Thursday, January 19, 2017

Nepal's GDP will grow significantly through power trade: Report

Nepal's gross domestic product (GDP) could reach to Rs 13,100 billion (over $120 billion) in 2045, which is 39 per cent more than with existing trading mechanisms, with accelerated power trade (APT) between India and Nepal, according to a report.
The report, 'Economic Benefits from Nepal-India Electricity Trade,' released here today, also states that the growth in GDP is driven in part by the three-fold increase from Rs 310 billion in 2030 to Rs 1,069 billion in 2045 in revenue earned from electricity trade.
However, Nepal needs to invest up to Rs 2,596 billion in between 2012 and 2030 and another Rs 2,216 billion in between 2031 and 2045 to harness electricity of this quantum, the report added.
Highlighting the key findings of the report, chairman of Integrated Research and Action for Development (IRADe) – which conducted the study – Kirit Parikh said that the increased power trade will also fuel Nepal's per capita electricity demand to jump from the current 139 kWh/year to 1,500 kWh/year by 2045.
The report attributes it to increased domestic hydropower production that is 34.4 Gigawatt (Gw) in 2045. "Per capita electricity demand reflects strongly on the Human Development Index (HDI) of a country as increased access to electricity is directly linked to better quality of life," it added.
Nepal’s per capita electricity consumption stood at a low of 139 units per year in 2012, as against South Asian average of over 600 units and global average of around 2,800 units.
The first of its kind study was conducted by the India-based research institute IRADe under the fourth phase of the South Asia Regional Initiative for Energy Integration (SARI/EI) Programme. SARI/EI is a United States Agency for International Development's (USAID) programme that works to promote cross-border electricity trade for revitalising and accelerating regional economic development in South Asia.
Member of National Planning Commission (NPC) Swarnim Wagle, Chargé d'Affaires at the US Embassy in Kathmandu Michael Gonzales and second secretary at the Indian Embassy in Kathmandu Mala Narendra, released the report amid a function here today.
The report analyses the potential of cross-border electricity trade (CBET) between Nepal and India, and its feasibility and impact on the economy, power systems and power infrastructure of both countries.
Wagle, on the occasion, said that the report will be useful for the NPC while preparing periodic plans. "Electricity trade and hydropower development can significantly energise Nepal's economy and can help in the process of industrialisation," he said, adding that both the countries stand to gain from India-Nepal electricity trade. "Bangladesh and other South Asian countries also stand to reap benefits from the power trade."
Saying that power shortage is the biggest binding constraint to Nepal’s economic growth," he further added that Nepal can revive the manufacturing sector, if it can generate more electricity. "This could absorb youths, who want to move away from subsistence agriculture, reducing outflow of workers to various labour destinations."
He also opined that abundant supply of clean and reliable power through hydro sources will not only drive economic development but also improve the country’s ranking in HDI.
Nepal, home to around 6,000 rivers, rivulets and tributaries, has the potential to generate over 40 Gw of electricity through hydropower plants. But as of now, the country’s installed capacity stands at less than 1,000 MW, whereas peak demand stood at around 1,385 MW in the last fiscal year.
There is a big gap in demand and supply of electricity because Nepal has not been able to build relatively bigger hydropower plants since 70MW Middle Marsyangdi Hydroelectric Project, located in Lamjung, came into operation in 2008.
Nepal has now set an ambitious target of generating 10 Gw of electricity through hydro resources in the next 10 years, which, many say, is achievable.
However, Nepal will not be able to take advantage, if there is a delay in capacity addition. For instance, if project implementation is delayed by five years, not only will the country lose the earnings from power exports in that period, it will also have to pay for the power that it imports until the projects are implemented, the report reads, adding that the country will be net importer of electricity and will have to spend more to purchase power, if project implementation is delayed. Currently, the country has been importing around 450 MW of electricity from India to manage its power deficit. However, Nepal has planned to export electricity to India and gradually to the regional power market from the fiscal year 2021-22.
The country will require around Rs 2,596 billion to develop 18.6 Gwof power by 2030 and Rs 4,812 billion to exploit 34.4 Gw of hydropower potential, according to the study. "Nepal itself has huge possibility to increase consumption, as the share of electricity in the total energy demand of the country is merely two per cent."
Based on the IRADe-System for Analysis of Power Trade and Economic Growth (I-SAPTEG) modeling system, the research uses five models – three power system models and two macro-economic models to capture the impacts of electricity trade in India and Nepal under three scenarios – trade, business as usual and delayed capacity addition.
The study assesses potential power trade and the price of tradable electricity in between 2012 and 2050 consistent with the country’s macroeconomic framework. It also quantifies and analyses socioeconomic benefits of cross-border electricity trade arising from investment, export revenue and reduced electricity price between Nepal and India.
Similarly, on the occasion, Gonzales said that Asia, which is the fastest growing region in the world, lacks reliable power infrastructure. "With optimum utilisation of resources and a coherent regulatory framework in place, better regional integration could be achieved through CBET," he said, adding that the report rightly points out Nepal can gain tremendously from CBET. "For India, the benefits are more in terms of lower electricity system costs due to electricity imports from Nepal." Additionally, the import of hydropower electricity from Nepal will reduce carbon emissions of the power sector in India as the country's electricity generation is largely coal-based," he added.
Calling the findings of the report 'a win-win opportunity for both India and Nepal,' Mala Narendra said that India was committed to cross-border electricity trade in South Asia.
"To facilitate this, India's Ministry of Power in consultation with Ministry of External Affairs recently issued the 'Guidelines on Cross Border Trade of Electricity',” she added.
However, experts have been claiming that the guideline is against the ethos of Power Trade Agreement (PTA) signed between Nepal and India.
On the occasion, Jyoti Parikh of IRADe said that the power systems of the two countries are linked for different periods – peak and off-peak hours – to capture the compatibility for trade in the model which gives very different insights. "Our aim was to see, if Nepal too can follow Bhutan's example in transforming its economy," she said, adding that the primary objective of the study is to provide critical research on the viability and advantages of CBET so as to assist policy-makers in making strategic decisions.

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