Water Resources and Hydropower Development in Nepal: Opportunities, Policies and Challenges

Ram Manohar Shrestha, PhD

Emeritus Professor

Asian Institute of Technology (AIT)

Thailand

KU/IIDS Six Day Seminar on Nepal’s Policy Regime and Priorities in the Context of Federalism2-7 September 2018, Dhulikhel Lodge Resort, Dhulikhel

Contents• Water resources and hydropower potential• Power sector profile• Resource Mix for Electricity generation• Opportunities• Challenges• Laws and Policies

Is the present approach of hydropower development efficient?- Integrated basin wise hydropower development planning

- Determination of least cost project portfolios and optimum size or capacity of plants- Reduce the possibilities of investing in sub-optimal capacity– problem of high cost of

revering the decision (or economic irreversibliity”)

- Competitive bidding of HP projects? Reverse bidding of solar projects?- Revision of PPA rates- Retail electricity tariff not efficient– no time-of-day (ToD) and seasonal tarrifs

Water Resources of Nepal: How Big?

• Altogether 6,000 rivers (including rivulets and tributaries) in Nepal.

• It is estimated that approximately 70% of dry season flow and 40% of annual flow of the Ganga River comes through Nepal.

http://www.wepa-db.net/policies/state/nepal/state.htm

River water discharge flowing through Nepal

http://www.wepa-db.net/policies/state/nepal/state.htm

In addition, it is estimated that Nepal has ground water discharge of 12 km3/year.

Water Resources Potential: Ranking of Nepal

• FAO (2003) has estimated water resource potential of 182 countries in the world.

• According to FAO (2003), Nepal ranks

44th in terms of total annual water resource availability,

73rd in terms of per capita annual water resource availability

Source: FAO, 2003, Review of World Water Resources by Country, FAO, Rome. http://www.fao.org/docrep/005/Y4473E/y4473e00.htm#Contents

Hydropower Potential of Nepal

How Big?

Theoretical Potential

Technical Potential

Economic Potential

Exploitable Potential

Types of Hydropower Potential

Hydropower Potential: Different Concepts• Gross (Theoretical) potential:

It includes the total potential energy from all water resources within specified spatial boundaries without any physical, technical and economic usage limitations. In practice, only a small percentage of theoretical potential can be harvested.

• Technical potential:

“Technical potential of hydropower is defined as the annual energy that could be developed under current technology, regardless of economic and other restrictions.” (Zhou et al. (2015) Usually, technical potential ranges from 20 to 35 percent of theoretical potential [Auer 2010].

• Economic potential:It is defined as the energy capacity that is economically exploitable relative to alternative energy forms (without environmental and other special restrictions).

• Exploitable potential:

Not all areas can realistically be used for hydropower development.

Exploitable hydropower potential is defined as the competitive annual energy with the consideration of environmental or other special restrictions.

Global Hydropower Potential, billion kWh/year

0

20

40

60

80

100

120

140

Gross (Theoretical) Technical Economic Exploitable

Global Hydropower Potential, pWh

128

2116

26

Source: Zhou et al. (2015)

The top-100 hydropower potential countries in the world

Numbers in the bars show exploitable potential in billion kWh per year.

Source: Zhou et al. (2015)

2,140,000

209,338 126,000

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Ch

ina

Ru

ssia

Can

ada

Bra

zil

Ind

ia

USA

Ind

on

esia

Peru

Tajik

ista

n

DR

Co

ngo

No

rway

Ven

ezu

ela

Turk

ey

Nep

al

Paki

stan

Co

lom

bia

Ch

ile

An

gola

Mya

nm

ar

Bo

livia

GW

h/y

ear

Source: IHA (2017)

Total Hydropower Potential of top 20 countries (GWh/year)

Hydropower Potential in South Asia

Technical Potential, MW

Afghanistan 23,000

Bangladesh 330

Bhutan 30,000

India 148,000

Nepal 83,000

Pakistan 59,208

Sri Lanka 2,000

Nepal’s economic hydropower potential: 42,000 MW (?)

