18 January 2009

Nepal’s power crisis: as it happened



It’s my honor and privilege to present Er. Nava Raj Karki at this blog as a guest writer. He is Lecturer at the Department of Electrical Engineering, Pulchowk Campus, Tribhuvan University, Nepal and currently pursuing Ph.D. at the Indian Institute of Technology Bombay, India. I have admired Karki Sir as a teacher, a colleague and a well-wisher of mine. His opinion pieces over various issues have always attracted me. As Nepal is currently facing an unprecedented scarcity of electricity, he intends to analyze the roots of the problem and presents his views on several related issues including recently proposed emergency generation expansion plan. Before he takes over, I extend my gratitude to him for accepting my request of penning this article for all the readers of this blog…

As a young student in my early post-secondary education period in mid 1980s I was proud of the fact that Nepal possessed world’s second highest hydropower potential. The figures of 83,000 MW have been rarely doubted although there are plenty of scopes for the same. The power demand in the country was very small and thanks to then newly completed Kulekhani I Hydropower plant, there were no power cuts (load shedding) in the country. Kulekhani II (32MW) and Marsangdi (69MW) were completed later on. Arun III, a mammoth by then Nepal’s standard 402MW plant was in the pipeline.
The restoration of democracy had most adverse effects in the power sector development of the country. Arun III was derailed as a result of sustained opposition led by then main opposition party and some prominent figures associated with water resources advocacy groups.

The 1990 people’s uprising forced Late King Birendra to restore multiparty democracy in the country. The restoration of democracy had most adverse effects in the power sector development of the country. Arun III was derailed as a result of sustained opposition led by then main opposition party and some prominent figures associated with water resources advocacy groups. There were no immediate alternative plans with the government to meet the expected electricity demand growth in the country. The G P Koirala led government was facing serious problems from both within the party and from main opposition party. This was a fluid political environment, which allowed the policy revision for hydropower sector in the country paving the way for entry of private players into power sector. The privatization drive started by the then minister of state for finance Mahesh Acharya at the time were responsible for selling off of many industries like Bansbari Leather Shoes Factory, Bhrikuti Paper Factory, Harisiddhi Brick Factory, etc. The government interference in other profit making public enterprises resulted in these entities turning to loss making units. The current power crisis also is mainly triggered by naked political interference with vested interests in the past to enrich the concerned ministers and their masters.
Nepal’s desire to fulfill the whole electricity demand by hydropower and uncertainties in the water levels in major rivers have made things worse. Had there been diversification of generation, the current crisis would have been far less.

Nepal Electricity Authority (NEA), set up by the act of erstwhile parliament (Rashtriya Panchayat) in early 1980s by merging Nepal Electricity Corporation, Eastern Electric Corporation and Department of Electricity was mandated to generate, transmit and distribute electricity to all type of consumers in the country. At that time it was common practice to have all these three key services of power generation, transmission and distribution under one umbrella expecting better coordination in operation and planning. All these three components must function in desired manner simultaneously for effective performance of the whole system. Nepal’s desire to fulfill the whole electricity demand by hydropower and uncertainties in the water levels in major rivers have made things worse. Had there been diversification of generation, the current crisis would have been far less. But it is easier said than done. We do not have coal reserve to go for Coal Thermal Power Plants, which are very cheap. We cannot expect to have Nuclear Power Plants in the country in near future because of its highly sensitive nature and unpredictable security and political environment in the country. The potential of wind power generation has not been explored meaningfully to date despite strong proofs of its possibility. But again the Wind Power Generation is not as easy as hydropower generation and carries with it high degree of uncertainty. The wind technology is a proven technology in the countries like Denmark, Germany, UK, Canada, Spain and even in neighboring India. We have to look for wind power as one of the ways to diversify our generation. In addition to wind, we have to continue working for promotion of other alternative sources of power and energy like Solar PV Systems, Solar Water Heaters, Biogas plants, etc. Solar PV Systems are very expensive because their key components are mostly manufactured and imported from developed countries. Concerted Research and Development works are going on to bring down their cost. We can only rely on Solar PV Systems to electrify homes in remote areas where National Power Grid is highly expensive to expand.
You cannot blame the poor security scenario in the country only for the delay in construction and cost overrun. The vested financial interest of NEA top officials directly involved in the project was one of the main reasons for this. They colluded with the contractors and consultants to cause colossal loss to NEA and the country.

