Investing in Hydropower in Nepal
PRESENTED BY:
ROSHAN SHARMA
PRANAB BHAKTA MALLA
SURAJ SHARMA
SANDEEP TULADHAR
Background
Nepal has 2.27% of the world water resources (818,500 Ha of total water surface
area, about 6,000 rivers including rivulets and tributaries totaling about 45,000 KM
in length)
Currently there are 11 Major Hydroelectric plants, 16 grid connected small
hydroelectric plants, 23 isolated small hydroelectric plants and 22 Independent
Power Producers (IPPs) connected to Integrated Nepal Power System (INPS)
generating about 568 MW
Hydropower potential of Nepal : Theoretical 83,000 MW ; Feasible 42,000 MW
88 billion m3 estimated water storage potential
GoN has prepared a plan for the development of 10,000 MW and 25,000 MW of
hydropower for the coming 10 and 20 years respectively
Hydropower is a priority sector for GoN
ANNEX (1,2,3) provides major operated and proposed projects of National
interest
Advantages of Hydropower
cost-effectiveness in comparison with other renewable energy forms
Hydroelectric plants have long economic lives, with some plants still
in service after 50 years
Operating labor cost is also usually low, as plants are automated
and have few personnel on site during normal operation.
High demand of hydroelectricity and potential to contribute to
economic development of the Nation
Resource Availability
Demand Forecast
Domestic Demand
Nepal: acute
shortage of
electricity, only
42 % have
access to
electricity
Regional Demand
India and China Growing Economies
India
The electricity energy shortfall for India would remain at 34,250 MW
by 2012. India will need electricity energy above 300,000 MW by
2020 to sustain its economic growth1
India depends largely on Coal and Petroleum sources for fulfilling its
energy needs (both non-renewable sources)
China
China entered Nepals water and power sector in 2012
Shrinking availability of resources and increasing resistance to the
social and environmental consequences of non-renewable sources
of energy in China water resources in decline imported power is
required to meet energy demand2
Source: 1Socio-Economic Development Panorama Vol.1(1) 2007 pp.91-105
Growing Energy Demand in India: Nepal's Hydro-Power Export Potentialities Bamadev Gautam
Source: 2Strategic Analysis Paper / Nepal, Hydropower and Geopolitics: Tess Marslen / GFWCRP
Acts, Policies and Regulations
Policy and Plan Documents
Hydropower Development Policies 1992 and 2001
Water Resources Strategy 2002 and National Water Plan 2005
National Electricity Crisis Resolution Action Plan 2008
Rural Energy Policy 2006
Nepal Governments policy and plan of 10,000 MW in 10 years (2010-2020) and 25,000 MW in 20 years
(2010-2030)
Emergency Alleviation Plan
Acts and Regulations
Water Resources Act 1992, and Electricity Act 1992
Foreign Investment and Technology Transfer Act - 1992
Environment Protection Act - 1996 (Regulation-1997)
Electricity Act and Rules (proposed) (need to enquire)
Nepal Electricity Regulatory Commission Act (proposed)
Key Highlights of Hydropower Development Policy, 2001
Encouraged BOOT (Build, Operate, Own and Transfer) model
Electricity Tariff Fixation shall be made rationale and transparent
GoN will assist private sectors in acquiring houses and lands required to construct a
hydropower project
GoN will assist to rehabilitate and resettle communities near the project sites
Private Sectors operating project of up to 1MW can not linked to national grid system
may sell and distribute can determine the tariff rate on its own / No license required for
such projects registration with District Water Resource Committee
GoN will render appropriate Power Purchase Assistance (PPA) for the power to be
exported abroad
Study License: max. 5 years
Hydropower Generation License: (issued by Ministry of Water Resources)
Supply Internal Demand: 35 Years
Exported Oriented: 30 Years
Foreign exchange and repatriation facility
Provision relating to Fees
Internal Consumption Project
Electricity
Capacity
1
2
3
4
5
Up to 1 MW
From 1 MW to 10
MW
From 10 MW to 100
MW
Above 100 MW
For captive use
Up to 15 years
Annual
Energy
capacity
Royalty,
Royalty,
per kWh
per kW
Rs. 100/1.75%
After 15 years*
Annual
Energy
capacity
Royalty,
Royalty,
per kWh
per kW
Rs. 1000/10%
Rs. 150/-
1.85%
Rs. 1200/-
10%
Rs 200/Rs. 1500/-
2.00%
-
Rs. 1500/Rs. 3000/-
10%
-
Export Oriented Hydropower Project
Type
Export-oriented theriver project
Export-oriented
project
Up to 15 years
Annual capacity
royalty, per kW
run-of-river
Rs. 400/-
storage
Rs. 500/-
After 15 years*
Energy
Annual
royalty, per capacity
kWh
royalty, per
kW
7.5%
Rs. 1800/10%
Rs. 2000/-
Energy
royalty,
per kWh
12%
15%
Facility relating to Tax and Customs
Tax as per Income Tax Act
Only 1 % custom duty shall be imposed on the devices, machineries
and spare parts
If VAT is not levied on Electricity Tariff, VAT will not be imposed on
industrial machineries, equipment's and spare parts imported, after
acquiring permission and vice-versa.
