lighting extends villager‟s social lives, andelectricity powers TVs and radios that bring news of the outside world (Winrock,2006).



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Consumption Pattern of Renewable Energy(in GW)

Fuel Type 1995-1996

1996-1997

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006*

Electricity 0.097 0.104 0.112 0.120 0.134 0.146 0.150 0.171 0.189 0.212 0.227

Biogas 0.013 0.017 0.022 0.026 0.031 0.037 0.044 0.051 0.056 0.060 0.066

Microhydro 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.002 0.002

Solar 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Grand total 9.254 9.422 9.714 9.971 10.487 10.636 11.015 11.209 11.47 11.646 12.034Table: 3.3 Energy Consumption Pattern of renewables from year 1995/96 to 2005/06

Source: Energy Synopsis Report 2006, WECS (* provisional figures)

The above table shows that the energy consumption trend of renewables is verylow as compared to other energy sources. Though the contribution of renewablesto the total energy demand seems very low, the consumption pattern hasincreased to 0.53% in the year 2004/05 compared to 0.11% in the year 1995/96.The consumption is estimated to increase to 0.56% of the total energyconsumption in year 2005/06.

The most significant increasing trend was seen in the consumption of electricitywhich was 89 MW in the year 1995/96 to GW in 2004/05. The contribution ofelectricity in total energy consumption in the year 1995/96 was 1% which increasedto 1.82% in 2004/05. This consumption is expected to increase to 227 MW in year2005/06.

3.3.1 Resource wise energy consumption of renewables

Of the total renewable energy consumption in the FY 2004/2005, share of biogaswas 97.3 percent, microhydro was 2.5 percent and solar was 0.1 percent

respectively, while in the FY 2005/2006 it is expected that the consumption ofbiogas will remain at 97.3 percent while that of microhydro and solar 2.48 percentand 0.14 percent respectively.

The major factor for hindering the increasing pace of renewables is the ongoingconflict in the country due to which the foreign investment has nearly come to halt.



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Among the renewable energy sources also, biogas has larger share than otherenergy sources like microhydro and solar PV‟s in the total energy consumption.Most of the renewable energy generated is consumed by residential consumersand it must be remembered that 90.28% of the total energy is consumed byresidential sector. The share of the renewables was 0.11% in 1995/96 and it

increased to 0.53% in year 2005. Similarly biogas consumption in the year 1995/96was 298 GJ increased to 1903 GJ in the year 2004/05. Energy consumed throughmicrohydro in the year 1995/96 was 21 GJ which increased to 50 GJ in 2004/05. Inthe same year, 2.0 GJ of energy was consumed through solar energy sources.

3.3.2 Sector wise energy consumption scenario

The energy consuming sectors has been defined as per the economic sector of thecountry namely residential, industrial, and commercial, transport and agriculturalsector. The energy consuming entities like street light, temples, etc fall into otherssector. The sectoral energy consumption pattern has changed only marginally in

2004/05 as compared to previous years as shown in the table below.

Sector Wise Energy Consumption Scenario (in GW)

Year Residential Industrial Commercial Transport Agricultural Others Total1995-1996 8.60 0.38 0.09 0.28 0.02 0.01 9.381996-1997 8.82 0.21 0.10 0.38 0.03 0.01 9.55

1997-1998 9.05 0.22 0.09 0.44 0.04 0.01 9.851998-1999 9.25 0.24 0.10 0.48 0.02 0.01 10.111999-2000 9.49 0.51 0.12 0.41 0.10 0.01 10.632000-2001 9.68 0.42 0.13 0.44 0.10 0.01 10.782001-2002 10.12 0.40 0.16 0.39 0.09 0.01 11.172002-2003 10.30 0.38 0.17 0.41 0.09 0.01 11.362003-2004 10.49 0.44 0.17 0.42 0.09 0.02 11.642004-2005 10.66 0.41 0.17 0.45 0.10 0.02 11.812005-2006* 10.89 0.55 0.19 0.46 0.10 0.02 12.20

Table: 3.4 Sector Wise Energy Consumption Scenario from year 1995/96 to 2005/06 Source: Energy Synopsis Report 2006, WECS (* provisional figures)



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Of the total energy consumption in the FY 2004/05, share of residential sector was90.28 percent, industrial sector 3.47 percent, commercial sector 1.4 percent,transportation sector 3.8 percent and agriculture sector 0.8 percent whereas in theFY 2000/2001, share of residential sector was 88.9 percent, industrial sector 4.8percent, commercial sector 1.2 percent, transportation sector 4 percent and

agriculture sector 0.9 percent.

