As Nepal focusses on hydropower development to meet its own energy needs and export the surplus to neighbouring countries, a fresh study has identified that Nepal has the potential to harness over 72,000MW of hydropower across 10 major river basins and their sub-basins.

Nepal’s rich water resources were long known, as the country has approximately 6,000 rivers with a total length of 45,000 kilometres. Average annual water runoff from these rivers is about 220 billion cubic metres, according to an Asian Development Bank (ADB) report.

Hydropower potential from the major 10 river basins and their sub-basins were identified in a study undertaken by the Water and Energy Commission Secretariat on how the 10 rivers could be tapped for hydroelectricity, irrigation and drinking water by 2050.

The study was conducted as a part of preparation for a unified river basin plan for Koshi, Gandaki, Karnali, Mechi, Babai, Pashchim Rapti, Kankai, Kamala, Bagmati and Mahakali.

Sushil Chandra Tiwari, secretary at the commission, told the Post in a recent interview that as much as 72,000MW–73,000MW can potentially be generated in these river basins and their tributaries even if hydropower plants are operated under Q40 standards.

A hydropower project that can generate electricity in full capacity for 4.8 months or 40 percent of a year is known as Q40 project.

The estimated potential is in line with the commission’s 2019 study that put the gross hydropower potential of Nepal at 72,544 MW with three major river basins—Koshi, Gandaki, and Karnali—accounting for 94 percent of the total gross potential.

Citing a research report, the ADB study stated technical potential for hydropower has been estimated to be 83,000MW but slightly more than half of it is estimated to be economically feasible.

“Irrespective of the past and present studies, the country has ample hydropower potential,” said Tiwari.

Why has Nepal not been able to produce more?

Nepal’s installed capacity of hydropower projects is around 2,800MW till date, according to Nepal Electricity Authority (NEA), the state-owned power utility. In fact, development of hydropower took a jump only in recent years as the country lived in darkness for most of the past century.

The 500kW Pharping Hydropower Plant developed in 1911 was Nepal’s first hydropower plant and only the second hydroelectric project developed in the entire South Asia. Until 1960, Nepal had only 1.1MW of power. Nepal developed only 556.8MW till 2005, according to the NEA.

“It was the lost century for Nepal in terms of hydropower development,” said Ganesh Karki, president of Independent Power Producers’ Association, Nepal (IPPAN).

It is not that there had not been studies for big hydropower plants in the period. For example, the 10,800MW Karnali Chisapani Multipurpose Project was initially conceptualised as early as the 1960s. Nippon Koei Co Ltd (NK) of Japan had studied its feasibility between December 1962 and February 1966. It had suggested developing a run-of-the-river 1,800MW project.

The first study on the West Seti Hydropower Project was initiated in the early 1980s. In 1987, the French company Sogreah prepared a pre-feasibility study proposing a 37-MW run-of-the-river scheme, according to a report of the Asian Development Bank. These projects are yet to be developed.

“One key reason for poor development of hydropower plants for half a century since 1960 is the state-led economic model by the Panchayat regime and the lack of private sector involvement,” said Karki. “The government didn’t have enough resources but the closed economic model prevented the private sector from filling the void.”

Economic liberalisation adopted since the restoration of democracy in 1990 emerged as a watershed for the development of the private sector in Nepal. But politics prevailed over development as Nepal failed to rope in the World Bank to develop the then 300MW Arun-3 Hydropower project.

The bank had pulled out in August 1995 after a big controversy over the project’s huge construction costs, among other things, particularly after a major political party CPN-UML opposed project development.

Many experts point to the World Bank’s exit from the Arun III project as the reason behind years-long load-shedding in the country. Nepal had suffered prolonged power cuts since 2008 and it could officially end load-shedding only after 10 years in May 2018.

How did Nepal become a power exporter?

Nepal has been an energy surplus country in the wet season ever since the 456MW Upper Tamakoshi Hydropower Project came into full operation in August 2021.

In early November 2021, India opened the door for Nepal to sell its electricity in the southern neighbour’s power exchange market. The country was allowed to sell as much as 39MW of power generated from the 24MW Trishuli Hydropower Project and the 15MW Devighat Hydropower Project.

India has been gradually increasing the quota of imports from Nepal and now, Nepal has been permitted to export as much as 632.6MW. Till mid-November this wet season, Nepal exported power worth Rs14.5 billion, according to NEA.

Nepal sees a growing prospect of exporting power to India and other regional South Asian markets.