Source: IHA (2018)

Total Installed Capacity Including Pumped Storage of top 10 countries (MW)

341,190

102,867100,27380,985

49,905 49,382 48,45031,837 27,273 25,517

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

China United States

Brazil Canada Japan India Russia Norway Turkey France

MW

Nepal’s ranking?

Province-wise Hydropower Potential and Present Generation Capacity in Nepal (%)

Power Sector Profile of Nepal

Per Capita Electricity Consumption (kWh)

Country 2005 2015

Bangladesh 147 326

China 1781 4047

India 480 859

Nepal 69 138

Pakistan 456 488

Sri Lanka 379 585

Source: Key World Energy Statistics (IEA, 2007; IEA, 2017)

Structure of NEA’s Sales and Consumers in 2016/17

S.N CategoryShare (Number of

Consumers)

Share (Energy

Conspumption)

Share (Sales

Revenue)

1 Residential 94% 42% 36%

2 Industrial 1% 36% 45%

3 Others 5% 23% 19%

Description 2018* 2017

Average Price of Electricity (NPR/kWh) 10.4 10

Average Power Purchase Rate (NPR/kWh)[India+IPPs] 7.12 7.17

* Provisional figures

Average Price of electricity by consumer type, NPR/kWh

Domestic, 9.3

Non-Commercial, 15.4

Commercial, 14.4

Industrial, 10.0

Water Supply & Irrigation, 6.5

Street Light, 8.8

Temporary Supply, 18.5

Transport, 7.0

Temple, 6.8

Non-Domestic, 15.1

Entertainment, 17.1

Community Sales, 4.9

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Average Tariff of 2018* (NPR/unit)

* Provisional figures• Source: NEA Annual Report 2018

How expensive is electricity in Nepal?

Case of the Household Sector

Average retail price of electricity in the residential sector in 2016, $/kWh

(Nepal and India)

Average retail price of electricity in the residential sector, $/kWh

Consumption units

Country/State 100 Units 200 Units 300 Units 400 Units 500 units

India

Sikkim 0.03 0.04 0.05 0.05 0.06

Uttar Pradesh 0.07 0.07 0.07 0.07 0.08

Uttarakhand 0.04 0.04 0.05 0.05 0.05

West Bengal 0.07 0.08 0.09 0.12 0.09

J&K 0.02 0.03 0.03 0.04 0.04

Himachal Pradesh 0.02 0.03 0.03 0.04 0.04

Bihar 0.04 0.05 0.05 0.06 0.07

Assam 0.07 0.08 0.09 0.09 0.10

Arunachal 0.06 0.06 0.06 0.06 0.06

Nepal 0.12 0.12 0.12 0.14 0.14

Average retail price of electricity in the residential sector in 2016, $/kWh (in selected countries)

Average retail price of electricity in the residential sector, $/kWh

Consumption units

Country/State 100 Units 200 Units 300 Units 400 Units 500 units

Nepal 0.12 0.12 0.12 0.14 0.14

Pakistan 0.09 0.10 0.10 0.11 0.11

Bhutan 0.02 0.03 0.03 0.04 0.04

Sri Lanka 0.07 0.16 0.21 0.24 0.25

Bangladesh 0.06 0.06 0.07 0.07 0.08

Changing Government Targets for Hydropower Development

Government Targets on Electricity Development

• In 2017, the then Energy Minister declared a target of installing 17,000 MW of power generation capacity in next 7 years

• Latest targets: Power generation capacity targets declared by MoEWIR in Baisakh 2075:– 3000 MW in next 3 years– 5000 MW in next 5 years– 15,000 MW (including 10,000 MW for domestic market) in

next 10 years.

• Per Capita electricity consumption: – 700 kWh in next 5 years (by 2080)– 1500 kWh in next 10 years (by 2085)

Assessment of Hydropower Capacity Requirements under Different Economic Growth Scenarios

Three Alternative Growth Rates: Low (5%)

Medium (7.5%)High (10%)

Approach Used for Estimation of Investment Needs

• Step I: – Estimate future electricity consumption using GDP elasticity of

electricity demand (estimated using cross country data from IEA)

• Step II: – Assume shares of RoR, storage hydro and solar power options in

meeting the electricity demand (a simplification!)