In the FY 2005/06, this energy consumption pattern is expected to remain withresidential sector comprising of was 89.26 percent, industrial sector 4.5 percent,commercial sector 1.5 percent, transportation sector 3.7 percent and agriculturesector 0.8 percent.

It can be observed that share of residential sector in the total energy consumptionis decreasing in a steady rate while other sectors have a increasing trend. With theestablishment of industries, industrial sector has maintained the third position in

the total energy consumption.

Resource wise/Sector Wise Energy ConsumptionScenario

In year 2004/05 (in 000GJ)

Sector Residential Industrial Commercial Transport AgriculturalFuelType

Traditional 317798 2245 2049 0 0Commercial 11815 10516 3286 13894 3085Electricity 2898 2750 394 21 180Renewable 2134 0 0 0 0Biogas 2078 0 0 0 0Microhydro 53 0 0 0 0Solar 3 0 0 0 0Total 331567 12761 5335 13894 3085

Table: 3.5 Resource Wise/ Sector Wise Energy Consumption Scenario Source: Energy Synopsis Report 2006, WECS

The total energy consumption in the FY 2004/05 was 11.64 GW. Out of thissubstantial portion was in residential sector in which traditional energy occupies95.8 percent and that of petroleum 2.7 percent. Of the total energy consumption inthe FY 2004/05, share of traditional alternative energy was 0.6 percent.



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Till now, renewable energy sources are not used by other sectors. So it can beconcluded that the sole consumer of renewable energy sources is residentialsector. As we know residential sector accounts for 90% of total energyconsumption, renewable energy sources can be used the traditional energysources. In the year 2004/05 this sector consumed about 331 million GJ of energy.

Biomass resources are the major fuels in this sector (MOF, GON. (2002), pp-123).

Sectoral Energy Consumption, 2004/05

81%

1% 3%

4%

6%

3%

1%

1%

Fuel Wood Agriculture res idue Animal dungCommercial Petroleum Coal Electricity

Renewable Biogas Micro HydroSolar Figure: 3.1 Sectoral Energy Consumption by Fuel Type, 2004/05 (In percentage)

Source: Energy Synopsis Report 2006, WECS

Renewable sources like biogas and electricity from micro hydro and solar homesystems are slowly substituting the conventional fuels which are mainly used forcooking and lighting. The commercial sources of fuel used in urban areas arenominal. The population growth rates as well as economic situation of thehouseholds are reflected in the pattern of residential energy consumption. Theoverall growth pattern in the residential sector is about 1.2 % each year.

About 3.5% of the total energy consumption is accounted by industrial sector andthis rate has been increasing each year. In the year 2004/05, 12.7 millions GJ ofenergy has been consumed by this sector. This sector relies mostly on fuelwoods

and agricultural residues. The main end uses in this sector are process heating,motive power, water boiling and lighting. This sector does not consume renewableenergy sources.

Consumers like school, hotels, restaurants, government and non-governmentalinstitutions etc. are categorized as commercial sector. The energy consumption inthis sector in the year 2004/05 is 5.3 millions GJ with an increase of 8% each year.



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Fuelwoods, LPG, kerosene and electricity are the main sources used by thissector.

Transport sector and agricultural sector also has an increasing energyconsumption trend. Transport sector is heavily dependent on imported fossil fuels.

Diesel contributes 65.7% followed by petrol with 18.9%. Aviation Turbine Fuelcontributes 15% where as the share of electricity and coal is negligible. These allfacts indicate that the energy demand in the country is rising at a speedy rate andto cater the demand of energy new strategy are to be formulated and implemented.

3.4 Growth and future potential of the renewable energy consumption

It is easy to predict that world energy demand, and especially that for electricity,will increase greatly during this 21st century, not only because of demographicpressures, but also through an improvement in living standards in the lessdeveloped countries, which will represent 7 billion inhabitants in 2050 (78% of the

total).Consumption of primary energy will increase up to threefold by the middle of thiscentury, and the increase will be even greater for electricity. In view of thissituation, many sources of energy will be necessary, but for environmentalreasons, a high priority should be the development of all technically feasiblepotential from clean renewable sources, especially hydropower. (WEC. (1998), pp-67)

About 87% Nepalese live in rural areas with agriculture as main livelihood. Energyconsumption in rural are as constitutes about 87% of the country‟ s total energyexpenditure. The rural people mainly use the energy for different end uses.Cooking only accounts for 65% of the of the energy consumption whereas spaceheating, water boiling, agro processing and lighting are other applications for whichthe energy is required in rural areas.