We are in current mess not only due to poor planning and coordination among different functional groups within NEA, excessive political interference by successive governments with the sole aim of amassing wealth and sometimes, poor choice of Chief Executive as well as members of Board of Directors (I mean those from outside government ministries). All of us know the cost overrun in Kaligandaki A but none of the officials involved in that project were ever investigated and forget about their prosecution for failing to deliver and causing grave loss to NEA and the country as whole. The construction cost of recently completed Mid Marsyangdi Hydroelectric Project has doubled from its initial estimate. The civil construction part, which may prove difficult to unearth once the project has been completed, is to blame for most of these cost escalations. You cannot blame the poor security scenario in the country only for the delay in construction and cost overrun. The vested financial interest of NEA top officials directly involved in the project was one of the main reasons for this. They colluded with the contractors and consultants to cause colossal loss to NEA and the country. I doubt the anti-graft body in the country will ever look at the matter seriously. The CIAA simply lacks desire and competence to probe such matters. The officials there can in-turn use this as an opportunity to get their rightful (?) pie. The natural calamity (I mean Koshi flooding) that struck the nation would not have come at worse time. Low rainfall in the Kulekhani catchment area made things further worse as Kulekhani I and II generate at peaks a combined total of 92MW. The loss of Kattaiya-Duhabi line due to damage to few towers should have been fixed working in warlike regime. But this has not been done. We never seriously considered such contingencies in the past and never had any readymade plan for the same. The current situation, I hope, will give impetus to serious thoughts for increased attention to Research and Development activities within NEA.

Is Diesel Power Plant a Solution?
It is suicidal to opt for Diesel plant as quick fix to current power crisis. Had there been 10-15% deficit during peak hours only, this option may have been an affordable and sensible alternative but not for a deficit of more than 50%.

Current power crisis in the country is of unprecedented level. We have huge deficit both in demand and energy. We are facing acute shortage not only at peak hours but at off-peak hours also. As estimated by Load Dispatch Centre of NEA, current deficit is around 400MW which is unimaginable for a system of just over 600MW. Large Diesel plants not only require diesel on daily basis but also efficient manpower to handle and operate. They will need proper training on operation and maintenance (O&M), which will take time. Otherwise we will have to rely on foreign technicians and engineers that will increase the O&M cost and make the option further costlier. The petroleum oil has plunged to below US$ 40/bbl but it is highly volatile commodity whose price is controlled by developments in Middle East, Russia, Nigeria, Venezuela, Mexico, the US, etc. The serious environmental impact and its long-term effects on surroundings are other points of concern. The main point is the country simply cannot afford these plants. It is suicidal to opt for Diesel plant as quick fix to current power crisis. Had there been 10-15% deficit during peak hours only, this option may have been an affordable and sensible alternative but not for a deficit of more than 50%. Various Indian states are suffering from power crisis for decades. They have the technology, manpower and up to some extent affordability, but still why such option has never been considered seriously attracts serious thought. In case of Nepal, in the pretext of saving industries from bankruptcy, if we go for this option, one of the major stakeholder in the development of country will be bankrupt. The industrialist lobby, agents of many big corporation, who are coercing the Maoist leadership for installing DPP, are trying to make billions for themselves from this new business opportunity created due to crisis in the country. The current Minister of Water Resources seems to lack even fundamental information regarding power supply issues whereas the Maoist top brass without whose positive nod this whole initiative could not have gone through seems to be no different from other parties.

What then?
The crisis did not arise overnight and it cannot be solved overnight. There should be immediate, short-term, medium-term and long-term measures.

