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Overcoming barriers to hydropower development

March 31, 2018

While the history of hydropower development dates back to 1911 in Nepal, the country is still struggling to harness hydropower potential to its minimum requirement. It has been told over and over again that Nepal’s economically feasible hydropower generation capacity is one of the highest in the world. However, this huge potential is still untapped.


Nepal is blessed with abundant hydro resources. Thanks to the country’s major rivers and their small tributaries. With the potential to generate over 90,000 MW, nearly 50,000 MW power has been told to be economically and technically viable.


As a result of proper management, Nepal Electricity Authority has been able to slash the power cut to few hours a week. It is definitely a relief to Nepali consumers who were suffering long hours of load shedding in the past. But what is equally important to understand that nearly half of our population have no access to grid-connected power. Because of which, many people are forced to rely on alternative sources like firewood and imported fossil fuel. It is also important to highlight that the power demand is also increasing day by day. The government estimates that at least 8,000 MW of additional power will be needed to fulfill the demand of Nepal alone by 2030. This suggests that investment in hydropower can be beneficial to the hydropower developers as well as the consumers.


Although Department of Electricity Department has issued about 13,000MW of survey license, only a small fraction of those issued has been initiated for construction. A lack of political stability and good governance are some of the important factors which are hindering the hydropower development. Lack of inter-governmental agency co-ordination and prolonged processes for environmental clearances from the government are also often cited as other barriers by the developers. Absence of proper coordination with the locals and their unreasonable demands are also challenging factors in hydropower development. Besides, these socio-political challenges, there are other natural risks like earthquakes and landslides. The little discharge of Nepali rivers in the dry season is also another issue often pointed out by hydropower experts.



Silver lining

Despite all above cited problem, it is important to focus that a conducive environment has been created for developers and investors. Although there are some challenges to identify the barriers to the development of hydropower resources, a lot of progress has been done.


At present more than 12 major hydropower projects are under construction. Although many of these project’s completion has been a setback because of the devastating earthquake in 2015, the government is firm in the reduction of energy crisis. The government has declared a National Energy Crisis Reduction and Electricity Development Decade (2016-2026) with the aim to end the existing energy crisis of the country and to develop hydropower projects.


Political turmoil has long been blamed as a major barrier for hydropower development, particularly to attract FDI. With recently formed new government, it can be at least assured that political situation in the country is back on the tracks. A two-third majority of left alliance in the House of Representatives indicates that the current government will be in the rule for at least next five years. It means that a conducive environment has been created for developers and financers.


Likewise, in order to address the issue raised by the locals, many hydropower projects have started involving the locals within the projects in different ways.


With the objective to help investors develop their projects rapidly, the government is establishing a coordination committee which will work with the investors. The committee will also work towards simplifying administrative procedures.


Another barrier is the requirement of huge capital in investment and financing. However, this problem is also being addressed with the concept of project financing and increasing interest of foreign investors as well as Nepali residing abroad and within the country. Now, the country needs rebranding to assure the investors that the country is ready for hydropower projects.


‘Unleashing 40,000 MW in 10 years’

Energy Development Council, the umbrella organization representing the entire energy sector organized a three-day conference with the target of knowledge-sharing on investment in Nepal, early this year. The event featured renowned speakers and provide a platform for investors, developers and financers worldwide to seal the deal in the energy sector.


This event provided an opportunity for the investors to come and feel the sense of optimism that is growing in the country with political stability. The event was successful in bringing together the stakeholders of hydropower. President Bidhya Devi Bahandari who was the chief guest of the event called on both local and foreign investors for active involvement in harnessing the huge hydropower potential in the country. The summit was also successful in bringing international attention for the investment along while brining some commitment for the investment.

Sushil Pokharel

CEO, Sushmit Energy