Kathmandu, Jan 31 (RSS): In recent years, the progress made through the national transmission line, achieving electrification in 98% of households, and the increased electricity cross-border trade infrastructure has undoubtedly created a new wave of hope.
The qualitative improvement in the lives of people, who were previously burdened by frequent load-shedding, is certainly a welcome development. Similarly, the promotion of electric vehicles and electric stoves has delivered a positive message.
However, it seems that this progress has overshadowed other critical aspects of the national energy sector and the significant tasks that need to be addressed.
According to the report published by the Water and Energy Commission Secretariat (WECS) , in the fiscal year 2079/80, the total national energy consumption (532.42 Peta Joule) was contributed by traditional biomass energy sources (firewood, agricultural residues, and dung) at 63.87%, imported fossil fuels at 25.80%, electricity available in the national grid at 7.23%, and off-grid renewable energy at 3.1%. Based on these statistics, it is evident that the contribution of electricity, which has been the predominant of national debate, remains less than 8% at the national level.
Nevertheless, the ongoing hydropower projects in the pipeline and the strengthening and up gradation of transmission and distribution infrastructure will positively contribute to electricity availability in the coming years. However, based on past experiences, it seems unlikely that the complete replacement of traditional and imported fossil fuels with the generated electricity will be achieved in the near future.
Currently, electricity contributes to around 20% of the total global energy consumption. In this context, Nepal has ample opportunities to increase the contribution of electricity to the total national energy consumption through the extensive use of hydropower, thereby reducing the consumption of other traditional and imported fossil fuels.
In the current context, as most of Nepal’s hydropower projects are based on run-of-the-river, various reports have clearly indicated that during the rainy season, which lasts for about five months, the electricity production within the country increases significantly. Naturally, this trend is expected to grow in the coming years. It is indeed a pity that the increased electricity cannot be utilized to expand the productive sectors and harness the qualitative economic benefits that could be derived from it.
Energy: Situational Analysis
From the perspective of electricity consumption, the inability to achieve the expected outcomes is evident from the electricity consumption projection made by the WECS in 2014 for the year 2020. According to the projection, with an economic growth rate of 4.5%, the estimated electricity demand was 3,384 MW. However, in reality, only around 1,800 MW was available, which was sufficient to meet at least the monsoon demand.
Moreover, Nepal has the lowest per capita electricity consumption among SAARC countries. In fact, Nepal is among the countries with the lowest per capita electricity consumption in the world, with its current consumption being in a 1:20 ratio compared to the global average. According to a study conducted by the World Energy Council, Nepal’s position remains dire in the Energy Trilemma Index, which is based on three dimensions: Energy Security, Energy Equity, and Environmental Sustainability. Although significant improvements have been observed compared to the past, Nepal has yet to fully enter the modern energy era when compared globally.
This is evident from the contribution of electricity to total energy consumption in various sectors: 2% in households, 5% in agriculture, 10% in commerce, and 14% in industries. A study conducted by Oxford Policy Management in 2023 revealed that 22% of healthcare centers lack regular electricity supply, while 12% rely on diesel generators.
Similarly, the World Bank study found that, more than one-third of electrified areas require significant improvements in terms of reliability and quality of electricity. Despite more than 50% of households still relying on firewood and 3% on dung cakes for cooking and heating energy, the consumption of LPG has increased tenfold over the past decade, now reaching approximately 45% of households (CBS, 2021).
The aspiration of the government of spurring national economy by amplifying the industrial sector through electricity production has faced setbacks, as the Ministry of Finance reports that industries have been declining at a rate of 1.6% annually in recent years. This indicates a disparity between electricity production and its intended role in enhancing productivity. In the industrial sector, thermal applications alone accounts for 15% of total national energy consumption, with over 60% of it coming from imported fossil fuels. Meanwhile, the agricultural sector, which directly involves 62% of the population and contributes 24% to the national GDP, has an energy share of only 1.6%, with 91% of that being met by imported diesel.
Based on this analysis, there is an urgent need to reduce reliance on traditional and imported fuels while expanding the scope of clean energy sources. On the other hand, acknowledging the reality of electrification in remote areas as distinct from urban regions is crucial. While even minor power outages in urban areas quickly become topics of media coverage and public debate, the poor quality and irregular supply of electricity in rural areas rarely make it into the national discourse.
