Sunday, July 2, 2006

Energy crisis in Nepal

With petrol prices rising and natural resources diminishing, Nepal has no options than to look to alternative energy. Renewable energy sources like solar, hydro and biogas are the major sources that Nepal can use for its benefit.
Among them hydropower is considered to have huge potential in Nepal though at present it meets only less than two per cent of the total energy need. “In long-term micro-hydel projects is the only solution of the growing energy need, says energy experts. The energy crunch in the country, which has more than 6000 rivers with huge potential of hydropower generation, can be overcome with more clear vision and investment.
Hydropower technology is a proven technology that offers reliable and flexible operation. At present, however, only about 40 per cent of the total population has some form of access to electricity. “The hydropower plants have mainly catered to the electricity needs of the urban or semi-urban areas at present, says Ram Chandra Pandey, director at the Community Rural Electrification Department (CRED) of Nepal Electricity Authority.
Nepal’s enormous hydropower potential remains virtually untapped, creating a chronic imbalance between energy consumption and energy resource endowment. “There are a number of problems and challenges that need to be addressed to make the hydropower sector the launching pad for higher economic growth and development in Nepal,” claim energy experts.
Hydropower projects are capital-intensive, and most of the existing hydropower plants, owned and operated by the Nepal Electricity Authority (NEA), have mainly come up through bilateral and multi-lateral sources of financing.
After almost a century of development of hydropower — that started in early 1900 with Pharping power plant with 500 KW installed capacity — in Nepal, it has moved in a snail’s pace.
Post-1990 government opened the sector to local and foreign independent power producers (IPPs) and NEA also initiated some projects with different financing modes. As a result 292 MW capacity was enhanced within 10 years.
The current peak hour demand of NEA system is 556.3 MW and is likely to increase in an average rate of seven per cent every year, according to NEA. To meet the increasing demand, more mini-and micro-hydel projects should be encouraged, says Lila Nath Bhattarai, project manager of the Chilime hydroelectricity project, a model project developed by the NEA and private sector.
To enhance hydropower development, the most important elements are promoting cost effective small and medium-sized projects to meet domestic demand at affordable price, encouraging private sector investment in hydropower development and distribution, accelerating rural electrification also by attracting investment from the community and local private entrepreneurs, improving the integration of social and environmental elements into the power development process, and encouraging power-based industries and transportation systems as markets for the energy produced.
In places where hydropower plants are considered expensive, cheap solar energy is becoming popular. Some 500 solar cells have been installed in Humla district. “Below poverty level areas should be encouraged to use solar energy,” adds Bhattarai.
People, who rare cattle, use cow-dung to create fuel in many places. It is widely in practice in the remote areas. “Tukimara could be another option,” energy experts suggest.
There has been pressure on the forests in the rural areas in the absence of alternative sources of energy. It is imperative that we develop alternative sources of energy in the rural areas to check deforestation. So far, hydroelectricity has been the best alternative, which has not only helped protect the forest resources and environment but also saved huge amounts of money from flowing out of the country to import fossil fuels.
Hydropower has a number of benefits. It is a renewable electrical energy source and is non-polluting, like no heat or noxious gases are released. No fuel costs are involved, and given its low operating and maintenance cost, it is essentially inflation-proof.
However, in recent years NEA is going in loss, and people blame rural electrification for the loss. But Pandey, director at the CRED does not agree. He says, “Since most of the town areas are already electrified and most of the electricity demand is from the rural areas. The demand of rural area being very high, it will be potential market for electricity. If there is no demand there is no way generating more power and searching for more power plants.”
“At a national level, where electricity substitutes paraffin or diesel it is possible that there would be significant foreign exchange savings on imported fuels. Government should levy ten or twenty paisa from the millions of dollar that goes outside the country for importing fossil fuels specifically petroleum products for the source of energy and to be deposited on rural electrification fund,” he suggests.
The other source of energy is petroleum products. It has, in recent times, become a challenge to keep — the Nepal Oil Corportaion, the government agency that buys and distributes petrol, diesel and kerosene — afloat, due to rising oil prices in the global market.
NOC has incurred a whopping loss of about Rs 620 million. “The NOC is in loss of Rs 2 million every day,” says Umesh Dahal, acting general manager of the NOC. “The reason why the NOC is incurring such a huge loss,” according him is, “the heavy subsidy being provided by the corporation despite continuous rise in the price of oil in the international market.” However, Nepal Petroleum Dealers’ Association (NPDA) does not buy his logic. According to NPDA, the subsidised kerosene that the NOC provides does not reach the targeted group. Rather it is making its way to industries, they claim.
The government, to cut down the dependency on imported petroleum products, has established Petroleum Exploration Promotion Project (PEPP) and started doing surveys for the possibility of oil and gas reserves. But the cost of exploration is highly expensive. Dr Rajendra Bahadur Shrestha, project chief of the PEPP, says, “Petroleum exploration is high risk and capital intensive. It needs sophisticated technology and the drilling process is much more expensive that Nepal can not afford.”
Still some of the global companies like Shell are interested. Shell did some drilling at the block 10, in Biratnage, from 1986 to 1990. But the result was not as expected. Now Cairns that has taken blocks 1,2,4,6,7 for exploration and is working on the sites. “However, it will take at least eight years for them to get some result,” Shrestha adds.
Foreign expert companies are encouraged to come to Nepal and explore petroleum through Petroleum Act because technically sedimentary basis is appropriate for petrol exploration and our Terai region is likely to have oil wells and gas reserves.