History of power development in Nepal

Introduction

• Nepal was isolated from global development until the democratic movement of 1951-52.
• During the Rana Regime (1846-1951), there were no serious attempts at systematic economic development until 1930.
• In 1935, the UDYOG PARISHAD (Development Board) was constituted as a development agency.
• Planning for development in Nepal began with the First Five-Year Plan (1956-1961).
• Before 1951, only limited development occurred, such as the establishment of power, water, schools, banks, and some roads.
• Since 1956, the government has started using periodic plans to guide development.

Development in Nepal followed three main systems:

• Centralised Planning during the Panchayat regime (up to the 7th plan).
• Liberalised Planning during the constitutional monarchy (8th to 10th plans).
• Inclusive Planning during the Federal Republic (11th and 12th Three-Year Interim Plans).

First Plan (1956-1960):

• This plan began Nepal’s organized development efforts.
• Total power generation increased to 9,860 KW (1,000 KW from hydropower and 2,580 KW from diesel).

Panchayat Regime (1962-1990):

• During this period, Nepal followed a controlled planning approach.
• Power generation increased significantly:
• Second Plan (1962-1965): Total power reached 17,360 KW (4,000 KW from hydropower and 3,500 KW from diesel).
• Third Plan (1965-1970): Power generation grew to 37,320 KW.
• Fourth Plan (1970-1975): It reached 49,634 KW.
•  Fifth Plan (1975-1980): Power generation increased to 68,344 KW.
•  Sixth Plan (1980-1985): Power output reached 129,500 KW.
•  Seventh Plan (1985-1990): Total power generation jumped to 258,500 KW (126,850 KW from hydropower, 2,050 KW from diesel).
• Plan Holiday (1990-1992): This period was a transition phase from controlled planning to liberalized planning, with no specific development plan.

Constitutional Monarchy Regime (1992-2007):

• Nepal adopted liberalized planning during this period.
• Power generation continued to grow:
• Eighth Plan (1992-1997): Total power reached 271,500 KW (10,000 KW from hydropower, 3,000 KW from diesel).
• Ninth Plan (1997-2002): Total power output expanded to 584,500 KW (297,000 KW from hydropower, 20,000 KW from diesel).

Republican Regime (2007/08-2012/13):

• This period marked the shift to inclusive planning.
• By the end of the Tenth Plan (2002-2007), total power generation had reached 619,000 KW (566,017 KW from hydropower and 57,003 KW from diesel).

More Information

• Rural electrification has been a major priority in Nepal's development plans since the mid-1970s, continuing through successive plans, especially up to the Tenth Five-Year Plan (2003-2008).
• The 2001 Hydropower Policy emphasized the importance of rural electrification, proposing the establishment of a central rural electrification fund to support power supply development in rural areas.
• The Tenth Plan solidified rural electrification as one of the highest development priorities for the Nepalese government, fully incorporating the 2001 Hydropower Policy's goals.
• The plan specifically called for the creation of a central organization tasked with developing and managing rural electricity supply, ensuring sustained focus and development in this area.
• In 2003/04 government adopted a policy of creating a Community Electrification Program to accelerate rural electrification in Nepal.

Source of Energy in Nepal

Solar energy

• Solar energy has been used traditionally in Nepal for drying crops, clothes, fuel wood, and crop residues.
• In the 1960s, the first PV system was installed in Bhadrapur, marking the start of solar energy technology in Nepal.
• In 1977, RECAST introduced solar cookers as parboiling cookers.
• The development of solar cookers continued in 1997 with the introduction of parabolic cookers by RECAST, followed by locally developed box-type cookers.
• By 1990, NTC was using PV systems extensively, powering 75% of its Public Call Offices (PCOs) and generating about 47,000 kWh/day of electricity.
• In 1998, the government announced a 50% subsidy on the cost of solar dryers through AEPC.
• In 2000, the government introduced the Renewable Energy Subsidy Policy and Renewable Energy Delivery Mechanism to promote solar energy use.

Biomass

• Biogas technology in Nepal started in the 1980s as a research project with limited test models.
• During the 1990s, the Biogas Support Program expanded biogas technology into a successful market development initiative.
• By July 16, 2007, 186,073 family-sized biogas digesters had been installed across 67 districts.
• By June 2009, biogas plants were installed in 2,800 of the 3,913 village development committees (VDCs) of Nepal.
• The Biogas Support Program is currently the second largest alternative rural energy program in Nepal.
• In 1982, pyrolysing and extrusion briquetting technologies were introduced in Nepal.
• Bio-briquettes became commonly adopted about a decade ago.
• Issues with high initial investment, rising raw material costs, and operational challenges have limited the success of many briquetting enterprises.
• In 1981, research on improved cooking stoves began with support from CFDP and FAO.
• The national ICS program (2002-2006) installed about 300,000 improved cooking stoves in 44 mid-hill districts of Nepal.
• During the 10th plan period (2002-2007), the government installed an additional 250,000 improved cooking stoves in Nepal.
• The government has prioritized increasing ICS installation in the 9th plan and supported ICS dissemination through the Energy Sector Assistance Programme (ESAP) funded by DANIDA.