Renewable energies are essential contributors to the energy supply portfolio asthey contribute to the world energy security, reducing dependence of fossil fuelsresources and providing opportunities for reducing emissions of greenhousegases. Total renewables supply experienced an annual growth of 2.3% over thelast 33 years (IEA, 2006). Renewables are the third largest contributor to globalelectricity production. They accounted for 17.9% of production in 2004, after coal(39.8%) and natural gas (19.6%), but ahead of nuclear (15.7%) and oil (6.7%) andnon renewable wastes. Almost 90% of electricity generated comes fromhydropower plants while close to 6% comes combustible renewables and waste.Geothermal, solar and wind have now reached for 4.5% of generation (IEA, 2006).

Renewable energy consumption will increase by 1.8% per year from over1400Mtoe in 2003 to 2300Mtoe, a rise of more than 60%. In this scenario, theshare of renewables in global energy consumption will remain largely unchanged



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at 14%. As developing countries like Nepal shift to modern forms of energy,dependencies upon traditional biomass will be reduced. Renewables will continueto increase their market shares in the power generation mix. Overall they willaccount for 20% of world electricity generation in 2030, up from 18% today. Whileheating and cooking will remain the principle use for renewables; mostly in

developing countries where three quarters of renewables (especially traditionalbiomass) are consumed, the power sector will lead the increase in renewableenergy consumption between2003 and 2030. its share of global renewable energyconsumption is expected to rise from a quarter in 2003 to 38% by 2030.

Non-hydro renewables in electricity generation will triple, from 2% in 2003 to 6% in2030. Of non-hydro renewables:

Wind power will see the biggest increase in market share.Biomass used for electricity generation will triple between now and 2030.Geothermal power will grow at the same rate as biomass.

Solar, tidal and wave energy will make more substantial contributorstowards the end of projection period.

A major hindrance to the future penetration of renewable energy is the intermittentnature of much of it (wind, solar, ocean, and hydropower). There is a little doubtthat efficient and inexpensive energy storage technologies can play a significantrole in overcoming this obstacle.

With all these developments, Nepal alone cannot remain unaffected. Thedevelopment of RETs is Nepal is even more prominent as can been seen from theconsumption pattern and the consumer structure. Major portion of the consumerslive in rural areas and most of the energy is used for basic purposes like cookingand lightening. Hence the viability of replacing traditional fuelwoods used currentlyfor these purposes can be easily replaced with introducing new, clean andenvironment friendly RETs. A recent development in this field signifies and provesthat this can be done in Nepal.

A total number of 1588 MHPPs (Pico-hydro included) have been installed indifferent parts of country from 1962 to mid July 2005, generating 8827.5 kW ofelectrical energy (CADEC, (2005), pp-12). Till 2005 11905 households (about130kW) have installed Solar PV Home System in 67 districts. Solar program ofEnergy Sector Assistance Program (ESAP) has succeeded in installing 58,131systems with installed capacity of about 2 MW peak. Beside this there has beenalso 293 Solar Dryer used for the purpose of cooking or drying foods in 21 districts.Solar Dryer is used for drying up fruits or any agro products. There are150,000 Improved Cooking Stove (ICS) installed in 32 mid hill districts benefiting54731 households till July 2005 (AEPC, (2006).

Till year 2005, 96129 people of 17478 households in 56 districts has benefitedfrom biogas support program. there are about ten biogas companies and 152,373



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biogas plants have been installed till July 2005. Considering the high temperaturerequirement for biogas generation and minimum number of livestock perhousehold, about 640,000 biogas plants are the potential. Small credit fund hasalso installed 829 plants in 19 districts (Bajgain Sundar and Shakya Indira,(2005)).

All these figures show that the future growth of RETs is inevitable.

4. Institutions involved for the support of renewableenergy

4.1 Policies and Organization

The government‟s Five -year plans shape a great deal of the policy environment fordevelopment works. From the sixth five year plan (1980-1985) onwards, theGovernment of Nepal has supported the development and further dissemination ofRETs. The government has then increasingly recognized the importance of RETdevelopment and has carried it since.

