1.

New Nepal plunged in darkness, the energy crisis continuous…

The lights are out. Who’s to blame? How long will this DARKNESS last?

Load shedding has been increase 9 hours

per day and the authority has planed 14 hours
of load shedding a day if there will be no rain
in this season. As load shedding continues to
be imposed in Nepal, it has created several
nightmarish situations, making daily life a
chore. Sample some of them: the CT scan at
Bir Hospital (National Institute of Medical
Science - an university granted institution)
suddenly failing because of power outage;
traffic lights not working; streetlights dying
out leading to accidents and crime, the
machinery in factories lie deadly silent. Lives
all over the country have been thrown out of
ear because of the continuing spells of load
shedding. But Nepal Electricity Authority
(NEA) to be blamed? Perhaps not. The NEA
has been bearing losses since 2001, and if
there were no load shedding, the losses would
have been higher. And it may cause to
dissolve the NEA.

So what about Nepal’s rivers and their much-touted capacity to generate electricity? But the fact
of the matter is that these rivers are capable of generating profuse amount of hydropower when needed
the least and they cannot match up when needed the most. The obvious solution is generation of more
power, but capital-oriented hydro power projects are not taking shape. The goal of the present ruling party
to generate 10,000 megawatt in 10 years sounds so far-fetched given the century-old incompetent history
of electricity in the country. Till date, only 619.6 megawatt nameplate capacities of electricity generating
machines have been installed. And days after the government announced its ambitious aim; it had to
declare a state of energy crisis in the country.

For the government’s hydropower vision to work, it is mandatory for it to come up with measures
that can encourage potential investors to invest in the sector. Experts assert that there exist a lot of
loopholes in the government’s hydropower plans and policies, as the Acts and regulations hinder the
registered Independent Power Producers’ activation, causing the Nepal Electricity Authority tremendous
loss. The situation has been compounded by the prevailing economic and political situation, not to
mention the chronic issue of technical snags.

On its part, the government has been trying to instill confidence in the Independent Power
Producers’ regarding secure investments. Some hydropower experts are also affirmative that with
perseverance the goal can be achieved. The generation of 10,000 megawatt is possible only if the
government can arrange for donors. Nepal is getting Rs 150 billion annually from remittance with which
only 1000 megawatt can be generated. In an interview to a business magazine; Sandip Shah, president of
the Independent Power Producers’ Association of Nepal, does not believe that the generation of 10,000
megawatt is a realistic goal, and sees not more than 3000 megawatt additional electricity production in the
next 10 years, and that too only if the Independent Power Producers’ can be rejuvenated and the
government follows a liberal policy on mega project like Upper Karnali and Arun III, which were opened
for competitive bidding. In additional Shah says that no substantial development will take place in the
electricity sector before 2013, and load shedding can even rise up to 18 hours a day till 2010, after which
it will see some reduction when transmission lines are constructed.

Hydropower projects are highly capital-oriented and give return only after a prolonged time,
which includes licensure, environment impact assessment, pre-feasibility and acquisition, construction
and generation which ultimately keep Banks and Donors away. Banks are business institution that turn to
more profitable venture. The cost of hydropower generation is Rs 150 million per megawatt and bank
loans are limited to only 250 million, this demonstrates the incompetence of Nepali economy to generate
hydroelectricity. With the current global economic crunch, credit globally is virtually frozen and even
multinational banks will be incapable of financing such mega projects, which compel us to rely on
organizations such as the World Bank or Asian development Bank.