Although efforts to upgrade electrical infrastructure have begun, the rapid pace of local-level development in rural areas is not in sync with the progress of electricity strengthening initiatives. There is a long-term plan to maintain electricity quality by upgrading transmission and distribution infrastructure while also constructing power plants in various locations. However, the estimated financial requirement (around NPR 300 billion) and the long time frame for implementation make it necessary to immediately develop alternative renewable energy technologies—such as small and micro-hydro projects and solar mini-grids—in remote areas to ensure access to quality electricity.
If such decentralized energy systems are developed, it will help achieve energy justice for marginalized communities in Karnali and the Far West, who currently lack reliable electricity. Many in these regions struggle with basic healthcare services due to power shortages, and women walk miles to fetch drinking water.
A recent example of progress in this direction is the 1 MW Chukeni Hydropower Project in Jumla, completed with support from the Asian Development Bank, the Alternative Energy Promotion Center, and Patarasi Rural Municipality. This project now provides 24-hour quality electricity to Jumla’s district headquarters and vicinity areas, significantly improving daily life.
In the past, even areas connected to the national grid faced unreliable and low-quality power due to weak and lengthy transmission lines. This forced small industries, hotels, lodges, and institutions like the Karnali Academy of Health Sciences to rely on diesel-powered operations. However, with the availability of consistent electricity, residents of Jumla—who endure extreme cold—can now use electric heaters for heating.
Recognizing the necessity of decentralized energy systems, the National Planning Commission prepared a detailed technical plan six years ago to develop renewable energy projects, including solar, hydropower, and biomass, at local level. This plan proposed projects ranging from 500 kW to 1 MW for each local unit. If implemented, it could serve as a strong foundation for providing reliable and high-quality electricity to remote regions in a short period.
On the other hand, in areas of Nepal with well-established electricity infrastructure, electricity demand remains extremely low, particularly in the expected productive sectors, where the situation is dire. Based on this, the surplus electricity generated during the monsoon can be traded. However, it is clear that Nepal cannot achieve its goal of upgrading to a developing country by 2026, transitioning to a middle-income country, and meeting the Sustainable Development Goals (SDGs) by 2030 solely by relying on electricity trade and remittance income.
While exporting surplus electricity is essential in the short term, immediate efforts must be made to stimulate the economy by increasing electricity consumption in key sectors such as agriculture, industry, and tourism. Developing infrastructure that enhances electricity consumption in these sectors is crucial for economic growth.
Furthermore, revenue from electricity trade must be invested in ensuring quality electricity access for citizens in remote areas and revitalizing the local economy. This is imperative from the perspective of energy justice and equitable development.
Another critical aspect to consider is that Nepal’s total energy consumption density is nearly twice the South Asian average. Nepal consumes an average of 1.19 tons of oil equivalent (TOE) per $1,000 of GDP, whereas the South Asian average is only 0.59 TOE. This means Nepal requires significantly more energy than its regional counterparts to achieve the same economic output. The primary reasons for this inefficiency are low energy efficiency across various sectors, along with a high reliance on traditional biomass energy, which contributes 64% of total energy consumption, with 60.59% being used in households.
According to a study by USAID/Urja Nepal, simply replacing inefficient household and industrial appliances—such as bulbs, fans, refrigerators, and motor pumps—with energy-efficient alternatives could save up to 550 GWh of electricity annually.
However, achieving this would require an investment of approximately NPR 73 billion. To put this into perspective, the Upper Trishuli B hydropower project, a 60 MW run-of-river plant, is designed to generate 490 GWh annually. The estimated cost of constructing such a project is around NPR 13.5 billion, at NPR 2.2 billion per MW.
Given Nepal’s past experiences with hydropower projects, such constructions typically take 6-7 years to complete. However, the same amount of electricity could be saved much faster through efficiency measures, and the investment needed would be recovered before a new power plant is even operational. Beyond cost savings, energy efficiency measures avoid the social and environmental impacts associated with hydropower construction.
Therefore, this approach is not only cost-effective but also strategically crucial. Moving forward, Nepal’s energy policies and programs must prioritize these innovative energy efficiency strategies, in collaboration with relevant stakeholders, for immediate implementation. This is also in line with the National Energy Efficiency Strategy, 2075, which outlines a clear policy framework for such initiatives.
The recently issued “Energy Development Roadmap, 2081” by the Government of Nepal, Ministry of Energy, Water Resources, and Irrigation includes a commendable initiative to enhance national energy security by discouraging the import and sale of inefficient non-electric cooking appliances.