The fifth five-year plan (1975-1980), for the first time, considered the role of micro-hydro plants in rural electrification. The goal of rural electrification according to theplan was to promote expansion of agriculture, commerce and small-scaleindustries. Under the guidance of the plan, the Small Hydropower DevelopmentBoard was established in 1975, which played a crucial role in the electrification ofrural hill areas. Under the Sixth Plan Period (1980-1985) ADB/N, instituted in 1981,the Rural Electrification Project provided financial as well as technical assistance topromote rural electrification through micro-hydropower plants.

In 1984, HMG delicensed plants up to 100 kW to encourage private participation inrural electrification through micro-hydropower. The provision of subsidies for micro-hydropower in 1985 provided further encouragement. Under this provision, 75 %cost of electric components of MHPP was subsidized for remote districts and 50 %for the remaining districts and was channeled through ADB/N. since then, GONhas been actively pursuing rural electrification through MH schemes.

The Eight five-year plan is more specific. It gives more stress to private sectorinvolvement for developing and promoting improved water mills and water turbinesand generating both mechanical and electrical power to establish various ruralindustries. The development of the energy sector has been given special priority inthe eighth five-year plan. The basic objectives of the energy plan concerningMHPP development are to maintain regional balance in the energy sector withhydropower by maximum utilization of indigenous energy resources, and todevelop alternative and decentralized energy resources available in the country.Targets for MHPP were set at 5 MW for the period.



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4.1.1 Institutions involved in RET Sector

The establishment of Alternative Energy Promotion Centre (AEPC) in 1997 as thegovernment agency for the promotion of renewable energy technologies, includingmicro-hydro, led to a reformulation of the subsidy policy. Since 2000, the AEPC‟s

Interim Rural Energy Fund (IREF), supported by Danish International DevelopmentAssistance (DANIDA) Energy Sector Assistance Programme (ESAP), hasadministered subsidy of micro-hydro and other RETs.

Alternative Energy Promotion Center was formed in 1997 with the view to aid inthe development of Alternative technologies. In addition to the AEPC‟s micro -hydrosupport programme, supported by ESAP/ DANIDA, the Rural Energy DevelopmentProgramme (REDP) of the United Nations Development Programme (UNDP)formed in 1996 provides significant assistance to this sector. REDP supportedmicro-hydro projects obtain subsidy funds from AEPC‟s IREF. The REDP, whichsees micro-hydro as an entry point to enhancing rural livelihoods, supports

community projects in 15 districts. Major features of REDP are the involvement oflocal government in energy planning and social mobilization.

The Go N’s Remote Area Development Committee (RADC) is another keyplayer in the promotion of micro-hydro. Supporting community-owned plants withan aim of achieving regionally balanced growth, efforts are directed at remoteareas.

The introduction of new GON subsidy policy and delivery mechanism channeledthrough the AEPC increased the level of subsidy from 20-25 % of total investmentto 50-75% of total investment on different types of RETs. Also subsidy is providedas a part of a promotion program that links financial support with a structuredproject cycle, productive end-use and quality requirements.

GoN has created a number of ministries in order to implement various programsrelated to the micro-hydropower development.

Ministry of Water Resources (MOWR) is the focal ministry with respect to powerdevelopment. Policy and development programs relating to the proper utilization ofwater resources are formulated by this ministry. It is also responsible for promotingthe private sector‟s participation in hydroelectric projects, and for enabling theoptimum utilization of water resources.

Ministry of Finance (MOF) looks after overall financial affairs of the government.Its scope of work includes matters relating to economic policy, allocation offinancial resources, mobilization and coordination of foreign assistance, as well asraising internal loans.

Water and Energy Commission Secretariat (WECS) is responsible forcomprehensive planning in both the energy and water sectors. It is the planning



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and policy arm of the Water and Energy Commission (WEC), and is responsible forrecommending appropriate policy and strategy to GON for the water and energydevelopment sector.

Beside above government agencies there are other semi-government agencies

that are involved in the development of this sector. They are listed below.Agricultural Development Bank, Nepal (ADB/N) is a major development andfinancial institution specialization in the field of agriculture and rural credit. It hasbecome a leading public enterprise for the promotion and dissemination of micro-hydro technology. However, it has withdrawn all-round support for MHPP and haslimited its role to MH financing alone.

