Objectives• Review of Hydropower Policy in Nepal• Review of Successful Project Practiced until date• Possibility of implementation to other projects
A brief on Nepal• Area 147,181 Sq. km• Population: 26.67m (2011 census)• GDP: 18.8 billion USD (2011World Bank)• Some 6000 rivers with annualdischarge of 174 billion m3• 83 GW theoretical potential ofhydropower• 45 GW economical potential ofhydropower is from 114 surveyedprojects• 740MW of installed capacity Hydro –electricity 92% Thermal/Imports 8%• Electrification Ratio 43.6%
Current Energy Status of NepalSource: NEA,2011Why firewood dominates fuel source? Cheapest source of Energy and Easilyavailable from forest Lack of infrastructure, and electricitysourceAround 10% growth ratePlant Capacity YearPharping 500KW 1911Sundarijal 600KW 1936Panauti 2.4MW 1965Kulekhani 60MW 1982Total 688 MW 2010
Why is Nepal Behind?Constraints•Political: Autocratic regimes and their effect on bureaucracy for a long time Political instability, frequent change of political regimes; (1950, 1962, 1989, 2006) Lack of political will Maoist insurgency from 1995 to 2006 Overall security situation•Technical: Poor infrastructure high sedimentation Logistics Maintenance•Economic: Low electricity tariff that do not match costs Poor financial health of Nepal electricity authority Local people’s unjustified demand and expectationsFirst Hydropower built in 1911
Why Hydropower in Nepal?• Perennial rivers originated from the Himalaya and steepgradient of the country’s topography• One of the sustainable, clean, and renewable energysources• A most prominent base for direct job creation and long-term economic benefit• The best solution to displace fuelwood which currentlyserves as the main source of energy
Hydropower Policy of Nepal• Acts and Policies:Hydropower Act 1992Hydropower policy 2001 (amended in 2006)Interim policy 2010 (inclusion of Vision 2020)
Policy contd…• Major Provisions Government land to be available on lease throughout the license period 1% customs duty No import licenses/sales tax Energy Royalty: 1.85% (10-100 MW) 2% (above 100MW) until 15 years 10% after 15 years License upto 35 years with exclusive right of water use• Social Inclusion and empowerment Sharing of Hydro Royalty 10% of the royalty to the local government 10% share ownership to Project affected local people Environmental and social management plans
Vision 2020 HydropowerPrivate Sector Promotion Program: Bright Nepal Campaign No license up to 3 MW and waivers of EIA for up to 50 MW. During construction, Tax exemption for companies that use > 50 % local rawmaterials in hydro electricity projects, until mid April, 2019. VAT and customs duty exemption : construction materials, machinery,equipment, tools and spares In operation, income tax is fully waived for the first 7 years and reduced by 50%for the next 3 years Policies to address local demand for shares & social mitigation.
Comparing policy with neighborItem Nepal IndiaCustoms duty 1% 5% (exempt for mega projectsExcise Duty 1% 16%Average Generation per MW 6-7GWh per MW 4-5GWh per MWRepatriation Policy 100% allowed 100% not allowedCost of Licenses Govt. fees negligible Govt. fees around 44k USD per MW isfloor priceRoads & Transmission Lines Network is poor Network is better
Chilime Hydro Power (CHP)• Constructed and owned by ChilimeHydropower Company Limited• Located at 133 km north of Kathmandu atthe right bank of Bhotekoshi River inRasuwa District• The electricity generated from the powerplant is purchased and distributed by NEA(PPA concluded on June 25, 1997)• Delivers power via a 38 km long 66 kVsingle circuit transmission line to TrisuliPower House Switchyard• The plant has started its commercialgeneration on 24th August 2003• Annual availabe energy to NEA is 132GWh
Equity StructureSource: chilime.com.np46 million USD raised from domesticpopulation within 4 days
Performance of the Plant• The plant is able to generate more energy than contractually supplied to NEA, theexcess energy is sold to NEA at higher prices.• The plant load factor of the CHP Hydropower Station is calculated to be 77.5%.The plant outage was kept at minimum level with an availability of 96.8%.• In 2011 the total revenue was approx 14 million USD, an increase of 8% overprevious year figure 82% was from bulk electricity sales to NEA, 18% from otherincome sources.
Corporate Social Responsibility• The company sponsors local projects related to drinking water, education, health,employment generation, irrigation, roads and other areas• Educational Collaboration with academia: established a turbine testing lab atKathmandu University• Opportunity for the local population to obtain 24% of the shares of any newprojects under Chilime• Promoting entrepreneurship: Technical and financial support to develop BemdangKhola SHP (1 MW), promoted by the local population is one of such initiativesundertaken by the company• Tree Plantation : More than 80 thousand planted per year• Credit Facility to support local purchasing of the Chilime Shares
What made Chilime successful• Local investment: They encouraged local people to invest• Participation: participation of public sector and citizensPeople act as White Knight for any kind of hindranceProtect them in terms of security (vulnerabilities fromvested interest groups like political interference)
4. Implications for the for otherHydropower projects
Arun Valley: Where Upper ArunProject site is located
Regional Hydropower Projects• Koshi River and its tributaries• Bagmati River and its tributaries• Gandaki River and its tributaries• Seti River and its tributaries• Karnali River and its tributaries• Mahakali and its tributaries
Outcome• People in the project affected area have more sense of mattersand the sharing of ownership to project affected area.• People acceptance and security of project• Empowerment of people (financial, infrastructure, education,health)• Large power projects are possible from the local investment
Conclusion• Favorable investment environment provided by Governmentwith “Vision 2020” can meet the growing energy demand.• People centric PPP: Empowering peoples along withcountries economy• Potentially feasible to be applied in other hydro projects bothin Nepal and other developing countries.