When Prime Minister Pushpa Kamal Dahal visited India in May–June, the southern neighbour promised to buy as much as 10,000MW in 10 years. Nepal and India have also agreed to cooperate in the power sector at sub-regional level of the ‘Bangladesh, Bhutan, India and Nepal’ (BBIN) initiative through a joint vision statement signed in April 2022.

As domestic power production has grown rapidly in recent years, NEA aims to become a net exporter of power by 2026.

How is Nepal planning to boost production?

The Ministry of Energy, Water Resources and Irrigation is preparing a 12-year plan to boost energy production and expand the market, with the target of producing over 28,000MW of electricity by 2035.

Of the targeted power generation, domestic demand is expected to reach 13,500MW if the economy grows at an average of 7.2 percent annually. Moreover, there is a plan to export 15,000MW by 2035, more than the expected domestic consumption.

But massive resources will have to be poured into the sector to achieve that target.

As much as $46.5 billion (Rs6,209 billion) will be required to generate the targeted power and develop transmission and distribution infrastructure, while $40 billion will be needed only for generation, according to the government’s estimate.

The government is preparing a 12-year plan to boost energy production and market expansion, with the target of producing over 28,000MW of electricity by 2035.

Currently, Nepal’s installed capacity is just over 2,800MW, and the plan is to greatly boost energy exports by 2035 with new regional markets, particularly in India, opening up, albeit slowly.

NEA Managing Director Kul Man Ghising told the Post last week that the target was obvious. “Even if we can meet 50–60 percent of the target, that will be a huge achievement,” he said. But multiple problems like local obstructions due to compensation related issues and delays in environment clearance and corruption have emerged as other major obstacles, according to officials and experts.

Former senior NEA official Sher Singh Bhat said that without market guarantee, it is not possible to generate enough power to meet the target. “There is room for massively boosting domestic consumption considering our high import of petroleum products,” he said. “Likewise, regional markets should also develop, particularly that of India, to attract investment and develop hydropower projects to harness the country’s water resources potential.”

Where is the market?

As per the 12-year plan, there is a target to increase the per capita consumption of electricity to 1,500 units from current 380 units by 2035. Even though the domestic demand for power has been growing steadily, it hasn’t jumped significantly as it remains below 2,000MW in the wet season, according to the NEA.

Bhat sees a huge scope of boosting the domestic market. He said some decisive actions and strategic shifts from fossil fuel to electricity in both kitchens and transport are needed.

Nepal’s fuel bill in the past fiscal year was worth Rs307 billion, as fossil fuel became the largest import item of the country. “Skyrocketing prices of petroleum products and high prices of imported coal-fired electricity from India last year made it clear that we need to maximise our use of electricity for the sake of energy security too,” said Bhat.

Growth of the domestic market for Nepal’s electricity would also reduce Nepal’s need to sell power to India as per the terms set by Delhi.

Former Water Resource Secretary Surya Nath Upadhyay said that Nepal’s bargaining power in dealing with India would be enhanced with regard to utilisation of Nepal’s water resources, provided the country has a robust domestic market. “Currently, we are thinking of negotiating with India for the export of power to our southern neighbour,” Upadhyay said. “But with embankments built in Nepal for hydropower plants, India also benefits on irrigation and flood control from regulated water flow. We have not been able to bring this up with India during negotiations.”

Upadhyay, who is also former chief of Commission for Investigation of Abuse of Authority, said that given Nepal’s need to sell power in the Indian market, the southern neighbour has been putting various restrictions including not buying power generated with Chinese investment.

Though India still puts forth various conditions while approving Nepal’s export of power, it has been slowly increasing import quota since it first opened the door for Nepal’s power in 2021. Likewise, India has allowed Nepal to sell power in its day-ahead, real time and medium term markets.

Once a long-term inter-governmental agreement is signed, there is expected to be a more predictable market for Nepal’s power, providing much-needed confidence to investors to pour money in Nepal’s hydropower sector.

Last month, the southern neighbour introduced a new rule allowing Indian distributors to incorporate imported hydropower into their set renewable energy quota. Earlier, such a quota could be met only from domestic generators of power.

India has a target to derive 50 percent cumulative electric power installed by 2030 from renewables, and achieve net-zero carbon emissions by 2070. “I think India will buy Nepal’s power even if it is only to meet its renewable energy target,” said IPPAN President Karki.

Bhat says that welcoming the entry of Indian private companies for the development of Nepal’s hydropower would also encourage India to be more flexible on import of power from Nepal.

Officials and experts also see potential in exporting power to other markets, with India already agreeing to facilitate Nepal’ export of 40MW electricity to Bangladesh through the existing transmission infrastructure.