The complete replacement of LPG consumption and traditional biomass fuels with electric stoves at household level is not practically possible in the near future because of weak electric infrastructure. Considering the fact, the “Biomass Energy Strategy, 2075” has emphasized the continued promotion of biomass energy technologies like biogas, improved cookstoves, pellet/briquette gasifiers, and biomass stoves in the coming years. This approach not only aims to reduce LPG dependency and address Nepal’s trade deficit, but it also helps create jobs, promote local industries, and strengthen Nepal’s bio-circular economy through the optimal use of domestic energy resources. Countries like Germany and Japan have already fully embraced this concept.
Beyond household level, Nepal has a strong potential to replace imported fossil fuels such as diesel and coal with domestically produced briquettes /pellets and green hydrogen for thermal applications in industrial sector. Because of relatively lower energy density of electricity, significant investments required to replace prevailing heating furnaces with consideration of time constraints, difficult to manage process thermal heat in controlled with flexibility manner, the immediate application of electricity for thermal applications in industry does not seem to feasible.
Hence, the alternative ways of utilizing biomass based briquettes/pellets and green hydrogen must be intervened to reduce imported fossil fuel. Some interventions have been made earlier in selected industries as pilot project in the country. For instance, with support from the Alternative Energy Promotion Centre (AEPC) through Nepal Renewable Energy Program (NREP), Galaxy Packaging Industries in Simara successfully replaced diesel burners with pellet burners, saving approximately NPR 500,000 per month—a clear indication that similar transition are viable in other industries. To scale up such initiatives, it is crucial for the inter-ministerial collaboration to introduce financial facilitation programs for private sectors to encourage biomass energy adoption in the industrial sector.
Similarly, the Electricity Regulatory Commission (ERC) should not delay in determining an appropriate electricity tariff to promote renewable energy and energy storage systems that can contribute during dry seasons, ensuring year-round energy self-sufficiency within the country. Most developed nations, as well as Nepal’s neighbor countries, India and China, have already adopted such systems on a large scale. Beyond just addressing dry-season electricity demand; these systems play a crucial role in maintaining grid stability and ensuring emergency power supply during natural calamities as well as to cope with potential geo-political issues that may obstruct supply chain of energy systems.
Technically, battery energy storage systems can be strategically installed at substations and integrated into 50MW/200MWh power stations to enhance grid efficiency and reliability. With the rapid advancements in Lithium Iron Phosphate (LFP) battery technology, these storage systems now have a lifespan of up to 15 years and are significantly more affordable than before. The ERC should urgently introduce favorable electricity tariffs and policy incentives to encourage private sector investment in battery energy storage systems (BESS) and renewable integration, ensuring a sustainable and resilient power sector.
The current BESS in use consists of a single unit (2.5 MW/10 MWh) housed in a 40-feet enclosed container, which costs approximately410 million NPR including transportation, delivery and installation at the required location. These units can be added as needed to efficiently manage electricity distribution. Given their regular electricity supply in industrial areas, ensuring year-round availability is crucial. For instance, if 200 such units were installed at substations within industrial corridors, they could collectively provide200MWh of electricity per day at a rate of 10 hours with the system of 500 MW/2000 MWh.
Summary
While large-scale hydropower projects, discussions, and planning continue at the national level, it is crucial to ensure that other dimensions of energy—such as reducing dependence on traditional biomass energy and fossil fuels—are not overlooked. In remote areas, reliable, high-quality, and affordable electricity must be made available for basic health services, education, and drinking water supply. Based on past monitoring and implementation experiences, it is evident that the construction of power generation and distribution infrastructure takes considerable time.
Until these projects are completed, distributed renewable energy systems must be leveraged to guarantee the constitutional right to basic energy access. This requires cooperation between federal, provincial, and local governments to implement necessary programs. To achieve year-round energy self-sufficiency, available resources and innovative technologies must be strategically utilized. Relevant ministries and agencies must play a key role in creating an environment where locally produced electricity is consumed domestically. Such efforts would definitely support to fulfill country’s aspiration of maintaining energy security and contribute to building the foundation of a sustainable economy by ensuring fair distribution of investment in energy to all citizens.
[The writer is Energy Researcher and Deputy Executive Director of Alternative Energy Promotion Center.] RSS #Nepal