Nepal Electricity Authority (NEA) is the only public utility responsible for thegeneration and distribution of electric power throughout the country. The SmallHydro Division (SHD) within NEA replaced the Small Hydro Development Board.

After the restructuring of NEA, the SHD is placed under the Rural ElectrificationDirectorate within two departments under it- the Rural Electrification Departmentand Small Hydropower Department. Constraints experienced by SHD are the longbureaucratic process of international tendering for plant equipment andaccessories, non-availability of contractors, and the slow decision- makingprocess.

The Community Rural Electrification Department (CRED) is a newlyestablished department which oversees rural electrification through communityparticipation under the NEA Bye-Law 2061.

The Tariff Fixation Commission (TFC) is an autonomous body under MoWR. Itwas created as per the Electricity Act 1992. It is responsible for fixing electricitytariff. Under the proposed Electricity Ordinance, this commission will be abolished.

4.1.2 Private Sector Institutions

Private sector institutions involved in electrification and RETs may, broadly, beclassified as:

independent power producers (IPPs)

utilities

distributing institutions

private companies (specialized in supplies/trainings and installation)

4.1.2.1 Independent Power Producers (IPPs)Presently, there are eight IPPs which generate and sell power to the NEA namely Annapurna Power Company P.Ltd., Arun Valley Hydro Power Development Co. P.



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Ltd., Bhotekoshi Power Company, Chilime Hydropower, Lamjung ElectricityDevelopment Company, National Hydropower Company, Rairang Hydro Power,and Sanima Hydropower Company Ltd. They own plants with a total installedcapacity of 71.3 MW. In addition, there are three IPPs whose plants are underconstruction (NEA, 2005, p. 61).

4.1.2.2 Utilities

There are four companies in this category. Two of them, namely, Butwal PowerCompany Limited (BPC) and Himal Power Limited (HPL) generate power, sell tothe NEA as well as distribute electricity on their own in rural areas. In addition,there are two companies, Salleri Chialsa Electricity Company (SCECO) andKhumbu Bijuli Company (KBC), which generate in isolated mode and distributeelectricity on their own in rural areas. A brief description of companies engaged ingeneration and distribution of electricity follows.

Butwal Power Company (BPC) Limited, established in February 1993, is one ofthe leading hydropower developers of Nepal. BPC, a public company with majorityholding of the government, was privatized in 2003. It owns and operates the 12MW Jhimruk Hydropower Plant and the 5.1 MW Andhi Khola Hydropower Plant.Besides supplying power to the national electricity grid, the Company haselectrified more than 20,000 households through these power plants under its ruralelectrification program in Pyuthan, Syangja and Palpa districts.

Himal Power Limited (HPL) owns and operates the 60 MW Khimti HydropowerPlant. The power generated from this project is sold to the NEA. HPL, underJhankre Rural Electrification and Development Project, also owns a 500 kWJhankre Power Plant, the power of which has been used to electrify about 2,000rural households in Ramechhap and Dolakha districts since July 2000. The projectis being managed by user cooperative - Khimti Rural Electric Cooperative Ltd.

Salleri Chialsa Electricity Company (SCECO), a locally managed company,owns a 400 kW power plant located in Salleri, the district headquarters ofSolukhumbu district. The power plant was built with support from the SwissGovernment and was commissioned in 1993. It has served about 900 customers in30 villages in the southern part of the district.

Formed in May 1994, Khumbu Bijuli Company (KBC) is a locally managedcompany. KBC owns a 620 kW Thame Hydropower Plant located at KhumjungVDC in Solukhubu district. The plant was built in 1989-1994 with support from theFederal Government of Austria through Eco Himal, an Austrian NGO. The planthas electrified about 650 households in Namche Bazar and nearby villages.



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4.1.2.3 Distributing Institutions

In the recent years, a few community level institutions have evolved and haveundertaken the responsibility of electricity distribution in their communities.Presently, there are 13 such institutions which have entered into agreement with

CRED for the distribution of on-grid electricity.The Lamjung Electricity Users' Association (LEUA) was the first distributinginstitution established as a pilot project in 1997 under GON and NORDIC fundingto manage the extended electricity distribution system of Lamjung district in westNepal (BPC, p.19). The objective of the association is to manage electricitydistribution system by forming a local association among the consumers forcatering them better services at least cost and restricted system losses. It has alegal status of a non-governmental organization (NGO). Previously, LEUA wasoperational under the NEA's Small Hydro and Rural Electrification Department.Now, it has also come under the CRED.