Few simple things should be understood. The crisis did not arise overnight and it cannot be solved overnight. The government has already declared Electricity Emergency and came up with set of measures to tackle the electricity crisis in short-term as well as long-term. The government’s new announcement has to be carefully studied before commenting on the same. However, I would like to address few points as possible way ahead to tackle the current crisis. There should be immediate, short-term, medium-term and long-term measures. The immediate measures may consist of reduction in usages of unnecessarily excess lighting fixtures in government offices starting from Singh Durbar and NEA head office. Similarly, significant power and energy savings can be achieved through reduction in consumption at power generating stations where electricity to all employee quarters are provided free of cost prompting huge wastage by the employees and their families. Street lighting wherever they may be, should be switched on and switched off at right times. Power supply to hoarding boards has already been switched off though they only constitute very small of fraction of total demand. Even these days heaters ranging from 1000W to 2000W are seen in use at NEA central office premises which shows little respect for what is happening in the country. The same might be happening in the other government offices and government owned companies. The areas with high pilferage of power must be penalized first by cutting their supplies to longer hours compared to other areas with permissible level of leakage. This should have been done even when there was no load shedding.

The repair of Kattaiya-Duhabi transmission line must be completed at the earliest. Concerned Nepalese authorities should have worked day and night to get part of the transmission line repaired/restored as an emergency. The water level in the Koshi river has reached its annual minimum and the work should have been completed by now. What are the impediments for this? The repair of the line would have provided us an estimated 75MW of power. The existing Diesel plants with NEA are said to be in poor health- most of them not working properly. The concerned engineers have cited lack of fund for repair/maintenance and lack of spare parts for this grim scenario. But why the concerned NEA officials did not deem it necessary to carry out repair and purchase the spare parts in time so that they could have been operated to minimize the load shedding. Should these officials be punished for failing to maintain the stations under their control? Since NEA management was aware of significance of power delivered by Kattaiya-Duhabi line, they should have taken timely decision to tackle impending power cuts. There are news of various power plants failing to operate at their rated capacity not only due to reduced water flows but also due to lack of regular maintenance and application of good maintenance practices at their power plants.
The over reliance of government/planners on IPPs for the fulfillment of electricity demand in the country is one of the reasons for current crisis. First two IPPs in Nepal are emptying NEA coffer as NEA pays almost its 40% revenue for meager 96MW generation from those two IPPs. Nepal based IPPs can in no way be relied upon for large-scale power generation simply because it takes colossal capital investment and they lack expertise for such projects.

The over reliance of government/planners on IPPs for the fulfillment of electricity demand in the country is one of the reasons for current crisis. This policy of bringing huge capital investment on this basic requirement for the country was flawed from the beginning. Even in developed countries, electricity was used to be produced by government controlled companies or tightly regulated and monitored private companies with license to produce electricity in given regions (especially in the US). First two IPPs in Nepal are emptying NEA coffer as NEA pays almost its 40% revenue for meager 96MW generation from those two IPPs. Nepal based IPPs can in no way be relied upon for large-scale power generation simply because it takes colossal capital investment and they lack expertise for such projects. IPPs should concentrate on projects less than 25MW and government and NEA should facilitate their inception. When Power Purchase Agreement (PPA) is concluded between NEA and IPP, there must be strict timeline by which the power plant must come in to operation. Incentives can be offered for plants coming before their stipulated deadline and punishment for those coming late. NEA should have adopted differential PPA based on power surplus and power deficit zones and should have provisions to consider other factors like local consumption, available transmission line capacity and future expansion planning. Uniform PPA rate make things easier for the developers but is not the best solution for NEA. Holding rivers and selling them must be stopped immediately and the existing licensing procedure must be scrapped altogether and new one whereby real developers are attracted must be enacted.