Petroleum Products

• The need for petroleum products in Nepal was first felt in the early 1930s with the arrival of the first four-wheel vehicle in Kathmandu Valley.
• Following the construction of the Tribhuvan Highway in 1956, which connected Kathmandu to India, the consumption of petroleum products began to rise.
• In the 1950s and 1960s, private entrepreneurs acted as dealers for Indian companies such as ESSO, Burmah-Shell, and Caltex, marketing products like petrol, diesel, and kerosene.
• In January 1971, the Nepal Oil Corporation (NOC) was established under the "Company Act, 2021 (1964)" as a state-owned company to handle the import, transportation, storage, and distribution of petroleum products.
• The government owns 98.36% of NOC's shares, with the remaining shares held by four other state-owned enterprises.
• NOC, headquartered in Kathmandu, operates five regional offices, branch offices, fuel depots, and aviation fuel depots, with a total storage capacity of 71,558 kilolitres and around 600 employees.
• By 2007, NOC procured most petroleum products from Indian Oil Corporation Ltd (IOC) under a five-year contract agreement signed on March 31, 2007.
• NOC imports products from IOC's refineries and depots in eastern and northern India, with transportation conducted by tank trucks.
• In response to increasing demand, an MOU between IOC and NOC for a cross-border petroleum product pipeline from Raxaul (IOC) to Amlekhgunj (NOC) has been signed, with the Detailed Feasibility Report prepared and investment modalities under discussion.
• The government announced plans to end NOC's monopoly by allowing private sector participation in the import and processing of petroleum products.
• The government set capital requirements for new entrants: Rs 20 billion for refineries, Rs 10 billion for fuel importers, and Rs 5 billion for LPG importers.

Wind Energy

• Wind energy is available in the northern belt of Nepal, but the exact potential is yet to be estimated due to a lack of technical personnel.
• It is reported that Mustang has the potential to generate about 200 MW of wind energy.
• The Kagbeni wind power project, built in 1987 with a 20 kW capacity and supported by the Danish Government, could not sustain itself due to maintenance issues.
• Wind-solar hybrid systems of 400W with 150W solar power projects have been established in six rural communities in Nepal, benefiting more than 48 households and two secondary schools.
• The government planned to generate 20 MW of electricity from wind energy in the Three Year Interim Plan (2007/08-2009/10), but the lack of research data, complicated geography, site-specific conditions, and limited infrastructure hindered implementation.

Hydropower

Hydropower development in Nepal began with the 500 kW Pharping power plant in 1911, the first power plant in Asia.

• In 1968, 'Shree Chandra Jyoti Prakash' was constructed under Rana Prime Minister Chandra Shamsher J.B.R., providing electricity to the Rana Palace and local areas.
• The second hydropower plant, Sundarijal, was established in 1934 with a 900 kW capacity and is still operational, producing 640 kW.
• The third hydropower plant, Chisang Khola, with a 1600 kW capacity, was constructed by Morang Hydro Electric Company in 1942 but was later damaged by landslides.
• Nepal's second largest hydropower plant, Kaligandaki A, with a 144 MW capacity and 791 GWh output, was commissioned in 2002.
• The 3 MW Piluwa-Khola hydropower and 7.5 MW Indrawati III hydroelectric projects were also commissioned around this time.
• In 1962 establishment of the Nepal Electricity Corporation (NEC) marked a formal structure for electricity management.
• In 1985, NEC was restructured into Nepal Electricity Authority (NEA), enhancing its role in hydropower development.
• Systematic importance was given to hydropower development starting with the five-year development plans from 1955.
• Until 1990, hydropower development was solely under NEA. The Hydropower Development Policy of 1992 opened the sector to private investment, diversifying development beyond government control.

The three distinct stages of hydropower development are:

Donor-aided (till 1995)

• During this period, major projects were financed through grants and loans from organizations like the World Bank and Asian Development Bank.
• Till this time hydropower development in Nepal was solely relying on international funding and technical assistance.
• Significant infrastructure was established, including large government-led hydro plants such as the Kali Gandaki A and Arun III.
• The sector largely depended on external support, with minimal private sector involvement.

Independent Power Producers (IPPs) oriented (1995-2001)

• The introduction of the Hydropower Development Policy in 1992 facilitated the entry of Independent Power Producers (IPPs) into the market.
• IPPs were encouraged to develop, finance, and operate hydropower projects, leading to increased private-sector participation.
• This period saw the development of various small and medium-sized hydroelectric projects by private companies.
• Challenges included regulatory issues, financing difficulties for smaller IPPs, and operational problems.

Open and liberal policy (since 2001).

• Since 2001, Nepal has adopted an open and liberal policy approach to further encourage private sector investment in hydropower.
• Policy reforms were implemented to create a favourable environment for private investment, including streamlined licensing and financial incentives.
• The open policy approach led to increased investment in both large-scale and small-scale hydropower projects, such as the Upper Tamakoshi Hydro Project.
• This stage has resulted in substantial growth in hydropower capacity, improved energy security, and advancements in technology and efficiency.