Nepal Electricity Authority
has projected 18 hours of load shedding in coming dry season while the care
taker PM Bhattarai, looking after the portfolio of Energy Ministry, has committed
to limit it to 10 hours and announced certain mitigation measures.
One of them is curbing
leakages. The deficit this dry season will be in the range of 900 MW (installed
capacity generating around 250 MW whereas projected peak demand is 1163 MW)
while system loss that theoretically could be reduced is less than 40 MW (about
15% of generation) reducing load shedding by a small fraction. However, it will
require huge investment in system up-gradation and strengthening of
transmission and distribution network which is not something that could be
accomplished for coming dry season; not even next dry season. Reduction of
nontechnical loss will not make
more electricity available as those “stealing” electricity will start to pay once
they are “caught”; not stop using electricity.
GoN also plans to set up 80
MW diesel plant for projected deficit of 900 MW; like a drop in the ocean. Rough
calculation indicates that it will cost about Rs 20 billion/year in diesel for
operation around the year (without accounting for depreciation, interest, lubricants,
repairs and maintenance, etc.). This amount is sufficient to build hydropower
plants of over 130 MW (assuming initial investment of Rs 150 million/MW).
Meaning, just one year’s fuel cost of 80 MW will “buy” 130 MW hydropower plant
with the potential economic life of 25 years. If the life of diesel plant is ten
years, then 80 MW diesel plant will burn up diesel worth Rs 200 billion (at
current price of diesel) which is sufficient to buy hydropower project with 1,300
MW installed capacity.
Further, as diesel costs Rs.
97/liter which can produce 3.5 units, electricity will cost about Rs 35/unit. Since
consumers will not be able to afford it, NEA, already projected to incur a net loss
of Rs 10 billion this year, will suffer additional loss of over Rs 15 billion;
Rs 25 billion in one year. If such loss is defrayed by government grant, it would
force reduction in the budget under other heads. For instance, operating the
plant for one year will cost 2,000 km in terms of new road to a nation lacking in
infrastructure adversely impacting rural people majority of who are below
poverty line. Furthermore, as only one fourth of the population has access to
electricity, it will amount to subsidizing the people with access to
electricity (urban rich) at the cost of the people without access to the
electricity (rural poor).
The idea of diesel plant
comes from the people who believe that “costly power is better than no power,”
attributing high cost to “un-served energy.” Indian government too allowed
Enron to build powerplant in Dhabol, Maharashtra subscribing to that concept only
to realize afterwards that “no power is better than costly power” when it was
already late. The rest is history.
The government seems to think
that diesel plant will start generating electricity as soon as decision is
made. As diesel plants entail adverse environmental impacts like noise
pollution, GHG emission, excessive vibration, etc. EIA is mandatory, requiring
about 6 months (no one in right mind would allow a diesel plant to be located
in her/his neighborhood). And placing order, getting shipped, erection at site,
connecting to grid, etc. will take about 18 to 24 months. We will be lucky if
diesel plants will start generating electricity for dry season of 2014 AD. In
view of all of the above, setting up diesel plant manifests the height of
foolishness.
There is also plan to import
200 MW electricity from India forgetting that UP and Bihar are suffering energy
crisis (people in certain areas of UP get electricity every 20-day for a few
hours!) and depending on India is like a poor begging from a pauper.
Historically too India has
proved to be unreliable source. After PTC India, Bihar State Electricity Board,
etc. had executed documentation to export 30 MW during the tenure of
'Prachanda' as PM, the process was aborted as External Affairs Ministry of
India objected to it in May 2009, culminating in PM Prachanda’s resignation
(people, unaware of the fact, ascribe the resignation to the then CoAS, Katwal).
Now, without any formal agreement in place, only verbal commitment was,
reportedly, made by Indian PM during NAM summit in Tehran, there is no
guarantee.
The government is also
planning to reduce the working days to five days. PM Krishna Prasad Bhattarai had
also declared five days week to reduce expenditure on utilities, petroleum
product, etc. But the expenditures didn’t decline, including on electricity,
while citizenry suffered and both productivity and production of the manpower
diminished. Therefore, by adding a day to the weekend, load shedding hours will
not decline. Conversely, if 7-day weekend is declared (shut down all
industries, educational institutions, government and nongovernment offices for
the whole week) the load shedding can easily be reduced to zero. But this will
take Nepal back to medieval ages which no one in right mind would choose.
There is no magical solution
for the dry season of 2013 except belt tightening. However, cost effective way forward
lies in water resources (where Nepal enjoys competitive and comparative
advantage). 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 (construction of Khudi project took only 18 months).
Therefore, it will be substantially cheaper if hydropower projects are offered Rs
10/unit on the condition that electricity is generated within 2 years.
It is very disheartening to
see PM Bhattarai, who talks a lot about mitigating load shedding problem in
Nepal, determined to export power from Upper Karnali
(900 MW), Arun III (900 MW), Tamakoshi III (650 MW) and Upper Marsyangdi (600
MW), notwithstanding the public opposition (writ petitions are pending in the
Supreme Court about the first 2). It is sheer foolishness for a country
starved for power, dreaming of exporting power.
Nepal is facing energy crisis
even under suppressed economic growth scenario (no power for industrialization,
impelling youth to migrate for employment). Nepal will need 5,000 MW in 5 years
to attain normal economic growth (NEA’s load forecast is based on suppressed
growth) and higher quantum to attain accelerated economic growth; common dream
of PM Bhattarai and this scribe.
Two things should be
remembered. This is no negation of foreign direct investment. As long as
electricity is used for the benefit of Nepal who invests is irrelevant.
Secondly, electricity is unique because it cannot be stored; must be consumed simultaneously
with its generation in real time. Therefore, electricity generated, if not
consumed domestically has to be exported immediately; otherwise it will be spilled. Besides, so far only a few
plants have been built with domestic funding but electricity has not been exported
to Norway from Khimti, nor to Japan from Kulekhani. Neither are there plans to
export power from Chameliya to Korea or to China from West Seti. Meaning, it is
foolhardy to say that the electricity has to be exported to the country to
which the investor belongs.
Nepal government should adopt
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 to Nepal. Secondly, Nepal should allow projects to be
implemented by the investor/s (domestic or foreign) that will generate the
electricity at the lowest cost, expeditiously. Nepal should purchase all such
power (at lowest possible price) and electrify the nation massively (not only
for lighting, but to industrialize, electrify transportation, energize agriculture
sector which will help us attain food, water and energy security) and export
the remaining at tariff comparable to what Nepal is importing at; as PTC India does;
not allow a developer/investor to export directly at rock bottom tariff. West
Seti project is excellent example. Originally envisaged as an export oriented project,
the license was cancelled subsequent to immense and unrelenting public
pressure; I was one of the few in the forefront. Now Chinese is building for
Nepal’s 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
lucrative. However, they are constrained by lack of infrastructure (transmission
network and access road) in which it is not feasible for them to invest. Private
sector indeed does have comparative advantage in building power plants from the
perspective of time and cost (all projects built by NEA, including Chilime,
have incurred time and cost overrun). Therefore, NEA should focus on
transmission network and if constrained by financial considerations, it should,
to use an old euphemism, “beg, borrow or steal”.
Ratna Sansar Shrestha. fca
Published
in Spotlight Newsmagazine: Vol 6 No 11 of November 30, 2012
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