In the long run, NEA and the government must rely on their own and make sure that no generation/demand gap exists. One of the most contentious issues is the sale of West Seti power at comparatively low rate to India when the domestic rates are far higher. There should be no repeat of West Seti. And, don’t hand over our rivers to foreign companies with other vested interests rather than commercial. The Upper Karnali 300MW license sold to GMR by Sher Bahadur Deuba’s protégé minister will have long-term ramification on the country. National treasure stolen or owned by foreigners is gone forever.
The government in this hour of crisis can easily fall in the trap laid by commission agents and big business houses whose only interest has been profiteering at any cost.

The government in this hour of crisis can easily fall in the trap laid by commission agents and big business houses whose only interest has been profiteering at any cost. The government task force should have involved people from power academia as well to give representation of group that in other countries wields heavy clout over such matters. The political appointments made to fill top NEA post as well as some of the members of its board in the past have been used by governing parties to ensure the controlling minister and concerned political parties get their respective monetary share from mismanaged and corrupt activities of NEA. Let us hope that the worst is over soon. Even if we decide to have DPP, we have to go for bets possible options. Diesel plant up to 100-150MW in temporary basis will alleviate the current crisis. But it will take at least 4-6 months before these plants come in to operation given the way our bureaucracy functions. So, for this year, we have no choice but to live with long hours of load shedding. By proper planning and timely decisions, we can reduce and minimize this year’s painful power crisis next year without installing DPPs and save billions of scarce rupees. Serious thought must go in this direction.

There are companies that provide diesel power plants on temporary basis. They install, operate and then will take back their plants after the completion of the contracted period. The price of electricity from such plants must be calculated scientifically and transparently which should not be more than NRs 16 per kWh(unit) if the current global oil price persists. If government mulls allowing private parties to install the plant and buy electricity as in the case of other IPPs, this will bring disaster to the country and NEA. Also, the cost of such plants must be transferred to its consumers. Otherwise, people in remote Humla, Mustang, Solukhumbu and other similar districts will be sharing the cost of diesel power plants and that does not make sense. Passing the cost of diesel power plants to the customers will be a difficult proposition for the government but there is no choice. We remember the Nepal Oil Corporation crisis. It can be in the form of fuel surcharge as in the case of airlines and must be terminated once these plants are out of operation. Vested interests will try to keep those plants as long as possible but the concerned authorities as well as pro-public groups should be attentive against such attempts. The most urgent need of the hour is to save NEA by restructuring and reforming its operations and activities. Colossal public money has been invested in NEA to make it achieve its targets. But the excessive government interference, high level of corruption and lack of accountability and transparency have brought this very important institution to the brink of collapse.


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10 Comments:

ExiOST on January 18, 2009 at 10:44 PM said...

wow this is india blog...

Prajwol on January 19, 2009 at 12:06 AM said...

A very comprehensive post.

Though it's very hard for people now (a problem that did not arise overnight and won't be solved overnight), it did has given an impetus towards new sustainable energy policies. Like the author pointed out, it would be nice to employ few contractors that can run diesel plants to provide short term relief. After the increased flow in the river, things would start to get little better. But in the long run we must:

1. Reduce consumption (using energy efficient appliances, especially in government buildings. Subsidy for public to buy energy efficient appliances)

2. Diversify (The figure 83,000 MW never existed, I'm surprised how all Nepalese were fooled to believe it. We do however still have great hydropower potential, but it would be foolish to pursue singular source)

3. Decentralize (it's expensive to serve all through a single National grid. Each town/city if can have their own generation, then there would be feeling of ownership for the project too)

4. Small is beautiful (bigger the system, more complications. with decentralized and diversified delivery, small is very beautiful indeed)

5. Private sectors (vigorous regulations + multiple private service providers will make things much better for Nepali people)

Netra on January 19, 2009 at 8:12 AM said...

