Nepal’s Hydropower at a Crossroads: Why Storage is the Missing Piece

 

Over the past 60 years, Nepal has made remarkable progress in expanding its generation capacity from just 50 MW to 3,500 MW. The private sector has played a crucial role in this growth, contributing around 80% of the total installed capacity within a short period.

Deconstructing the Storage Hydro PPA Pricing Framework: A Critical Review of the ERC Discussion Paper

 Introduction: Nepal’s Growing Need for Energy Security

In recent years, Nepal has experienced a substantial increase in electricity generation capacity, mainly driven by run-of-river (RoR) hydropower projects. However, the country’s energy landscape is still heavily dependent on seasonal river flow, leading to surpluses in the wet season and deficits during the dry season. Recognizing this vulnerability, the Government of Nepal has prioritized storage hydropower projects in the national budget, marking a strategic shift toward energy security and grid reliability.

ERC’s New Draft on Open Access — An Example with Cost Calculation

 

ERC has recently released a draft regarding open access. Experts have long demanded that the private sector be allowed to use the transmission line by paying certain fees. So, this draft is a positive step forward. In this article, I try to calculate how much an open access user has to pay if we export 10 MW. 

Peaking Power: Comparing RoR Hydro, Peaking Hydro, Solar, and Battery-Backed Solar in Nepal

Introduction

In recent times, there has been significant buzz surrounding battery storage for solar power projects in Nepal. Some industry observers believe the recent introduction of the “take and pay” mechanism for Run-of-River (RoR) hydropower projects is part of a broader shift aimed at prioritizing solar power coupled with battery storage. This prompted me to analyze how battery-backed solar stacks up against traditional RoR hydro and peaking RoR projects in terms of energy supply during critical demand periods.

Price Discrimination in Nepal’s Energy Sector: Challenges and Opportunities

 

The Government of Nepal has set an ambitious target to generate 28,500 MW of electricity by 2035, aiming to boost both domestic consumption and export capacity. This strategic initiative reflects Nepal's commitment to harnessing its hydropower potential, promoting sustainable energy development, and fostering economic growth through regional energy cooperation.

Key Aspects of the 2035 Energy Target

• Domestic Consumption: Approximately 13,000 MW is intended for domestic use, aiming to meet the growing energy needs of the country.
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• Export Capacity: Around 15,000 MW is planned for export, primarily to neighboring countries like India, to enhance foreign currency earnings and support regional energy integration.
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To achieve this target, the Department of Electricity Development (DOED) has already issued licenses for 30,000 MW of hydropower projects and 704 MW of solar projects. However, the current reliance on Run-of-River (RoR) hydropower projects raises significant challenges.

HIDCL’s right share proposal

Hydroelectricity Investment and Development Limited (HIDCL) has notified Nepal Stock Exchange (NEPSE) regarding the issuance of its 100% right share.

Vicious Cycle and ways to overcome it

It is needless to say that we have not been able to harness 2% of the total hydro potential. With a stable government on the horizon, I think it is the right time to debate on how to exploit our resources.

Financing capacities of Nepali banks

The total loan and advance of Nepalese commercial banks stood at NRs. 1,801.567 billion at the end of Ashwin 2074 or mid October, 2017 (source: NRB). With 5% minimum lending requirement in hydropower sector as provisioned by Central Bank of Nepal, the total loan available is NRs. 90.078 billion. On the other hand, hydropower projects with install capacity of 2,043.6 MW have done the financial closure while 910.31 MW are in the process of securing debt (NEA’s Annual Report 2017). Assuming NRs. 180 million per MW as the construction cost, and 70:30 as Debt equity ratio, the total loan requirement is NRs. 372.19 billion. Even at the 10% as minimum lending requirement (assuming that Central bank will increase the provision), the total funds available will be around NRs. 180.157 billion.

Budhigandaki vs Upper Karnali vs Arun 3

In a country like Nepal where financial resource is scarce, we have no other option than use it wisely to get optimum benefits. However, things are not applied in Nepal as learned in economic class during our uni days.

Paradigm Shift

Nepal’s hydro is predominately RoR schemes and almost all pipeline hydropower projects are also RoR.

The rise of nationalism

 Nationalism is one of the major ideological components of Nepali communist parties. They have evolved around by influencing commoners about how they defend the country's sovereignty and raise their voice against unequal treaties with other countries, particularly with India. Although few communist leaders are being accused of signing anti-national treaties with India by their own colleagues, they keep on bouncing back time and again with this ideology.
 

Crowdfunding

The liquidity surplus situation with a very limited investment opportunity has made IPO a popular choice among investors.  Now it seems like it doesn’t matter what sector you throw in. Every IPO seems to be overwhelmingly oversubscribed.

Hydropower promoter shares: A quick guide

I have been receiving tons of emails lately. People are asking me whether or not I should invest in promoter shares. Well, I don't want to list the projects here but a lot of hydropower companies are inviting general public to invest in promoter shares informally.
 

Absolutely needed

It is the duty of government to provide basic infrastructures like electricity to its citizens. When government struggles to do so and invites private investors to join hands, it is absolutely necessary to reward them properly. Expectation of healthy profits by private sector is very natural.

Energy ministers’ new commitment.

The newly elected deputy prime minister and energy minister Mr. Top Bahadur Rayamajhi has recently expressed his verbal commitment to provide equal treatment between domestic (private), NEA's projects and foreign funded projects. Let's find out what additional benefits NEA and foreign funded projects are getting at the moment.

Dollar PPA: Reasons for and against it

In my previous post, I wrote about what we lose if we do "dollar denominated PPA for 15 years from COD for up to 55 percent of total payment." I concluded that Nepal ends up paying an additional amount of NRs. 71.16 million per MW.

Impact of dollar PPA when Nepali Rupee is depreciating at an alarming rate.

No sane foreign investor will invest in Nepal's hydro without dollar PPA. It is crystal clear. 

Reality check

The border blockade that strangled Nepal’s fuel supply has pointed out the need for energy security. A lot of articles have been published on the newspaper advocating the importance of hydropower construction for the self sufficiency. By reading the suggestions and recommendations made by our experts, it creates a sort of illusion to me. The path to transform this energy deficit country into a surplus country seems very easy. 

Central Banks’ new directive and its impact on hydropower financing.

Nepal Rastra Bank NRB (Central Bank of Nepal) has increased the capital requirement by four times for the commercial banks (NPR 8 billion from NPR 2 billion). The decision to increase the paid up capital within two years is not only applicable for commercial banks but also for development banks and finance institutions.

High time to use water resources to reduce Nepal’s dependence on India

Finally, the much-awaited constitution is with us. This could be the end of the political deadlock that we have been facing for decades. Most of us, including me, are hopeful that this constitution will bring peace and prosperity.