Load
shedding has been a problem in Nepal since 90s and successive governments have
failed to address it effectively, though Nepal is very rich in the water resources
which can easily generate hydropower in necessary quantum. It has been ascribed
to lack of political stability and paucity of funding. But lack of vision with
regards to water resources and its multidimensional uses is the crux of the
problem. Therefore, Nepali people will be facing the problem, which is projected
to be 19 hrs a day in this dry season by Nepal Electricity Authority and at
this rate people will be getting electricity for a few hours about once a week
within a decade.
Prime Minister Dr Baburam
Bhattarai, who is also looking after the portfolio of Energy Ministry, is
relying on various measures to limit the load shedding to 10 hours in this dry
season. One of the measures envisaged for the purpose is curbing technical and
other leakages, which is not an unimportant issue, though. However, it should
be remembered that electricity deficit in this dry season will be in the range
of 900 MW (installed capacity of about 750 MW will generate around 250 MW whereas
peak demand projected by NEA is 1163 MW) while total system loss that could be
theoretically reduced in the dry season is less than 40 MW (about 15% of
generation) which will reduce load shedding only by a small fraction. However, it
will require huge investment in system up-gradation, strengthening, etc.
including of transmission and distribution network and it is, in any case, not
something that could be accomplished in time for this dry season; not even next
dry season. Moreover, reduction of nontechnical loss will not make more
electricity available in the system as those “stealing” electricity at the
moment will only start to pay once they are “caught”. The only difference it
will make is: so far those that are not paying for the electricity they are
consuming will have to start paying. Therefore, these will not have any
significant impact on the reduction of the energy crisis and load shedding
whatsoever.
The prime minister has also
put forward a plan to set up diesel plant to mitigate the problem. Is it
possible to set up the diesel plant to cover for electricity supply deficit of
around 900 MW? It is being said that a diesel plant with 25 MW installed capacity
will be set up. But 25 MW will be like a drop in the ocean and the deficit will
keep on increasing with the continuing increase in demand every year.
Further, rough calculation
shows that it will require 6 billion rupees a year in diesel for operation of
25 MW throughout the year (without accounting for other significant costs like
depreciation, interest, repairs and maintenance, etc.). With this amount a
hydropower plant of 40 MW can be built (assuming initial investment of 150
million rupees per MW); meaning just one year’s fuel cost of a 25 MW diesel
plant will “buy” 40 MW hydropower plant with the potential economic life of 25
years. If the life of diesel plant is ten years, then a 25 MW diesel plant will
burn up 60 billion rupees worth of diesel (at current price of diesel). Cost of
diesel for 10 years of 60 billion rupees is sufficient to build hydropower
project with 400 MW installed capacity. Therefore, the decision to set up
diesel plant lacks prudence.
Furthermore, currently the
price of diesel is Rs. 97 per liter and one liter of diesel can produce 3.5
units of electricity. In this backdrop even if the plant is operated in highly
efficient manner, it will cost about 35 rupees per unit of electricity. Who can
afford so expensive electricity? Nepal Electricity Authority will not be able
to pass on the cost to its consumers, in which case this institution, already projected
to incur a net loss of 10 billion rupees in current fiscal, will suffer
additional burden of operating prohibitively expensive diesel plant which will
increase the current fiscal year’s net loss by 50% and will further increase
with time.
The prime minister is even thinking
of providing grant for the purpose. What should be remembered is that it would
force him to reduce the budget under other heads. For instance, operating the
plant for one year will cost 600 km in terms of new road to a nation lacking in
infrastructure which will adversely impact the rural people majority of whom
are below poverty line.
Moreover, as only one fourth
of the total population has access to electricity, it will amount to subsidizing
the people with access to electricity at the cost of the people without access
to the electricity. Had a 40 MW hydro electricity project been built instead of
burning 60 billion rupees worth of diesel, it would have increased the access
of people's to electricity in rural areas as well.
The idea of diesel plant
comes from the school of thought which believes that “costly power is better
than no power”; as they attribute very high cost to “un-served energy.” Indian
government allowed Enron to build a power plant in Dhabol, Maharashtra
subscribing following that very school of thought, only to realize afterwards
that “no power is better than costly power” when it was already late. The rest
is history.
In view of all of the above,
setting up diesel plant manifests the height of foolishness.
The prime minister has also
said that he will import 200 MW electricity to meet the current energy crisis.
However, even after import of 200 MW electricity from India, the remaining deficit
will still be 475 MW and keep on increasing every year. Besides, it should not
be forgotten that UP and Bihar in India are staggering from its own energy
crisis and depending on these for additional electricity is like a poor begging
from a pauper. People should also learn from the fact that Chief Minister of
Bihar Nitish Kumar reduced export to Nepal by 30 MW even in the wet season and further
reduced recently too. The intensity of energy crisis in these states of India
is higher than in Nepal (people in certain districts of Uttar Pradesh get electricity
every 20-day for a few hours). Therefore, it is not wise to depend on import
from that country which itself is facing energy crisis.