Navaraj sir, I went through your post. it is comprehensive and wonderful post published timely.
Since the governement already decided to postpone the installation of DPP, I think its time to think about other alternatives.
1) Nepal's big asset for energy is still hydropower. However, there are no big project since 5 years. Main problem, along with other, is the vested activities of 'Jal Mafiya'. The revision of licence already distributed, should effectively done.
2) Wind power in Nepal context not seems to have bright prospective. As per rough wind map, most of the place have average wind speed less than 4m/s. In wind power technology the feasible speed is above 4m/s at the height of 10m and above, which is estimated only in few places. The detailed wind mapping should be done and those areas having proven wind speed should be in prime focus.
3)PV technology has brighter prospective in context of Nepal. Its technology is getting matured. The money government intended to invest in DPP, should be immediately utilize to develop and promote alternative energy.

Basanta Gautam on January 19, 2009 at 12:29 PM said...

I wan to thank Navaraj sir for such a very comprehensive and insightful post.

We don't still have a well-documented energy development policy. Sectors like hydropower development should be free from political manipulation. We should have a national hydropower policy for that. But a strong political will which is necessary is not yet seen on the horizon.

Second, as Prajwoljee has pointed, single electricity authority for a whole country is a very bad idea. We need many regional electricity authorities and some sort of competition among them. This seems more necessary now as the country is soon becoming federal.

I also agree with Prajwoljee and Netrajee.

Nabin said...

Thank U for this comprehensive post. It answers many of the doubts I still had.

It is also good to know that DPP is postponed for now.

It is not a secret that everything in our country depends on politics and we know how transparent everything happens in our country. We need not blame ourself nor 'our elected' governments as this is not uncommon in less developed nations.

These 16-18h of darkness should have opened everyone's eyes to all the nonsense that has been happening and also make us realize that with the same pace our economy is also falling.

One serious problem is there is no one to really tell us who don't understand what is happening and why it is happening. The very moment I heard about government's response to energy crisis and decision to make DPP, I called Deependra dai to help me clear my queries. He wrote in response and I got many answers. But, still there are others that pop up once in a while.

I am a lay person but I want to know and I have rights to know what goes in my country because it is 'people's country' now. The only way I can know is from the media and they are oddly silent on this. I have not seen much opposition on this. And the question is 'why'? (may be this is the answer http://www.nepalitimes.com.np/issue/2009/01/16/PlainSpeaking/15572)

Are there organisations/donors pressuring the government to rethink on this? (or are they also waiting for their TV set to get some life so that they can watch TV serials?)

Alok said...

Indeed an insightful article! I thank the author for writing such a comprehensive post. I acknowledge Deependra's effort too for presenting this timely article here at this blog!

The author discusses about political interference in the electricity sector with the vested interests is true with every under-developed countries as such Nepal could not be any exception. Now, the country has plunged into a crisis, the blame game has started for obvious reasons.

I also feel that we need a decentralized electricity policy to promote alternative energy production (distributed generation). However, I doubt the possibility of having a competition in electricity sector in near future as pointed out by Mr. Basant Gautam. It might take few decades to realize his dream in Nepalese context.

I think, there was no any homework done by government while taking decision in favor of setting up 200 MW DPP and again, there has not been any profit-loss calculations made while canceling the plan. If this is the way our policy makers function, then I don't see any ray of hope. The author's claim that price of electricity generated from temporary DPP should not exceed Rs 16/unit seems to be based on empirical thoughts rather than actual data. The diesel transportation cost at a place without railway network tends to become too high at times (the current fuel price might not stay at such a low level).

The questions I would like to put here is 'what exactly do you suggest the alternatives of hydro PP?' & 'what are the current developments/ thoughts in the government corridor to combat the crisis after the cancellation of DPP'?

Nava Raj on January 23, 2009 at 11:35 AM said...