Hydropower Investors in Nepal

S No. Nepali Banks/Financial Financed Project

Institution
01 Employee Provident Fund Chilime, Indrawati, Piluwa, Chaku
02 Himalayan Bank Shangrila Energy, Chilime, Mailung Khola, Lower
Nyadi,
03 Nepal Bangladesh Bank Indrawati, Lower Indrawati
04 Bank of Kathmandu Piluwa Khola, Mailung, Baramchi
05 Machhapuchchhre Bank Syange, Mailung, Sunkoshi, Sisne, Khudi
06 Nepal Investment Bank Sunkoshi, Khudi
07 Citizen International Trust Chilime, Chanku
08 Lumbini Bank Chanku
09 Nabil Bank Shangrila Energy, Mailung Khola, Rairang
10 Nepal Bank Limited Indrawati
11 Kumara Bank Sunkoshi
12 Laxmi Bank Chilime, Khudi
13 Siddhartha Bank Sunkoshi
14 Development Credit Bank Mailung
15 Ace Development Bank Sunkoshi
16 Rastra Banijya Bank Khudi
Source: Road map to Power Investors in Nepal, IPPAN

In a response to a national daily; the Asian Development Bank board of directors has approved a
loan of $65 million to strengthen and expand electricity transmission and distribution facilities in a bid to
cut network losses and reduce supply interruptions. Fund will also be used to upgrade two hydropower
plants, introduce compact fluorescent lamps and install solar and solar-wind powered streetlights in a bid
to boost energy efficiency, increase the use of clean renewable technologies and take the strain off the
national grid. In addition Asian Development Bank also state that, the public-private franchising
partnership will be develop in select urban areas to improve service quality, providing a model that could
be replicated in future.
 The Energy Access and Efficiency Improvement Project will support the government’s long term
vision to provide universal coverage using grid-based and off-grid supplies by 2027. Installed generating
capacities at the end of 2008 were 615 megawatt with just 33 percent of household connected to the
national grid. “The project will strengthen and increase supply capacity, increase consumer connections,
improve the finances of the state-owned Nepal Electricity Authority, and eventually allow for increase
cross-border energy trade, giving the economy boost” said Priyantha Wijayatunga, Energy Specialist in
Asian Development Bank’s South Asia Department. An estimated 20,000 additional households are
expected to directly consumers will receive more reliable power supplies. The installation of 1,000 solar
and solar-wind streetlights in municipal areas of Bhaktapur, Kathmandu and Lalitpur will improve safety
particularly for women and children, while the project is expected 15,000 to 20,000 tons of carbon
dioxide emissions annually.

Asian Development Bank’s loan from its concessional Asian Development Fund covers 69% of
the project cost of $93.7 million. The loan has 32 year term, including a grace period of eight years.
Interest is charged at 1percent per annum during the grace period and 1.5 percent per annum for the rest
of term. Grants totaling $4.5 million from the Climate Change Fund and Multi-Donor Clean Energy
Fund, administrated by Asian Development Bank, will also be provided. The Government and Nepal
Electricity Authority will supply the balance of $24.2 million. Nepal Electricity Authority is the executing
agency for the project which is due for completion around September 2014.

The two big problems for NEA are lack of investors on biggest project and many civilian involve
in tariff of electricity. The first problem can be solving out if NEA can built trust to the investors that their
money is in safe hand and it will be good return in the future. And second problem, electricity tariff can
be solve if only NEA makes strike policy as well as take action against the tariff person with the help of
local authority. In both of cases the Nepal Government must help the organization. For an example few
month earlier;

Nepal government and NEA, has launch an example program called “CFL ghar dailo aviyan".
Under this program if a consumer consumes bellow 20 units in ashad month of 2066 BS, they can get a
free CFL Bulb and if consumption is upper than 20 units then they can get a free CFL Bulb with purchase
of another same watt of CFL Bulb but a customer can buy maximum two pieces only. The program is
offered with GE and Radiant brand only. The authority has also stated that, it will make 80 percent less
consumptions than last year in household sector. By the program people lived in urban and town area are
aware enough of CFL technology and they started to use CFL bulb rather than normal bulbs. Where as in
village and remote area people still using the normal bulbs because of the CFL bulb cost 13.5 times much
more than normal bulbs. So the NEA and government’s example program still not sufficient to reduce the
use of electricity in household sector.

It might be ending of nightmare and starting of economic strength in Nepal.