Energy Policy, Planning and Economics

By: Juben Bhaukajee MS By research Student Supervisors: Dr. Hari Neopane, Associate Professor Mr. Suraj Baral, Lecturer Department of Mechanical Engineering School of Engineering Kathmandu University

Outline of Presentation
Introduction Problem Research question Objectives Methodology Research plan Expected outcome

Introduction: Background
Energy, a fundamental necessity for every system Electrical Energy- Electricity: Modern form of energy essential for industrial and overall development of country Only 2.4% of total energy demand fulfilled by electricity On going energy crisis in spite of huge hydropower potential 43,000MW of Hydropower generation technically and economically feasible 652.056 MW capacity; 956.10 Peak demand (FY 2011/12)

Energy consumption in 2010/11

Coal, 2.39%
Animal Residue, 5.68%

Electricity, Petroleum, 2.24% 8.18%

Renewable, 0.73%

Agri Residue, 3.62%

Firewood, 77.16% Source: Ministry of Finance, Economic Survey 2010/11

Background contd.
Interest of Government and non governmental institutions towards hydropower development Policies and plans made for facilitation of smooth development in hydropower sector Nepal has small market, survey necessary for export market, India being prime target

Problems: Motivation for study

In spite of dedicated efforts from government and non governmental institutions, situation not improving 35 hrs of load shedding every week in peak wet season More than 50% of total population deprived of electricity Imbalance in implementation of plans and resource utilization

20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0

Load forecast

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28

Energy (GWh)

System peak load

Source: NEA, 2010/11

Source: NEA- A year in review, 2011

Problem specification
Policy: Reform, Implementation and Impact
Centralized system Lack of sufficient information during policy planning Social and environmental issues

Planning: Generation and power evacuation expansion

Cost and time overrun of projects Transmission system expansion not in tune with generation expansion Grid connection agreement with NEA (for IPP) Load factor problem

Economics: Economic and financial viability

Equity financing, risk management Public private partnership Foreign Direct Investment

Under construction HP projects

S.N 1 2 3 Developer Project Capacity RCOD (MW) 5 4.5 1.765 Mailung Khola Hydropower Mailung Khola Company P. Ltd. Sunkoshi Hydropower Co. P. Ltd. Laughing Buddha Power Nepal P. Ltd. Lower Indrawati Lower Chaku 2060.12.18 2063.03.15 2065.04.01

4
5 6 7 8

Laughing Buddha Power Nepal P. Ltd.

Nyadi Group P. Ltd. Bhagwati Hydropower Development Co. P. Ltd. United Modi Hydropower P. Ltd. Synergy Power Development P. Ltd.

Middle Chaku
Siuri Khola Bijaypur I Lower ModinI Siprin

1.8
4.95 4.41 9.9 9.658

2067.09.16
2067.10.29 2067.12.30 2068.05.01 2068.09.01

Under construction HP projects

S.N 9 2 3 4 5 6 Developer Project Capacity RCOD (MW) 8.4 3 3.52 2.2 2 2.475 2068.11.01 2068.12.14 2069.01.01 2069.03.31 2069.02.17 2069.11.30 Ankhu Khola Jalbidhyut Co. Ankhu Khola I P. Ltd Bhairavkunda Hydropower P. Ltd. Nepal Hydropower Ltd. Bojini Compani P. Ltd. Electrocom and Research centre P. Ltd. Eastern Hydropower P. Ltd. Bhairavkunda Charnawati Jiri Khola Jhyadi Khola Pikhuwa Khola

Research Question
How can hydropower development be accelerated in the country, in order to establish an economical and efficient system operation and resource utilization

Research Question contd.

What are the flaws in existing policies?
How are policies formed? Who are the actors involved? How have they been implemented? What are the impacts?

How can the energy system be made more economical and efficient?
How can cost of generation be reduced? How can time and cost overrun of projects be reduced? How can power evacuation problem be solved?

How can investment in hydropower sector be encouraged, through equity- debt financing, promoting public private partnership and foreign investment?

Objectives
Identify drawbacks of existing policy and status of planning and implementation and recommend mitigation measures Prepare an energy model for generation expansion plan in order to create and economic and efficient system. Identify the optimum financing method in order to implement the plans in accordance with national development plan and available resources, encouraging public private partnership in investment and foreign direct investment.

Limitations
Availability of limited data due to confidentiality issue Data from all the projects and institutions will not be taken, mainly data from under construction projects will be used.

Delimitations
Research focused on Hydropower, not in other forms of generation like solar, wind etc. Focus mainly on generation planning, and then on power evacuation, distribution will not be dealt in detail

Methodology
Three dimensions of research
Policy

Energy Economics

Energy planning

Methodology: Policy analysis

Policy analysis shall be carried out to understand historical context of policy reform, reform and implementation process and its impacts at different levels. The framework shall include: Institutional analysis Stakeholder analysis

Institutional Analysis
It is carried out in order to understand the overall institutional structure, and the manner in which there is flow of resources, information and decision making. Organizational Mapping shall be used as a tool to carry out institutional analysis.