First of all, thanks a lot to Deependra ji for posting my opinion regarding unprecedented power crisis in Nepal. This was an effort to highlight the causes and also provide material for discussion to the learned community. I thank all the commentators for providing very logical comments and suggestions in this regard. I would like to make following concluding remarks on this topic:
1. We need to diversify our energy (electricity) resources even within hydropower also. We must not rely on ROR type only, but build more storage type plants. Also we should not concentrate in a particular river basis as of now ( mostly generation concentrated in one Gandaki basin and somehow in Koshi basin). Spread of generation from Karnali-Mahakali basin to Koshi-Arun-Tamor basin will minimize effects of uncertainty in river flows and corresponding power outputs.
2. Though we do not have large coal reserve required for Coal Thermal Power Plant, we can enter into long term agreement with India to supply part of our base load from cheap coal-based generation in North India. Nepal, in turn, can supply India with off-peak or peak demand that should earn more revenue for us.
3.Wind may not have potential to serve large part of our electricity demand but we must explore its viability in areas with good wind velocities. Especially, for distributed generation application, wind and hydro can compliment each other.
4. Regarding Nepal's electricity supply industry structure, at first, the generation, transmission and distribution services should be separated. Current Engineering Services can be developed into specialized Power Project Development and Construction Company. Going for regional and local municipal power supply companies as in case of most of developed countries can be done further down the timeline.
5. We must start developing professionalism at our power utility otherwise it will be too late to save it. The state has made colossal investment in Nepal's power utility and this must be safeguard as that investment belongs to all Nepalese people.
6. Demand Side Management(DSM) was a hot topic at NEA in the last few years. Promoting energy efficiency and demand reduction using CFLs, energy auditing, differential tariffs etc showed encouraging results during discussion phases. But unfortunately not all were implemented timely. So no desired outcome. How successful will be the current NEA initiative regarding CFL lamp, will only be known after few months or a year.
7. DPP should never have been an option for Nepal given highly volatile nature of price of petroleum oil. But for a short-term solution during emergencies and natural calamities (ours is our own made), DPP are found to be best suited given their short time of installation and start of production. Now this option has been canceled as of now, we can discuss DPP's unit electricity price discovery mechanism in detail. Based on current price for diesel plants in the range of 400-500USD per kW, current fuel price of about 40USD per bbl and considering O&M costs, the cost of electricity from DPPs, would be approximately NRs 16-18 per kWh, no more. As a short-term measure, if the government had decided to chosen DPP option, then price discovery should have been done scientifically.
8.Serious effort must be directed to control large scale theft of electricity in relatively advanced areas like Bhaktapur and Chitwan. Local politicians must come forward to solve these problems as this sort of problem is more a social problem than simply pilferage of electricity. Pilferage by industries and large commercial consumers occurs mainly in collusion with responsible NEA personnel. So special attention must be given by the top management to curb such activities.

Nava Raj Karki, Mumbai

Anonymous said...

SOLAR SOLUTIONS BRINGS SOLAR SYSTEMS FOR URBAN RESIDENTS IN KATHMANDU. 3 WEEKS LEFT FOR LAUNCH

Anonymous said...

oops, i lost my posting.
--

restructuring, DG, UC, load forecasting with latest techniques, optimization techniques, power systems dynamics and control, power systems stability, viability of wind energy integration into grid; applying power tool to perform load flow, see the response of V, P, Q, f; formation of R&D dept., utilization of various RE sources, EMS, smart grid, any lesson from the neighboring country, bhutan????, etc.

doubling the salary of NEA staff and reducing that of MP at least by half (do they deserve 46k p.m.?);

until and unless there is no Political Stability, it is impossible to have Power Systems Stability!!

End of political crisis will certainly end Power Crisis!!

Will the above keywords be fulfilled unless the top NEA personal, govt. body, water resources minister, etc. have sound knowledge of power energy systems?

otherwise, its better to do CANDLE load management and dream about Power Quality in the country where we have economical potential of at least 40k MW hydro power.

--

an excellent article, however, who will hear you except the power professionals? Let's wish the analysis will turn out to be true in an efficient and robust way.

-------
If everything goes smoothly, we could be able to export hydro power (to neighboring country) and earn at least hydro (or economic) rent ($/kWh), but when?

Thx Deependra ji for highlighting the top.

best,

Anonymous said...

highlighting the topic **

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