Expediting construction/reconstruction of hydropower projects affected by earthquake, developing at least one storage-type project and upgrading cross-border transmission lines will be major focus of the planned Energy Emergency.

Officials said they were preparing to declare energy emergency by the next week, which would also prioritise reducing load-shedding by focusing on alternative energy sources like sun and wind and increasing electricity imports from India.

Upper Tamakoshi, Chameliya, Upper Trishuli 3A and Kulekhani III hydropower projects being developed by Nepal Electricity Authority (NEA) and various other projects being undertaken by the private sector have been affected by the April 25 earthquake.

The government is likely to develop storage-type Budhi Gandaki Hydropower Project (1,200MW) during the emergency period. The DPR of the project has been completed.

The Energy Emergency, which is expected to last for three to five years, will focus on cutting red tape and launching rush programmes to make the country self-reliant in energy.

The government is preparing to declare the Energy Emergency under the theme of Energy Crisis Elimination Decade. Though the emergency is likely to last for just three to five years, activities in line with its spirit will continue for a decade. During the period, the government aims to generate 10,000MW electricity. “The declaration of the emergency will show the focus of the government on the energy sector,” said  Gokarna Pant, deputy spokesperson for the Ministry of Energy.

Under the emergency, the Energy Ministry has proposed signing Power Purchase Agreements (PPA) with potential hydropower developers in US dollar terms for 10 years under the Energy Emergency that the government has planned to announce shortly.

Signing PPAs in US dollar terms has been a controversial issue in Nepal as the Nepal Electricity Authority (NEA) has been incurring losses from the 60 MW Khimti and 36 MW Bhote Koshi projects. The NEA said that 40 percent of its revenue goes into making payments for these two projects.

Those in favour of signing dollar PPAs argue that it is necessary to attract foreign investment while critics say that it could lead to additional losses for the NEA due to a rising greenback.

With the country in the midst of an energy crisis, the ministry has prepared to unveil policy under the Energy Emergency to sign PPAs in dollar terms in a bid to attract foreign investors that can deliver timely results.

“As per the recommendations made by a thematic committee, PPAs signed in dollar terms should be for a maximum period of 10 years,” said Pant. “The recommendation concludes that 10 years should be set as the payback period for developers; and after they have made a substantial recovery of their investment, the PPA should be converted into domestic currency.” Most foreign investors want to sign PPAs in foreign currency terms to avoid the risk of fluctuating exchange rates since they will be earning revenues in Nepali rupees and they have to repay their financiers in foreign currency.

As land acquisition and forest clearance have emerged as big obstacles to the development of hydropower projects, the government also aims to table several amendment bills in Parliament once the proposal to remove hurdles in these areas is implemented during the Energy Emergency.

In order to address coordination issues, the government will form a coordination committee under the leadership of the energy minister comprising members from ministries related to forest, finance and land, among others. Likewise, there will also be a committee headed by the Prime Minister which will handle inter-ministerial and jurisdiction-related issues to fast-track power projects.

In 2008, the government had also declared an energy emergency during the tenure of Water Resources Minister Bishnu Prasad Poudel. However, nothing came of it as there were no concrete plans and programmes. “The main reason behind its failure was lack of legal reforms and institutions. We have learned our lessons, so we plan to make the necessary amendments,” Pant said.

Considerations

• PPA with project developers in dollar terms for up to 10 years
• Expediting construction/reconstruction of projects
• Developing at least one storage-type project
• Reducing load-shedding by focusing on alternative energy, increasing imports, and upgrading transmission lines
• Amending laws hindering project development
• Forming coordination committee comprising related ministries
• Setting up committee headed by the Prime Minister to handle inter-ministerial and jurisdiction-related issues