• Step III: – Calculate the power generation capacity using plausible capacity

utilization factors

• Step IV: – Calculate investment requirements using per unit capital cost

figures of different plants

y = 1.271x - 1.418R² = 0.626

0

1

2

3

4

0 1 2 3 4 5kW

h/c

apit

a

GDP/capita

Electricity Consumption per capita (Below 7000 GDP/capita

countries)y = 0.955x - 0.365

R² = 0.788

0

1

2

3

4

5

0 2 4 6

kWh

/cap

ita

GDP/capita

Electricity Consumption per capita (136 countries)

Relationship between Electricity Consumption per capita and GDP/capita

GDP per capita under different economic growth scenarios

0

1000

2000

3000

4000

5000

6000

7000

2020 2025 2030 2035 2040

US$

at

2015

pri

ces

Low(5%)

Med(7.5%)

High(10%)

GDP per capita in 2030: $1350 (Low); $1920 (Med.); $2710 (High)

Projected Per Capita Electricity Consumption under Different Economic Growth Scenarios

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2020 2025 2030 2035 2040

kWh Low(5%)

Med(7.5%)

High(10%)

In 2030 per capita elec. consumption varies from about 500 kWh to 1200 kWh in low to high GDP growth scenariosInsight?GDP per capita has to grow by more than 10% to realize the government target of 1500 kWh per capita

Hydropower Generation Capacity Requirement during 2020-2040, MW

(at capacity factor of 50% for RoR and 40% for storage plants)

0

5000

10000

15000

20000

25000

30000

35000

2020 2025 2030 2035 2040

Gen

erat

ion

Cap

acit

y, M

W

Low(5%)

Med(7.5%)

High(10%)

6192

39412919

39445294

21652517

2916

9628

Hydropower Generation capacity in 2030: 3941 MW (Low), 6192 MW (Med.), 9628 MW (High)

Solar Power Capacity Requirement during 2020-2040, MW

(at capacity factor of 20%)

0

500

1000

1500

2000

2500

3000

3500

4000

2020 2025 2027 2030 2035 2040

Sola

r p

ow

er c

ap

acit

y, M

W

Solar Power Capacity

Low(5%)

Med(7.5%)

High(10%)

347

630469

469

1146

• If solar energy is to meet 5% of total electricity needs, 450 MW to 1150 MW of solar power capacity required by 2030.

• By 2040, 850 MW to 3800 MW required.

737

Total Power Generation System Capacity Requirement during 2020-2040, MW

0

5000

10000

15000

20000

25000

30000

35000

40000

2020 2025 2030 2035 2040

Gen

era

tio

n C

apac

ity,

MW

Low(5%)

Med(7.5%)

High(10%)

Total power generation capacity in 2030: 4410 MW (Low), 6929 MW (Med.), 10774 MW (High)

The 10 year target can be compatible only in high GDP growth scenarios (above 10%)

Generation Capacity Mix in 2030, MW(Economic Growth: 5%)

RoR, 2064 MW

Storage, 1877 MW

Solar, 469 MW

Generation Capacity Mix in 2030, MW

Total capacity: 4410 MW

Shares:RoR: 47%, Storage: 42%; Solar: 11%

Generation Capacity Mix in 2030, MW(Economic Growth: 7.5%)

Total capacity: 6929 MW

RoR, 3244 MW

Storage, 2949 MW

Solar, 737 MW

Case: Medium Economic Growth (7.5%)

Generation Capacity Mix in 2030, MW(Economic Growth: 10%)

Generation Capacity Mix in 2030 in High Growth Scenario, MW

ROR

Storage

Solar

Storage4585 MW43%

RoR5043 MW(47%)

Solar1146 MW10%

Total Capacity Requirement = 10,774 MW

What do these tell about government targets on hydropower Development?

