Nepal’s government is seeking to attract investment in the country’s vast hydropower resources, while exploring regional energy interconnections, as a way of reducing reliance on fossil fuels, increasing off-grid access, and reaching middle-income status, writes H.E. Barsha Man Pun, Minister of Energy, Water Resources and Irrigation.

In Nepal, after having enabled a political environment with a new constitution and the formation of government at federal, provincial and local levels, overall economic development is now the foremost priority. The present government’s campaign for a ‘prosperous Nepal and happy Nepali’ cannot be realised without the complete economic transformation of the country. Energy, being the key driver for economic development, has become the main area of focus for the government. We are committed to adequate energy production and supply of electricity to achieve the accelerated double-digit growth of the Nepalese economy.

Nature has bestowed enormous hydropower potential, of about 83 GW, on us. Of this about 42 GW is deemed technically and economically feasible. We have been able to develop about 1.1 GW of installed capacity with a few pondage run-of-river projects and numerous run-of-river projects. The storage facility of Nepal’s power system accounts only for 92 MW. On the brighter side, with the encouraging involvement of the private sector, around 2.5 GW of installed capacity is actively undergoing construction by prospective independent power producers. Out of these, around 2.4 GW is expected to be online within the next four years.

In the energy mix for the year 2016, the total energy produced was around 13 million tonnes of oil equivalent (MTOE), out of which the majority, around 66 per cent, came from fuel wood. The contribution of energy from renewables and electricity accounted for little over 6 per cent. For our energy requirement for the year 2050, estimated at around 17 MTOE, we intend to source 33 per cent of it from electricity and renewables next to 34 per cent from fuel wood and biomass. Thus, we foresee a substantial dominance of electricity and renewables in the projected energy mix for the target year 2050.

The Government of Nepal has set targets in the power sector for the next ten years. In five years, we intend to provide access to 100 per cent of the population through a mix of grid and off-grid systems. In the meantime, we are implementing several transmission and distribution system reinforcement projects to provide reliable electricity services to the people. The government is considering distributed electricity generation through micro-hydro, solar, and wind as complementary to the strengthening and expansion of the grid electricity distribution system.

The optimum exploitation of hydropower resources with seasonal and daily storage capacities along with the use of locally available renewable energy sources like solar and wind will be the key factor for a stronger and stable energy mix. This will greatly reduce our heavy dependence on imported fossil fuels through substitution with clean and renewable energy sources. By the next ten years, we are planning to develop 10,000 MW of generation for domestic consumption alone, with another 5,000 MW for cross-border trading.

We have initiated a programme, ‘Nepal’s Water - Citizen’s Investment’, through which we aim to mobilise financial resources from the public as an equity share for hydropower development, creating opportunities for people’s participation, and to develop a sense of ownership in hydropower development. Investment that can be generated within Nepal is limited, so is the case for debt as domestic lending is inadequate for the development of larger projects. This clearly points to the need for foreign direct investments in the sector.

Over the past couple of years, we have accelerated the pace of reforms in the sector. Even though it has been challenging to unbundle the sole public utility in the sector, we have been successful in creating a generation company and a transmission grid company. Seven distribution companies are now being planned to function in different provinces. Legal instruments are already in place for the formation of a regulatory mechanism in the electricity sector through which the Electricity Regulation Commission will become functional very soon.

One of the basic policies of the government is to promote private investments in the power sector. To that end, we have investor-friendly regulations which treat national and foreign parties on par. We have been successful in opening up opportunities for accessing neighbouring power markets beyond our political borders. The Power Trade and Transmission Interconnection Agreement with India and understandings reached with China as well as with Bangladesh for cooperation in the power sector have laid the foundation for cross-border electricity trade. We believe that these developments shall give confidence to prospective developers.

We are working to have a regional or sub-regional power interconnection. We are signatory to the South Asian Association for Regional Cooperation (SAARC) Framework Agreement on Energy Cooperation, and also party to the understanding reached for the establishment of the Bay of Bengal Initiative for Multi-Sector Technical and Economic Cooperation (BIMSTEC) Grid Interconnection. Eventually, such sub-regional or regional interconnections should help us to optimise our power systems and lower operating costs.

We envision Nepal to be an enterprise-friendly middle-income country by 2030. We are populated by a vibrant and youthful middle-class with absolute poverty in the low single digits and decreasing. Under this overarching vision, Nepal is continuously pursuing to meet, among others, the target of Sustainable Development Goal 7 which deals with ensuring access to affordable, reliable, sustainable and modern energy for all.

This piece originally appeared in the 2019 Hydropower Status report published on 12 May.