Beside these ICIMOD also has been actively involved in the development of thissector with providing both technical and other types of supports like trainings etc.others INGO‟s like United Mission to Nepal (UMN) has been actively involved inNepal since 1954. It has established number of projects to support and implementthe mini-micro hydro programm in Nepal through the establishment of the ButwalTechnical Institute (BTI) in 1963,

Developing and Consulting Services (DCS) in 1972, Butwal Engineering Works(BEW) in 1977, and Nepal Hydro Electric Company (NHE) in 1986. it has alsoestablished the Butwal Power Company (BPC) in 1966, Himal Hydro and GeneralConstruction Company in 1978 and Himal Power Limited (HPL) recently are keyplayers in Ne pal‟s power sector

Other organizations like Swiss Federal Institute of Technology (SKAT),Intermediate Technology Development Group (ITDG), German TechnicalCooperation (GTZ) etc has also been involved in this sector

Different research institutes are also actively involved in this sector. Organizationslike Research Centre for Applied Science and Technology (RECAST) establishedin 1977 as a research arm of Tribhuvan University has been involved in researchon traditional water wheels, development of MPPU, prototype construction ofimproved water mills, and test-site development of micro-hydro. Royal NepalAcademy of Science and Technology (RONAST) is involved in the improvementand promotion of appropriate indigenous technologies. It has, so far, not playedand crucial role in mini-and micro-hydro technology dissemination.

Considering the growing market and popularity of MHPP many Private Companiesare involved in this sector with different types of roles as manufacturers/installers,consulting agencies and training institutions.



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4.1.2.4 Private companies (specialized in supplies/trainings and installation)

Many companies have been involved in installation, supplies and training activatesrelated to RETs like solar, biogas, microhydro and wind energy.

So we can conclude that RETs has contributed in economic development, energysector and environmentally also. RETs have been widely used as a means ofreducing foreign exchange payments for imported energy and fuels. It is also acheap source of daytime energy easily convertible to heat and mechanical power.The introduction of privately owned micro-hydro power in the rural areas hasinitiated the basis of entrepreneurship in those areas. Moreover it has createdimplications in overall development of remote people with employment and otherincome generating ways.

RETs though small has contributed in the energy scenario of Nepal by providingaccess to those rural populations of nation, which are not touched by national grid.Other fact is that RETs has very low effect in the structure of landscape thusmaking it environmental friendly scheme than the large projects. It has introducednew technologies in remote areas. The positive attitude of government and activesupport from different agencies has remarked a significant development of thissector in a good and promising way and the future of micro-hydro in Nepal is verypositive

4.2 Energy Policies of GON

Nepal has followed planned economic development model since the early fifties inthe form of a year development plan. Recently the period of 9 th five-year plan

(1997-2002) is completed and the 10th

five-year plan has been formulated.However the specific policy in the energy development was mentioned only fromthe fifth five year plan (1975-1980) which was probably triggered by the first worldenergy crisis in the early seventies. A brief summary of the energy policies andprograms in the five-year plans by GON is presented below.

Energy Policies in the 5 th five-year plan (1975-1980): The main objectives in thisplan are to reduce dependency on imported petroleum products and to promotethe development of water resources and traditional fuel sources. Beside this it hasalso emphasized on capitalizing water resources along with the promotion ofresearch and development activities on Alternative Energy sources. It also focusedon encouraging effective investment on the exploration of small hydropowerpotential from private sectors through participatory approach.

In the 6 th five-year plan, policy of developing energy resources together with otherfactors was promoted. This plan emphasized on the development of both smalland large hydro electric projects with two different objectives. The development oflarge projects was targeted to meet the long-term needs of the country and withthe view of exporting the surplus power to augment the foreign exchange earnings.



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Similarly the small hydropower projects to be developed in appropriate places tosupply power for hill irrigation and rural industries.

In the 7 th five-year plan (1985-1990) the main policies were execution ofhydroelectric projects suited to medium and long term power needs along with the

erection of integrated transmission systems and extension of rural electrificationprograms. Other objectives were to carry out research and analysis of themanagerial and technical aspects of small hydro generation.