• MoEN White Paper sets the target of 10,000 MW

but does not specify the linkage with economic growth.

• GDP growth of higher than 10% per annum needed to realize the government target of 10,000 MW during the next 10 years.

• Role of solar?

Opportunities: Internal and External

Regional power trade agreements/MoUs

SAARC and BIMSTEC

BIMSTEC Region Peak Demand Forecast, 2015-2030

2015 2030

GW GW

Bangladesh 11 34

Bhutan 1 3

India 153 370

Myanmaar 3 15

Nepal 1 5

Sri Lanka 2 5

Thailand 26 44

• 43 GW of hydropower is identified as economically viable• India alone is a huge market for Nepal

Growth in petroleum products’ consumption and Energy Security

Implications

Petrol Import Growth Rate

NOC, 2018

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

200020012002200320042005200620072008200920102011201220132014201520162017

mill

ion

lite

rs

Petrol Diesel Kerosene Aviation Turbine Fuel

20%

20%

20%

14%

Share of Modern Fuel Mix Change 2000-2016

(MoF, 2004, 2012 and 2018)

86% 84%72%

9% 10%16%

3%3% 5%

4%2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2010 2016

Firewood Petroleum Coal Electricity Renewable and Others

Oil and electricity import and their economic implications

• The import bill of petroleum products increased by 34.4% to NRs 117.2934 billion in the first nine months of FY 2017/2018 compared to the amount in the corresponding period of the previous fiscal.

• Petroleum import bill in Nepal has exceeded total export revenue since 2010.

• In FY 2013/14 total export revenue covered only 67% of oil import costs.

• Oil import: About 14% of total import• In FY 2017/18 imported electricity accounted for 37%

of total electricity supply in Nepal• Electricity import cost in FY 2016/17: 16 billion NRs

Petroleum Storage capacity• Present total petroleum storage capacity: 71, 622 kilo liters (kl)

• This equivalent to 11 days of demand.

– Petrol storage capacity : enough for 5 days

– Diesel storage capacity: enough for 8 days

– Aviation fuel storage capacity: enough for 10 days

• Total petroleum product demand in FY 2074/75: 2297101 kl

• LPG demand; 370560 metric tons

• Annual growth rate in petroleum products during FY 2074/75: 20%

• Projected growth in petroleum products by FY 2082/83 (at current growth rate):

9877114 kl

The present storage capacity will be enough only for meeting less than 3 days of demand by FY 2082/83.

• If a national goal for strategic petroleum reserve is to be set at 90 days of reserve,

storage capacity required: 2,435,453 kl

This will require 33 times bigger storage capacity than the present one.

Estimated cost of storage for 90 days: Rs 117 billion

Source: NOC, 2018; Nagarik Daily, Arthik, 19 August 2018; Himalayan Times

Substitution of imported energy in industrial, transport and residential

sectors an opportunity

Challenges

Larget Hydropower Investment Requirements

Hydropower Investment Requirements at Moderately Low Capacity Cost (@USD 2000/kW)

0.00

10.00

20.00

30.00

40.00

50.00

60.00

Low(5%) Med(7.5%) High(10%)

Bill

ion

US$

2020 -2025

2020-2030

2020 -2040

5.21

Economic Growth ScenariosInvestment required during 2020-2030:5.21 billion $ (Low), 9.12 billion $ (Med.), 15.1 billion $ (High)These amount to 15%, 21% and 27% of the national GDP in 2025.Net national savings in 2015: 7 billion USD (World Bank)

9.12

15.1

Hydropower Investment Requirement in Different Periods, billion US$

Case B: Moderately High per Unit Capacity Costs

GDP Growth Rate Low (5%) Medium (7.5% High (10%)

2020-2025 4.4 6.7 9.8

2020-2030 6.7 11.8 19.7

2020-2040 14.2 32.7 70.6

Case A: Moderately low per Unit Capacity Costs

GDP Growth Rate Low (5%) Medium (7.5% High (10%)