Institutional Arrangements
A number of institutions exist in the energy sector.
a) Ministry of Energy,
b) Ministry of Forests and Soil conservation,
c) Ministry of Agriculture and Co-operatives
d) Ministry of Commerce and Supplies,
e) Ministry of Environment and Ministry of Industry
f) Nepal Investment Board
Commissions:
a) National Planning Commission
b) Water and Energy Commission
c) Corporation and Others
d) Nepal Electricity Authority
Opportunities and Challenges
Opportunities
Issues and Challenges
High flow in rivers: Himalaya is the source of most rivers of Nepal.
Environmental Risks (Upstream / Downstream / Forests / Disasters:
Himalayan geology young and fragile) , Climate Change, Glaciar
Lake outbursts, Sediments, Dry summer / wild monsoon
High prospect for small hydropower development
Issues of ownership, local employment, adequate compensation
High potential for Ponding type of Projects: Upper Karnali West Seti Burhi
Gandaki Pancheswar
Transitional political regime
Interested foreign investors: More and more Chinese and Indian investors
are interested to invest in Hydropower projects
Slow progressing development of transmission lines
High demand in local and regional market: Highly populated areas
Issues of resettlement / rehabilitation of local people
Market Assurances (PPA Tariffs)
Difficulty in acquisition of land
Per KW electricity production cost in Nepal is very high compared
to Bhutan, currently Bhutan exports 450MW to India
of India and Bangladesh are located near to Nepal. Electricity market is
available. Surplus energy can be exported
Clear financial incentives
Exemption of income tax for 10 years and 50 % for next 5 years
Exemption of VAT on machines, equipment
Private/foreign investor favorable policy of Government
ANNEX 1: Hydropower Projects at Operations
Project
Location
Capacity (MW)
Project Owner
Kaligandaki Hydropower Plant
Middle Marsyangdi Hydropower Project
Marshyangdi Hydropower Plant
Khimti-I Hydropower Plant
Bhotekoshi Hydropower Project
Syangja
Rasuwa
Tanahun
Dolakha
Sindhupalchok
1440
70
69
60
36
NEA
NEA
NEA
NEA
Bhote Koshi Power Company
Kulekhani-I Hydropower Plant
Kulekhani-II Hydropower Plant
Trishuli Hydropower Plant
Chilime Hydropower Project
Makwanpur
Nuwakot
Rasuwa
60
32
24
20
NEA
NEA
NEA
Chilime Hydropower Company
Gandaki Hydropower Plant
Devighat Hydropower Plant
Modi Hydropower Plant
Upper Modi Hydropower Project
Jhimruk Hydropower Plant
Sunkoshi Hydropower Plant
Indrawati Hydropower Project
Nawalparasi
Nuwakot
Parbat
Parbat
Pyuthan
Sindhupalchok
Sindhupalchok
15
14
14
14
12.3
10.05
7.5
NEA
NEA
NEA
GITEC Nepal Pvt. Ltd.
Butwal Power Company
NEA
National Hydropower Company
Puwa Hydropower Plant
Andhikhola Hydropower Plant
Chatara Hydropower Project
Panauti Hydropower Project
Other microhydro projects
Illam
Syangja
Sunsari
Kavre
6.2
5.1
3.2
3.2
14.5
568.7
NEA
Butwal Power Company
NEA
NEA
Total
ANNEX 2: Projects under Construction
Projects under NEA
Capacity
Type
Commissioning Date
Chamelia
Trishuli-3A
Kulekhani-III
Rahughat
30
60
14
30
PROR
ROR
2013 (soft loan of Korea)
2014 (soft loan of China)
Sept 2014
2016 (soft loan from India)
Under NEAs subsidiary
PPP Model
Upper Tamakoshi
Sanjen
Upper Sanjen
Rasuwagadhi
Bhotekoshi
Trishuli-3B
Bheri-Babai Diversion
456
14.3
42
102
111
37
48
PROR
ROR
ROR
ROR
ROR
ROR
ROR
Budhi Ganga
20
PROR
ROR
March 2016
Dec 2015
July 2015
2016
Dec 2016
2018 (undertaken by Irrigation
Dept.)
DoED
ANNEX 3: Proposed Projects
Projects
Capacity
Type
Developer
Status
Upper Karnali
900
PROR
GMR, India
PDA Signed
Arun-III
900
PROR
Satluj, India
PDA Signed
Upper Marshyandi
600
ROR
Himtal / GMR, India PDA Negotiation
Tamakoshi III
650
PROR
SN Power Norway
West Seti
750
Storage
Three Gorges
MoU Signed
Hydropower, China
Upper Seti
140
Storage
NEA (Fund: ADB,
Japan, Kuwait)
Detailed design
underway
Budhi Gandaki
600
Storage
NEA (Nepal Govt)
Detailed design
underway
Lower Arun
400
PROR
Brass Power, Brazil
PDA Negotiation
Upper Trishuli-I
216
ROR
Nepal Water and
Energy
Development
Company
Detail design
ongoing
PDA Negotiation
BE POSITIVE WITH THE HYDROPOWER SECTOR
THANK YOU
