Energy

AGRICULTURE ENERGY ENERGY

Despite the on-going pandemic, the energy sector has received a positive transformation. Nepal has been able to make successful agreements with General Electric (GE) and Bharat Heavy Electricals Limited (BHEL) for upgrading and maintaining consistent supply of electricity. A feasibility study to extend the Motihari- Amlekhgunj oil pipeline to extend to Chitwan has been conducted. Nepal annually spends NPR 6 billion (USD 49.8 million) in transporting fuels into the country with the government’s plan to extend the pipeline to Chitwan and (in future) to Kathmandu might help in saving transportation costs. However, the energy sector has also seen certain downfalls. Nepal Oil Corporation (NOC) hiked the prices of petrol and diesel recording it as one of the highest prices for fuel in past seven years. The increase in price is likely to make domestic products less competitive which might further worsen the trade balance. Besides this, Budhi Gandagi which was supposed to be Nepal’s largest hydro power project has failed to start its operation questioning the government’s ability to manage the establishment of huge hydropower projects in Nepal.

Nepal Electricity Authority (NEA) has contracted GE Renewable Energy’s Grid Solutions to upgrade three gas-

insulated substations: The capacity of substations in Khimti, Barhabise and Lapsiphedi will be increased from 220kV to 400kV as Nepal Electricity Authority (NEA) has contracted GE Grid Solutions to upgrade three gasinsulated substations. The substations will help produce a consistent supply of electricity, especially to households outside Kathmandu that currently do not have access to the national grid. The project will also allow Nepal to trade excess energy with neighboring countries.38

NEA to order electro-mechanical

work from BHEL: The Raghuganga Hydropower Limited (RGHPL), a company 100% owned by NEA has placed an offer to BHEL for electro-mechanical works for 40MW Rahughat Hydroelectric Project in Nepal. This is the second consecutive success for BHEL in the hydropower sector of Nepal. The project is majority funded by EXIM Bank of India in the form of a soft loan, along with funding from NEA and the Government of Nepal.39

Industries in Bhairahawa face uncertainty in production due to

insufficient electricity: Medium and large factories in Bhairahawa have been forced to cut down their production since mid-March 2021 due to insufficient electricity. As a result, the factories have been forced to increase their cost of production and are facing problems of paying daily wages to the laborers. Frequent tripping of circuit breakeNPRdue to unreliable distribution and old and weak local transmission systems are the main reasons behind insufficient electricity. The existing transformer capacity in the Bhairahawa–Lumbini Industrial Corridor is 20MVA, while a 23MVA power transformer is needed.40

Highest prices for fuels in the past seven yeaNPRhave been recorded due to the recent surge in its prices by Nepal Oil Corporation (NOC): The prices for petrol and diesel have increased by more than 20% in the past one year after NOC hiked the fuel prices again on Sunday (4th April, 2021). The new prices have been recorded as one of the highest prices of the fuels in the past seven years. NOC raised the prices of petrol and diesel each by NPR 2 (USD 0.01) per liter to NPR 120 (USD 0.99) per liter and NPR 103 (USD 0.85) per liter, respectively. For the price of the petrol that stood at NPR 96 (USD 0.79) per liter a year ago, the price

has increased by 25%. For diesel that costs NPR 85 (USD 0.70) per liter in April 2020, the price hike is around 22%.41

Motihari-Amlekhgunj Oil pipeline

to extend till Chitwan: A feasibility study for the 69-km long Amlekhgunj oil pipeline to extend till Chitwan has been conducted by NOC. The pipeline is expected to help reduce petroleum leakage, theft and adulteration and save transportation prices. The proposed pipeline is going to be 62 km long. The government further plans to extend the pipeline from Chitwan to Kathmandu.42

Nepal’s largest hydro power project

still at halt: The Budhi Gandaki hydro project which was supposed to be supplying 1200 megawatts (MW) of electricity by 2022 is still at halt. The project planned to build a dam 266 metres high (one of the world’s 10 tallest) providing steady flow of 3.38 billion units of electricity every year i.e. double the current electricity supply. The contract was given to China Gezhouba Group Corporation in 2018. Nepal government has not been able to receive a clear reply from the company yet. Nepali energy sector experts have widely criticized the project becoming financially unviable due to the falling costs of other renewables, such as wind and solar.43

Dorikhola hydroelectricity project to generate electricity commercially

by mid-July 20201: The Dordikhola Hydroelectricity Project in Lamjung is expected to generate electricity from mid-July 2021. The 27 megawatt hydroelectricity project which is being constructed by Himalayan Power Partner Ltd. (HPPL) has signed a power purchase agreement with the NEA to sell electricity by the second week of July. The NRN Investment Limited, established by non-residential Nepalis, will cover 35.7% of the cost, IME Group will cover 34.3% of the cost and the remaining 30% will come from local investment.44

OUTLOOK

In the last quarter, Nepal has seen to be working to build a consistent power supply. But, it apart from this, it should also focus in expanding the electricity production capacity as a whole. The country has been experiencing a rise in electricity demand. According to a research, the installed capacity requirement will reach up to 18,000MW45 by 2025, which is more than double of what Nepal is producing now (8,600 MW)46 hence, proving the need for new hydroelectricity power plants. The Budhi Gandagi hydro electricity project which was supposed to be providing electricity by 2022 has not come in operation yet. Instead of trying to build huge power plants, the government can focus in establishing smaller projects like the Dordikhola hydro electricity project which has proved that smaller projects which will require lesser capital and can be easily managed by local construction companies is far more realistic then aiming for huge ones. Similarly the country’s petroleum demand has been increasing by 10%47 annually. Nepal has witnessed 90% rise in fuel consumption then it did five years ago48. The government’s current plan to stretch the oil pipeline may reduce the freight charges and could build consistent supply of fuel but it may not entirely suffice the current demand. The solution for this can be switching to cleaner energy resources. Nepal can swap the fossil fuel with clean energy vehicles in order to balance the increasing49 demand.