Historically too India has
proved to be an unreliable partner to mitigate load shedding in Nepal. After
PTC India, Bihar State Electricity Board, et al had agreed to export additional
30 MW electricity to Nepal during the tenure of Prime Minister Pushpa Kamal
Dahal 'Prachanda' and all contracts/agreement were already signed, the whole
thing was aborted as External Affairs Ministry of India (“South Block”) objected
to it in May 2009, which eventually triggering PM Prachanda’s resignation
(people, not being aware of this fact, ascribe the resignation to Nepal’s the
then CoAS, Katwal). Now, we even do not have any formal agreement signed
between India and Nepal for the purpose. Only verbal commitment was,
reportedly, made by Indian Prime Minister Dr Manmohan Sigh during the summit meeting
of non-alliance nations in Tehran. Hence, there is no guarantee that India will
provide 200 MW of electricity when she herself is grappling with energy crisis.
The government is also
planning to reduce the working days to five days to reduce the duration of load
shedding hours. I do not think that it is a smart move either; at the risk of
being tagged “negative”. The government of Prime Minster Krishna Prasad Bhattarai
had also declared two days holidays as an austerity measure (to reduce
expenditure on utilities, petroleum product, etc.). But the expenditures didn’t
decline, including on electricity consumption, as expected while citizenry
suffered due to long weekend and both productivity and production of the
manpower diminished. Because, people working in government agencies of Nepal are
not conscious about energy misuse and the need for conservation and efficiency.
Therefore, by adding a day to the weekend the intensity of energy crisis will
not be mitigated, load shedding hours will not go down.
Moreover, with each passing
day, the electricity demand will keep on increasing (also due to expansion of
distribution network in rural areas), further intensifying the crisis which
cannot be solved by lengthening the weekend. At this rate we will soon require
7-day weekend. Conversely, if the government is to close down all government
offices, all industries/factories, educational institutions, private sector
offices, including imposition of prohibition on high electricity consuming
equipments, then the load shedding can be brought down to a few hours or even
zero. But this will take Nepal back to medieval ages where no one in right mind
would like to go.
Today, the crisis has
worsened to such an extent that there is no immediate solution to load shedding
problem in Nepal. Till a few years back, even I used to suggest minimizing the
technical leakage, conserving electricity by using “CFL” bulbs, etc. to
mitigate energy crisis (after the likes of us campaigned on behalf of CFL, it
was finally implemented last year). However, now the crisis has intensified by
a magnitude and these measures will not make a dent on the crisis. So, we do
not have any immediate or short term measure except belt tightening for next
two winters and if my suggestion is implemented we don’t need to suffer load
shedding thereafter.
Even setting up diesel plants
will take 18 to 24 months (people talk almost as if the diesel plants will
start generating electricity as soon as a decision is made). A diesel plant
entails adverse environmental impacts like noise pollution, GHG emission, etc.
and before deciding to set up a plant an EIA will have to be conducted which
will take about 6 months (no one in right mind would allow a diesel plant to be
located in her/his neighborhood). Placing order, getting it shipped, erecting
it at site, connecting it to grid, etc. will also take some time. We will be
lucky if a diesel plants will start generating electricity for next dry season;
it will not be possible to have electricity from new diesel plants for this
winter at all.
The best way forward is to
exploit Nepal’s competitive and comparative advantage which is water resources.
There are a number of hydropower projects in the pipeline which can be
completed within 18 to 24 months, if the construction is to be mechanized at
the higher plane (Khudi project under BPC took only 18 months). Therefore, it
will be a lot cheaper than diesel plant if hydropower project developers are
offered 10 rupees a unit if they commit to start generating electricity within
2 years. This is the best option for Nepal under the circumstance, as we don’t
produce even a drop of petroleum product.
It is very disheartening to
see, Prime Minister Dr Baburam Bhattarai who talks a lot about mitigating load shedding
problem in Nepal, determined to export power. It is foolish for a country
starved for power, dreaming to export power. Therefore, if we are to build big
export oriented projects, it cannot solve the energy crisis faced by the
country today even under suppressed economic growth scenario. If the food
cooked in one’s household is fed to the neighbors the family will have to
starve.
Dr Bhattarai, rightly so,
dreams of attaining accelerated economic growth or double digit growth (I too
dream of it along with him) while we have yet to achieve normal economic
growth. Even if the demand projected by NEA is met (meaning “no load
shedding”), no industries will be operated at full capacity and no new
factories can be set up for lack of power. This is the suppressed economic
growth scenario. My back-of-the-envelope calculation shows that Nepal needs
5,000 MW within 5 years in order for her to achieve normal economic growth
contrasted with NEA’s projection of 1640 MW for 2016/17 for suppressed economic
growth. To achieve double digit (accelerated economic) growth we will need more
than double of it.
