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