The 8 th five-year (1992-1997) plan postulated many targets for the development ofenergy sector. Promotion of energy self-reliance; encouragement of rural energyprograms and energy conservation measures; maintenance of environment andsafety measures for energy projects; participation of private sector etc were someof them.

The 9 th five-year plan (1997-2002) came with more strong objectives and policies.It focused the development of hydro electricity as to fulfill the power need ofagriculture, industry, and other sectors by generating electricity economically, toexport power, to co-ordinate rural electrification with rural economic activities fordeveloping the economy and to reduce rural-urban power disporting for regionalbalance with consideration for environmental protection. More liberal policies wereformulated and the generation was not only targeted for internal demand but alsofor export. Different policy like subsidy and other kinds were implemented in orderto attract the private parties in the development of this sector. Rural electrificationwas also emphasized for the first time with reduction of the system losses alongwith major changes in the institutional structures existing.

The 10 th five-year plan and National Water Plan has set specific targets that are tobe achieved by 2007, 2017 and 2027 (WECS, 2002).

Arguing for rural electrification, the Tenth Plan (2002- 07) states “Currently, theurban population is consuming most of the electricity. But majority of people live inthe rural areas and most of the agro-industries, irrigation and cottage industries arealso concentrated in rural areas. As the overall development of the nation premiseson the development of the rural areas, balanced development can be achievedonly through creating opportunity for equal consumption of power in the villagesand the urban areas” (NPC, 2002, p. 288).

The sole objective of the Tenth Plan is to alleviate poverty. Hence all sectoral goals

are aimed at contributing towards the primary purpose of poverty alleviation.Accordingly, the Plan has emphasized rural electrification and set separateobjectives, policies and programs of rural electrification.

Two separate policies are in place having bearing on rural electrification – theHydropower Development Policy 2001 and Renewable Energy Subsidy Policy2000.



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The Hydropower Development Policy 2001 is a revision of the HydropowerDevelopment Policy 1992. The objectives of 1992 policy were to (i) supplyelectricity as per the demands of the people in urban and rural areas through thedevelopment of water resources, (ii) enhance the development of hydropower tomeet the energy needs required for the industrial development in the country, (iii)

motivate private sector for the development of hydroelectric power, and (iv) renderassistance in the conservation of environment by supplying clean energy. Thepolicy for the first time opened space for private sector to invest on small and minihydropower projects. It further encouraged domestic private sector to invest on upto 1,000 kW projects by relieving license requirement. The Policy emphasized onrural electrification for the development of agriculture and cottage industries in hilland the Terai regions.

The 1992 policy was amended in 2001. The objectives of HydropowerDevelopment Policy 2001 are to: (i) generate electricity at low cost by utilizing thewater resources, (ii) extend reliable and qualitative electric service throughout the

kingdom at a reasonable price, (iii) tie-up electrification with the economicactivities, (iv) support to the development of rural economy by extending ruralelectrification, and (v) develop hydropower as an exportable commodity.

However, looking at the consumption pattern of commercial sources of energy, the1992 policy failed to replace other sources of commercial energies (e.g. coal andpetroleum). The share of electricity consumption in total commercial consumptionof energy has declined to 12 percent in 2001/02 from 13 percent in 1992/93 (MoF,2005, Statistical Table, p. 77).

The Policy has several provisions to gradually expand rural electrification. Inaddition to REF mentioned above, it has a provision of special investment forinfrastructure development of rural electrification. There is also a provision of grantfor micro-hydro projects to be disbursed through the Alternative Energy PromotionCentre. However, there is no provision of a central agency to oversee RE.

The Renewable Energy Subsidy Policy 2000 has an objective among others 'tosupport rural electrification as well as gradually reduce the growing gap ofelectricity supply, consumption, etc. between rural and urban areas' (AEPC, 2000,p. 1). It has provisions to provide subsidy for installation of a range of renewableenergy technologies including micro-hydro plants and solar home systems. Boththe micro-hydro plants and solar home systems have been considered asalternative means to electrify rural areas. In line with the Subsidy Policy, an InterimRural Energy Fund (IREF) has been created to provide subsidy to micro-hydro andsolar home systems. IREF is managed by the Alternative Energy Promotion Center(AEPC). IREF will be converted into a permanent Rural Energy Fund.