Organizational Mapping
Tool used to illustrate and analyze flows of resources, information and decision in an organization. Includes 3 analytical steps:
Institutional mapping Process tracing Process mapping

Organizational Mapping
Institutional mapping
Illustrates resources and responsibilities of agencies and organizations involved Shall be done through analysis of case studies and Interviews with key Informants

Process tracing
It is a qualitative method for identifying the causeeffect flow of resources and decision making from change in policy and its implementation. It tests the expected impact of a particular policy reform with the actual, and helps identify probable risk and potential solutions

Organizational Mapping
Process mapping
This is a tool that looks at the overall picture to illustrate the broader network of flow of information, resources and decision making, in policy implementation It is a form of a flow diagram consisting of network of threads of process tracing. This tool helps to locate and identify the bottlenecks and constraints and to analyze opportunities for changing processes to make them more effective and efficient.

Stakeholder Analysis
Stakeholders of policy are all the individuals, groups and organizations who influence and who are affected by the reform and implementation of the policy. Stakeholder analysis aims to identify stakeholder characteristics, their interests, and the nature and degree of their influence on existing or future policies, reforms, or interventions.

Stakeholder Analysis
The following tools shall be used to carry out stakeholder analysis: Stakeholder analysis matrices Political mapping

Stakeholder Analysis
Stakeholder analysis matrices
It is carried out through a combination of review of secondary literature and interactions with knowledgeable key informants Stakeholder analysis matrices are used to list and plot the stakeholders and their relationship to the policy process.

Stakeholder Analysis
Stakeholder analysis matrices shall be used to plot the following variables:
Degree to which policy reform impacts stakeholders Level of interest of stakeholders Level of importance to satisfy needs of each stakeholder Level of influence stakeholder has in policy design and implementation

Methodology: Economic Analysis

Economic analysis is carried out in order to show that the proposed project achieves optimum utilization of resources and provides economic merit to justify investment in it. Economic analysis of different hydropower projects (ROR, Storage) shall be carried to evaluate economic viability

Economic analysis

The following analysis shall be carried out: Cost benefit analysis Benefit to cost ratio Simple pay back period Initial rate of return Levelized cost of energy Cash flow analysis Discounted cash flow Net present value Internal rate of return

Economic analysis: Data collection

The following parameters shall be collected from different hydropower project to carry out economic analysis: Initial investment (one time cost) of power plant and transmission system Operational (running) cost including operation and maintenance Energy sales rate (PPA rate) Expected energy generation forecast

Methodology: Energy planning

Planning :
A process of collection and analysis of information regarding power system Demand analysis and forecast Market survey Demand side management Generation expansion and operation model using Wein Automatic System Planning (Tool)

Methodology: Planning
WASP
A model to find economically optimal expansion policy for an electric utility. It uses probabilistic simulation to evaluate the expected operation costs. It uses dynamic programming to select the optimal expansion plan.

Methodology: Economic and Financial analysis

Economic analysis is carried out from country view point with the objective of increasing national income by allocating resources to their best use. Financial analysis is carried out from the view point of project developer, with the objective of contributing to financial soundness of utility, by selecting profitable projects and through suitable financing. Tools: Ratio analysis, FIRR

Economic and financial analysis

Cost Benefit Analysis Inflation Discount Rate Benefit Cost Ratio Net present Value Internal Rate of Return Uncertainty Risk Analysis

Methodology: Approach
Data collection
Attend seminars, trainings, workshops related to Energy policy, planning and economics Take interviews with relevant personnel Questionnaire survey

Primary data: Through questionnaires and interviews Secondary data: From reports, journals, papers, websites etc

Methodology: Approach
Desk study:

To collect background information Identify indicators and data to be analyzed Data base for data collection Questionnaire preparation
For data collection Interviews Questionnaire survey Observation

Field visit:

Data collection framework

NEA Hydropower experts DOED

Under construction projects

Hydropower Policy, Planning, Economics

MOEN

Financial institutions

WECS

IPPs

IPPAN

Expected outcome
Policy problems, mitigation strategy Economic and efficient energy model Model for effective economic and financial evaluation of projects

Research Schedule

References
http://www.nea.org http://www.fncci.org http://www.doed.org.np http://www.wec.org.np Tools for Institutional, Political, and Social Analysis of Policy Reform, World Bank Energy Economics, Subhas C. Bhattacharyya Expansion Planning for Electrical Generating Systems, International Atomic Energy Agency, Viena, 1984 Hydropower pricing in Nepal, Jalasrot Vikas Sanstha, Nepal

Queries?

Thank you

41