Consensus on energy
Aug 26, 2012-
In “The Tragedy of Hamlet: Prince of Denmark” by William Shakespeare, the character of Marcellus, who is a guard at the palace, famously remarks that “something is rotten in the state of Denmark.” Much has changed since then in Denmark whose development miracle could hold an immense lesson for the rotten energy sector of Nepal. Apart from its improvement on governance and political leadership, Denmark has impressed the world with its great leap in the energy sector: The country was 99 percent dependent on foreign energy resources such as oil and coal until the 1970s. From such dependency it transitioned to being a net exporter of natural gas, oil and electricity today as its response to 1973 oil crisis.
Today Denmark ranks first in the world when it comes to having the largest portfolio of wind energy (almost 21.6 percent of total electricity production) integrated into its power grid via a production of almost 3,136MW. Furthermore, by 2005 Denmark had already become a world leader in wind technology export, with a value of US$7.45 billion in energy technology and equipment, contributing to almost 8 percent of total Danish exports. Wind companies such as Vestas have become a great boost for the Danish economy. They made 2,533 turbines in 2006, with a rough estimate of installing one somewhere in the world every five hours.
In a paper titled “Is the Danish Wind Energy Model Replicable for Other Countries?” energy experts such as Benjamin K. Sovacool ask an important question relevant
to other countries. The answer for Nepal is yes, specifically in the context of a faltering energy scenario.
Three core policies can unleash the wind industry in Nepal. First, assured grid connectivity embedded in power purchasing agreement when projects are built at sites whose proximity is only a few kilometers from the nearest transformer and transmission line. The Danish did this, with the famously called Feed-in-Tariff (FIT) mechanism. Another core factor was that various tax laws were passed in 1974 immediately after the oil crisis. These taxes, which included a carbon tax, sent price signals to industries, encouraging them to implement energy efficiency measures. Companies collected funds that could be invested in wind power, biomass, and other small scale solutions. This is a policy that can be easily emulated in Nepal at the time when the talk of the town is “Carbon Finance.”
Taxing businesses heavily reliant on fossil fuels, generator and inverter suppliers, and removing the existing fuel subsidy on oil can generate enough cash revenue to provide subsidies for renewable.
The third core policy was the expansion of transmission system operators. This is where the work of the proposed National Grid Company (NGC) in Nepal will be very crucial. The grid has to be expanded in such a manner that it captures the areas within Nepal where not only hydro but also wind are feasible.
Apart from these policies, Nepal government should give free custom duty to wind raw materials and pass no-taxation policy on Wind Farms profits for investors for five years. More importantly, it could follow the bottom-up approach followed by the Danes or the top-down approach followed by Germans and Americans. Bottom-up involves a gradual, crafted, step-by-step process that prioritises incremental learning through accumulated experience. The top-down approach is aimed at massive centralised, quick and ambitious full-scale development of wind power. In the context of Nepal, a hybrid model where large projects are implemented to address power cuts together with small steps taken with engineering schools to improve the capacities could provide relief.
The amazing contributing factor in Denmark is the culture of “consensus policy” amongst political parties when it comes to energy policy. Danish policymakers negotiate in a transparent manner considering the interest of all political parties and possible stakeholders, within the realm of national interest, and these are communicated clearly to the public. Without this as a prerequisite, Nepal’s dream of becoming rich and energy self-reliant on hydro-power, wind or any other renewable is unimaginable. Nevertheless political awakening has to be followed by policy instruments that can make the miracle happen in overall energy sectors.
Nepali policymakers seem to visit and be enamored with the beauty of Denmark without learning much from its policy mechanism. Perhaps this is the “rotten” part in terms of policy making in Nepal.
Dhakal is the COO of WindPower Nepal Pvt Ltd
Published: 26-08-2012 08:46