2020-2025 3.43 5.22 7.56

2020-2030 5.21 9.12 15.10

2020-2040 10.92 25.03 54.02

Time and Cost Overruns of Hydropower Projects

“Almost all energy projects facing time, cost overruns” (25 Sept. 2015, Money, The Kathmandu Post)

Project Original deadline

Extended deadline

Original cost estimate

Revised cost estimate

Kulekhani III Dec. 2011 Not yetcompleted

Rs. 2.43 billion Rs 4.22 billion

Chameliya Dec. 2011 Rs 8 Billion Rs 15.6 Billion

Rahughat May 2014 Not yetcompleted

Upper Trishuli3A

April 2013 Not yetcompleted

Upper Tamakoshi

July 2016 April 2019 Rs 35.3 billion Over Rs 50 billion

Khimti-DhalkebarTrans. Line

Started in 2004-05

Completed in Feb. 2017

Cost Competitiveness

Global levelized cost of electricity from utility-scale renewable power generation technologies, 2010-2017

Electricity costs from renewable power generation have continued to fall LCOE for renewable technologies is at the lower end of the LCOE range for

fossil fuel options9/6/2018 51Source: IRENA (2017)

Cost of hydro vs imported power

Source: NEA Annual Report 2018.

Seller Rate (NPR/kWh) Line

PTC India 5.5 Tanakpur

NTPC Viduyt Vyapar Nigam (NVVN), 6.3-6.6Dhalkebar -Mujaffarpur

State Power Utilities 8-10.32

Project Type Rate (NPR/kWh)

RoR 4.8-8.40

PRoR 8.50-10.55

Storage 7.10-12.40

Solar PV 7.3

Source: Cemnet, 2018, Price in Nepal, 2018, Inida Mart, 2018, The Kathmandu Post, 2017, India Mart, 2017

Description Nepal (NPR)India (NPR)

Cement (OPC)-50kg Bag 870 - 940 480 - 616

Cement (PPC)- 50kg Bag 790 456 - 632

TMT Steel Bars-Per kg 80-86 64

River Sand-Per Cu Ft 90 - 115 90 - 130

Inadequate cross-border transmission capacity

Source: White Paper, MoEWRI.

Barriers to Cross border power trade

• Indian guideline on the subject

Consistency , certainty and credibility of government policies and decisions important!

How are our experiences?

Case of Upper Trishuli 3A: How Contractors try to manipulate the project contract?

• The Chinese contractor had signed an agreement with NEA in May 2010, in which it had committed to complete the project (then 60MW) by May 2014.

• The Chinese contractor had been demanding the project be upgraded to upgrade the project’s capacity from existing 60MW to 90MW.

• After its plan to upgrade the project was denied twice by the NEA board, the ministry had tabled the proposal to the Cabinet.

• The Cabinet approved the upgradation proposal.• Following the Cabinet approval, an NEA board meeting asked the NEA

management committee to study whether the project’s capacity should be upgraded deciding, however, that the project should be completed on time.

• With the capacity expansion, the project is pushed back by three years. The upgradation would also require an additional investment of Rs 4 billion.

• According to the NEA, the Chinese contractor has already increased the cost for the upgradation. The company, which had initially quoted Rs 2 billion, had now doubled the cost to Rs 4 billion.

• A writ was filed to the Supreme Court, which refused a stay order against the cabinet decision in favor of upgradation on the ground that the final decision is yet to be made by the NEA Board.

Case of West Seti Hydropower Project• A storage hydropower project with estimated capacity of 750 MW

• Govt. first issued license issued to SMEC, Australia;

• SMEC holds the license for 15 years without financial closure.

• A Cabinet meeting on 27 July 2011 took a decision to scrap the license issued to SMEC.

• West Seti Hydropower Project was formally handed over to China Three Gorges International (CTGI) Corporation on August 29, 2012

• After more than 5 years, Nepal Electricity Authority (NEA) signed the final agreement in Nov. 2017 with CTGI Corporation, to set up a joint venture to develop 750-megawatt West Seti Hydropower Project.

