Nepal’s Roadmap to Produce 28,500 MW by 2035

The government has approved an ‘Energy Development Roadmap and Working Guideline’ which aims to generate 28,500 MW of electricity in the next one decade. A cabinet meeting held on Tuesday endorsed the energy roadmap that envisions injecting US $46.5 billion (Rs 6.231 trillion) to generate the aforementioned amount of electricity by 2035. For this purpose, the energy forecast framework aims to expedite construction of all types of hydropower projects with a target to construct Run-of-River projects in four years, semi-reservoir projects in six years and storage projects in seven years at maximum. The estimated cost of a Run-of-River project has been maintained at $ 1.6 million per MW and that of a semi-reservoir project at $ 1.7 million per MW. Apart from the power plants, the roadmap also earmarks the transmission lines necessary to support the production and utilization of 28,500 MW of electricity. For this purpose, the government has planned to install 6,431 circuit km of 132 kV, 4,061 circuit km of 220 kV and 6,440 circuit km of 400 kV transmission lines and upgradation of substation capacity to 40,000 kVA. This is ambitious, but a necessary roadmap to utilize Nepal’s abundant water resources and unleash the potential of the country’s development. The government must align its policies and programs to achieve the goal in the stipulated time frame.

A key highlight of the roadmap is its emphasis on prompt action to manage financial sources for the projects to be launched, while keeping the option open to handover the projects that cannot be materialized to the private sector. Additionally, the roadmap is flexible on allowing private sector investors to implement the model they wish for energy generation. It talks about facilitating maximum involvement of the general public in electricity production, while ensuring maximum benefits to the state. This flexibility can go a long way in terms of attracting investment in the hydropower sector. However, it is equally important to ensure that the investment made in the sector is commercially viable. The Energy Development Roadmap and Working Guidelines outline specific financial sources to achieve the ambitious goals. While the government will be injecting US $6 billion in various power projects, a total of $10 billion will be generated from internal sources including Nepali banks and financial institutions. The framework expects to generate $ 2 billion through climate financing and an additional $ 12 billion of investment has been sought from Nepali diaspora including the migrant workers. The Nepal Electricity Authority (NEA) will invest $ 8 billion through refinancing and reinvestment plans and the government plans to generate $ 8.5 billion from foreign direct investment, grants and loans.

Despite these projections, the financial plan appears challenging. Attracting the private sector including investments from the financial institutions, Non-Resident Nepalis (NRNs) and migrant workers as well as others requires near-term returns. The government must work towards bringing reforms to the legal and policy related issues while fostering political stability in the country. The roadmap also emphasizes the need to maximize electricity utilization. Out of the planned production, 13,000 MW is intended for domestic consumption, and 15,000 MW is targeted for export to countries including India. Under a long-term energy agreement between Nepal and India, the goal is to export up to 10,000 MW of electricity from Nepal to India over the next 10 years. In addition, the government has set a target to raise domestic energy consumption to 1,500 MW per capita per year. The government plans to increase domestic consumption of electricity to 13,000 by 2028, a significant rise from the current peak demand of 1,950 MW. The plan is less likely to materialize unless massive industrialization is brought about in the country. The government must work simultaneously to bring big industries that consume huge amounts of electricity and explore the possibility to export surplus electricity to neighboring countries. Realizing this vision requires multi-faceted interventions, including policy reforms to attract foreign investment, ensuring a guaranteed market for surplus electricity and maintaining a stable political and economic environment.