Two things have to be
remembered in this respect. This does not mean that we should close our doors
to foreign direct investment. As long as the electricity is used for the
benefit of the country who is investing in which project does not matter.
Secondly, electricity as a commodity is unique in the sense that it cannot be
stored; must be consumed simultaneously with its production in real time.
Therefore, electricity produced in Nepal, if not consumed domestically has to
be exported in real time; otherwise it will be spilled. Besides, only a very
few plants have been built in Nepal with domestic funding and electricity is
not exported to Norway from Khimti, to Japan from Kulekhani. Nor are there
plans to export power from Chameliya to Korea or to China from West Seti. Meaning
it is foolhardy to say that simply because a foreign investor is investing in a
project, the electricity has to be exported to the country from where the
developer hails from.
All problems have solutions
and load shedding problem is not different. Nepal government should have a
policy to implement as many hydropower projects as possible with domestic
investment so that benefit from investment linkage will accrue to Nepal’s
economy; but shouldn’t preclude foreign investment as long as electricity
generated is availed for internal consumption. Secondly, Nepal should allow
projects to be implemented by the investor/s (domestic or foreign) that will
generate the electricity at the lowest cost. Nepal should purchase all such
power (at lowest possible price) and electrify the nation massively (not only
for lighting purposes, but to industrialize and electrify transportation which
will help us attain energy security) and export the remaining at premium price
comparable to the rate Nepal is paying to import power from PTC India. It must
be noted here that Nepal should export to enjoy the profit as PTC India exports
to Nepal not a developer in India. West Seti project is a good example from
this perspective. Originally envisaged as an export oriented project, the
license was cancelled last year subsequent to immense and unrelenting public
pressure; I was one of the few in the forefront. Now a Chinese developer is
going to build it to meet Nepal’s internal need and the fact that it will be
implemented as a multipurpose project is the icing on the cake.
Private
investors have discovered that investment in electricity generation is a
lucrative business. However, they are constrained by lack of infrastructure
like transmission network and access road. We have learnt that private sector,
indeed does have comparative advantage in building power plants both from the
perspective of time and cost (all projects built by NEA, including Chilime,
have incurred time and cost overrun). Therefore, NEA should launch a campaign
to build transmission network and if it is constrained by financial
considerations, then it should, to use an old euphemism, beg, borrow or steal
to build it. It will be difficult to attract private sector in this business.
A part of the
load shedding problem is attributable to construction delays. Implementation of
hydropower projects by NEA is fraught with both cost overrun and time overrun
risks as the experience shows. Therefore, the best use of national resource is
to have hydropower projects implemented by private sector that seems to be able
to implement projects effectively and efficiently both in terms of cost and
time (government and NEA should avoid these by signing long term power purchase
agreements with the developers at lowest possible tariff). Technical loss can
be significantly reduced by up to 7-8 percentage points by strengthening the
transmission network which will definitely help in reducing load shedding
duration.
Nepalese
policymakers and leaders must wake up from their slumber to solve this mammoth
crisis because Nepal has the prime resource needed to generate the electricity
- water. There is some comfort in the fact that Nepal has more than 6000 rivers
and majorities of them are capable to turn the turbine and generate
electricity. Being pessimist is a waste of time (we don’t have right to be pessimists),
so let us think from an optimistic point of view. But even so the picture is
not that rosy. It’s not that Nepal is running out of the solution. We have some
reliable and lasting solution but for this we have to have a vision of
accelerated economic growth and willpower to attain it for which it is of
utmost importance to understand that exporting power will not help Nepal attain
even suppressed economic growth. Power for industrialization that will generate
employment will only lead us to normal economic growth which will eventually
help us achieve double digit growth.
There is inherent
self contradiction in the professed aim of PM Bhattarai: he pays lip service to
mitigating Nepal’s energy crisis while trying to have export oriented projects
like Upper Karnali (900 MW), Arun III (900 MW), Tamakoshi III (650 MW) and
Upper Marsyangdi (600 MW) implemented, notwithstanding the public opposition to
it (I myself am fighting cases in the Supreme Court about the first 2 projects
– not against the projects but against the idea of exporting power from these
projects).
To conclude, in today's world
of blooming information communication technology, modern electronic equipment, etc.
to what extent this load shedding is allowing a Nepali to contribute should be
the matter of concern for every Nepali. Going back to dark ages with candles,
lantern, and kerosene light and firewood (three-fourth of the population is
still dependent on it), what legacy will we leave behind for generations to
come; every Nepali should contemplate this issue.
Ratna Sansar Shrestha
Published in Vol 4, Issue 2 of
Greatway magazine based on conversation.