• The Chinese company would have 51 percent stake in the joint venture.

• Presenting the federal budget for the next fiscal year on May 29, 2018, Finance Minister said that the construction work on West Seti would be commenced by mobilizing internal resources

• Investment Board Nepal (IBN) refutes Finance Ministry’s claims that the government would build the West Seti Hydropower Project with internal resources as stated in the budget statement for fiscal 2018-19.

• As per the power purchase rate made public by the Energy Ministry in January 2017, reservoir-type projects like the West Seti will get Rs12.40 per unit during the dry season which lasts from December to May, and Rs7.10 per unit during the wet season which lasts from June to November.

• CTGI is reported to have said that it would not go ahead with the scheme if the power purchase rate was not increased.

• During a meeting in 2017, CTGI officials proposed decreasing the installed capacity citing a drop in the water level in the river. However, the Nepal Electricity Authority (NEA) rejected the plan.

• A high level meeting is held in Kathmandu between Nepalese authorities and CTGI in Aug. 2018. CTGI wanted to (i) decrease the project capacity from 750 MW to 500 or 620 MW; (ii) increase the period for payment in dollar and (iii) increase the PPA rate among others.

• Not all of CTGI’s new conditions were acceptable to the Nepalese side.

• CTGI effectively got out of the West Seti Project after holding the license for 6 years.

Case of Upper Karnali Project• “Four years elapsed, GMR is yet to sign financial closure” –

Republica Daily, 26 Aug. 2018.

• 900 MW hydropower project • A project development agreement was signed with GMR, an Indian

company, in Sept. 2014.• GMR plans to export 500 MW of power to Bangladesh.• Bangladesh signed an energy cooperation deal with Nepal to

import 500 MW of power in Aug 2018 (last month).• GMR has reportedly signed a MoU with Bangladesh to export 500

MW of power from Upper Karnali.• However, delay in the endorsement of the Indian Guidelines on

Cross Border Trade of Electricity 2016 has put the process in halt. • GMR sought extension for financial closure for the third year.• GMR has appealed to Govt. of Nepal to take diplomatic initiatives

with India to help with the project.

Lack of integrated power sector development planning

Strategy for hydropower development

• What types of hydropower projects should be developed first?

• What size of projects?

• Transmission line development strategy?

• Ad hoc project by project approach may be inefficient.

Power sector Plans in India

Optimizing the Energy Resource?The Case of Tamor Hydropower Project

• NEA is now planning to increase Tamor Project’s installed capacity to 762MW. • If the project is built at a higher capacity, 37.5 MW Kabeli-A and 21.5 MW Lower

Hewa hydropower projects will be inundated.• “NEA really wants to enhance the installed capacity of the project, but billions of

rupees will have to be paid in compensation to two other schemes,” said NEA Deputy Managing Director Rajeev Sharma, who is looking after the project. “So to move ahead with this plan, we need Energy Ministry’s green signal.”

• Although NEA has initiated informal talks on compensation with promoters of Kabeli-A and Lower Hewa projects, it needs the backing of the Energy Ministry to start final round of negotiations.

• NEA has already applied for a survey licence at the DoED to conduct a feasibility study on increasing the installed capacity of Tamor Hydropower Project.

• The DoED has asked NEA to first get consent of the two downstream projects.• Even though enlarging the Tamor Hydropower Project to 762 MW will directly impact

projects being built downstream, experts say that larger national interest should be taken into account.

https://kathmandupost.ekantipur.com/news/2018-04-08/nea-urges-govt-to-take-final-decision-on-tamor-project.html

Laws and Policies

Federal, State (Provincial) and Local Jurisdictions (Exclusive) related to Water Resources and Energy

According to Constitution of Nepal (CoN):• Federal Government Jurisdiction (CoN, Schedule 8)

– Policies relating to conservation and multiple uses of water resources

– Inland and inter-State electricity transmission lines– Central level large electricity, irrigation and other projects– Atomic energy, air space and astronomy