The Nepal Electricity Authority Act 1984 was put in place to establish and defineoperation of the Nepal Electricity Authority (NEA). The NEA‟s scope of work asdescribed in the Act includes generation, transmission and distribution of electricity



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throughout the country. The Act has a provision (Clause 16) that the NEA shouldoperate on commercial principle. Also, the provisions in the Act envisage that theNEA would run as autonomous corporate body with public participation.

The Water Resources Act 1992 was enacted to conserve, manage, develop and

use water resources of the country. It does not have any specific provision that isof significance to rural electrification. However, the Act has made a provision toregister „Water Users‟ Association‟ as a corporate bo dy which can work as ruralelectrification entity.

The Electricity Act 1992 was put in place to develop electric power by regulatingthe survey, generation, transmission and distribution of electricity and tostandardize and safeguard the electricity services. Although there is no specificreference to rural electrification, this Act has encouraged electrification of ruralareas through establishment of isolated mini hydropower projects generating up to1,000 kW. No license is required for a national or corporate bodies to generate

transmit and distribute electricity in the said range. Income tax is exempted and theperson or corporate body can fix electricity tariff on its own in less than 1,000 kWprojects. Electricity Regulation 1993 complements Electricity Act 1992.

The most comprehensive regulation designed so far to expedite rural electrificationis the Nepal Electricity Authority Community Electricity Distribution Bye-Laws 2003 . The Bye-law has been formulated to promote public participation, toencourage community management and to attract private investment in the field ofrural electrification. The Bye-law aims to promote technical and managerialcapability of rural community in the field of electricity distribution throughdistributing institution.

Presently, an Electricity Ordinance is under consideration by the government. Asreported in the public media, the Ordinance has spelt out mechanisms for thedevelopment of electricity that includes generation, transmission and distribution ofelectricity. It has also attempted to simplify rules and regulations for companiesinvolved in electricity distribution and expansion. The ordinance is said to havemade a provision of the National Electricity Regulatory Commission (NERC). TheCommission, as an umbrella organization, will create and enforce mechanisms forpower development, prevent monopoly, develop a code of conduct for registeredelectricity generating companies, diversify the electricity market and suggestcompanies to maintain a sound accounting system. As the ordinance will annul theTariff Fixation Commission 1993, the NERC, hence will fix the electricity tariff.



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5 Conclusion

Energy resources are classified in three major groups: traditional, non-traditionaland alternative in Nepal. Non-traditional (or commercial) resources have replacedthe traditional energy resources. Therefore, renewables falls under this group.

There is a huge theoretical potential for hydropower, but the economically feasiblepotential is assessed at 42,000 MW or about 147 TWh (at an assumed capacityfactor of 0.40). Total hydro capacity at the end of 2006 was 613 MW. A number ofother, smaller hydro plants are in various stages of construction, completion. Toincrease per capita consumption, supply of power need to be increased. Themarket for electrical energy is growing day per day but considering the terrain andtopology of the country and the population distribution, electrifying the rural areashas been the major issue since long time back. This problem is very muchaddressed with the aid of RETs which has been playing a significant role in fulfillingthe energy requirements of the rural people and delivering the fruits of technologyand economic benefits.

Though the share of RETs to the total energy demand is negligible (less than 2%),considering the rural electrification the share is termed very considerable. Most ofthe rural areas have been electrified and hundreds of thousands of people hasbenefited from these technologies. To support the pace of its development manyprivate companies like Butwal Power Company etc has played a significant role.

According to the different reports and study conducted worldwide, renewables aresubstituting the traditional fuel types and same is the case with Nepal. The figuresshow that the trend of renewable energy consumption, development andinvestment is increasing each year in this sector. This signifies that the future of

RETs is very bright and people are willing to use these resources than other typesof energy resources.

With the formulation of new policies and restoration of peace in the country and theavailability of technical manpower will prove as an additional advantage in thedevelopment of this field. The rising price of petroleum products and the depletionof the forests will eventually lead to no option rather than development ofrenewable sources and hence will see the increment in consumption of renewableenergy.

So we can conclude that the demand of energy consumption in the country is

rising with unavailability of traditional fuels have shift the consumption pattern tothe renewables and hence the popularity of this source is even triggered bygovernment policies and institutions involved along with the subsidy policies. Theinvestment is increasing with the local skills developing in manufacturing; repair ofthese technologies will surely increase the growth of RETs.



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