Challenges And Opportunities In Nation’s Energy Sector As Government Sees Them

Kathmandu, April 26: The government has identified 13 different challenges in the country's energy sector and concluded that effective initiatives, investment diversification, and legal reforms are needed to address them.

Weakness of the distribution system's capacity and quality, and the lack of quality and reliable power supply in the industrial sector have been taken as challenges, according to the Energy Consumption Growth and Export Strategy, 2083 prepared by the government.

Similarly, the government has identified increasing the use of devices that consume more electricity in household and commercial sectors, increasing electricity use in agriculture, irrigation and industrial sectors, and the lack of electric vehicle charging infrastructure as the challenges.

The low development of data centres, green hydrogen, fertiliser-producing industries, and electricity-intensive industries such as modern brick kilns is another challenge identified in the strategy and it is stated that once the domestic electricity demand is met, the surplus electricity should be supplied to bilateral, sub-regional, and regional markets as an exportable commodity.

The government concludes that the adequate development of internal and interstate transmission lines and associated structures is also a challenge.

As outlined in the 'Energy Consumption Growth and Export Strategy 2083' prepared by the Ministry of Energy, Water Resources and Irrigation, it is necessary to develop large reservoir-based hydropower projects suitable for exporting according to domestic electricity demand and regional market needs.

It is stated that harmonising the policies and regulations of neighbouring countries with Nepal's policies and procedures related to electricity production and import-export, as well as the lack of legal provisions to enable private sector participation in electricity trade, are also challenges.

The ministry's conclusion is that due to the high cost of electricity produced in Nepal, being competitive in the electricity market of neighbouring countries, developing Nepal's national grid system to the level of the neighbouring countries' grid systems, and developing a competitive electricity market in Nepal to build a system related to the electricity market of neighbouring countries, are also challenging.

The government has seen the high potential for reducing the annual trade deficit by developing hydropower as an exportable commodity as an opportunity.

The possibility of significantly increasing domestic consumption by expanding electricity in transportation, household, and industrial sectors, and the potential to ensure long-term energy security through the use of domestically produced clean electric power, has been regarded as an opportunity.

Also mentioned as an opportunity is the sufficient potential to export the electricity saved after domestic consumption to bilateral, sub-regional and regional markets, and the clear basis for exporting 10,000 MW of electricity in 10 years under the long-term electricity trade agreement between Nepal and India.

During the high electricity production peak season in Nepal, neighbouring countries India and Bangladesh experience high energy demand, creating a possibility of obtaining higher electricity rates during this period. For neighbouring countries aiming for carbon neutrality, Nepal's hydropower is an attractive option as green energy. The ministry has depicted this as an opportunity to save foreign currency by replacing mineral fuels and to strengthen the balance of payment situation.

There is an opportunity to increase access to climate finance and carbon markets as well as the potential to build an energy-based economy through the development of energy-intensive industries such as data centres, green hydrogen, and chemical fertiliser factories.

The government has set a target to increase per capita electricity consumption to 1,500 units by 2035 and to reach a total installed capacity of 28,500 megawatts. Out of this, 13,500 megawatts are targeted for domestic consumption and 15,000 megawatts for export.

According to the 'Energy Consumption Growth and Export Strategy, 2083' set by the government, a significant increase in electricity exports is expected. The notable reduction in trade deficit and the substantial increase in the contribution of the energy sector to the national economy are the expected achievements from this.

After the implementation of the strategy, per capita electricity consumption will reach around 1,500 units, and reliable electricity access will be ensured for 100 percent of the population. Electricity exports will increase along with the average export rate and revenue. Effective market management of electricity saved through domestic consumption will be ensured.

Similarly, it will lead to a reduction in environmental pollution and contribute to the achievement of sustainable development goals.