• State Government Jurisdiction (CoN, Schedule 6)

– State level electricity, irrigation and water supply services, navigation

• Local Government Jurisdiction (CoN, Schedule 8)

– Water supply, small hydropower projects, alternative energy

Optimizing the Energy Resource?The Case of Tamor Hydropower Project

• NEA is now planning to increase Tamor Project’s installed capacity to 762MW. • If the project is built at a higher capacity, 37.5 MW Kabeli-A and 21.5 MW Lower

Hewa hydropower projects will be inundated.• “NEA really wants to enhance the installed capacity of the project, but billions of

rupees will have to be paid in compensation to two other schemes,” said NEA Deputy Managing Director Rajeev Sharma, who is looking after the project. “So to move ahead with this plan, we need Energy Ministry’s green signal.”

• Although NEA has initiated informal talks on compensation with promoters of Kabeli-A and Lower Hewa projects, it needs the backing of the Energy Ministry to start final round of negotiations.

• NEA has already applied for a survey licence at the DoED to conduct a feasibility study on increasing the installed capacity of Tamor Hydropower Project.

• The DoED has asked NEA to first get consent of the two downstream projects.• Even though enlarging the Tamor Hydropower Project to 762 MW will directly impact

projects being built downstream, experts say that larger national interest should be taken into account.

https://kathmandupost.ekantipur.com/news/2018-04-08/nea-urges-govt-to-take-final-decision-on-tamor-project.html

Concurrent Federal, State and Local Government Jurisdiction related to Water Resources and Energy

According to Constitution of Nepal (Schedule 9):

• Services such as electricity, water supply, irrigation

• Royalty from natural resources

Legal Provisions on Royalty rom Hydropower

• (1) Royalty to be paid up to 15 years from the date of generation of electricity for commercial purpose: At a rate of Rs. 100 for each installed kilowatt of electricity per year plus 2 percent of the average tariff per unit (per kilowatt hour)

• (2) After the first 15 years: At a rate of Rs.1000 for each installed kilowatt of electricity per year plus 10 percent of the average tariff per unit (per kilowatt hour). – Electricity Act (1992), Article 12.

No revision in Royalty since 2001

Source: The Hydropower Development Policy, 2001.

• Exchange rate in 1992: Rs 42.7 per USD

• Exchange rate in 1 Sept 2018: Rs 113 .3 per USD

PPA Rates

PPA Rates-RoR Projects

Source: NEA

PPA Rates- PRoR Projects

PPA Rates-Storage Hydro and Solar Projects

SOLAR PV: NPR. 7.3/unit Source: My Republica

Hydropower - a strategic energy security option

• Storage hydropower can serve as a strategic option to mitigate impacts of interruptions in supply of petroleum products.

(Solar capacity: 10 to 30% of storage hydropower capacity(?))

• This can complement energy security strategies like electrification in transport, residential/commercial and other sectors.

• Strategic petroleum reserve vs. hydro-energy storage

Institutions for Hydropower Development

Key institutions at the national level

• Ministry of Energy, Irrigation and

– Department of Electricity Development

– Water and Energy Commission

– Nepal Electricity Authority

• Investment Board

• National Planning Commission

• National Energy Regulatory Commission

Key Messages• There is a need to have correct national level understanding about our

water resources and hydropower potential in the regional and global context.

• Have a credible mechanism to assess future electricity demand.• Consistency , certainty and credibility of government policies and decisions

important!• Do not change the rule or criteria in the middle of the game!• Take measures to improve cost competitiveness of hydropower in Nepal.• Make sufficient investments in feasibility studies and detailed design of the

projects so that they are thorough and reliable. They help to avoid/minimize expensive time and cost overruns.

• Determine the project parameters (design capacity, project type etc. based on thorough geotechnical and hydrological investigations and using best possible technical expertise/knowhow.

• Improve projct governance and implementation capacity.• Do not change the project parameters once a project development

agreement has been signed with the developer.

Thank you.