Oli stresses on creating regional energy infrastructure

Kathmandu, Jan. 28: Former Prime Minister and Chair of the CPN-UML KP Sharma Oli Sunday said that Nepal should create regional energy infrastructure to facilitate the power trade.

"This is also necessary in the context of seasonality of power production and consumption, energy mix, cost effectiveness in transmission and distribution, substation of energy demand by clean and renewable energy than fossil fuel based ones," he said while addressing the Nepal Power Investment Summit 2018.

He said that regional cooperation in energy was also about energy trading in South Asia and Nepal should create environment for energy trade also under the spirit of South Asian Free Trade Association (SAFTA) and create regional energy infrastructure for power trade.

According to him, electricity is a tradable good, and is heavily traded globally. Nepal's demand for electricity for domestic consumption for an economic growth rate of 8 to 9 per cent can be met with the installation of only 15,000 megawatt of hydropower capacity.

"As one of the key development strategies, our party intends to ensure energy security to our citizens along with other securities such as food security," said Oli.

He busted the myths related to energy in the country saying that the energy demand in Nepal would grow by higher than the present estimate of 10 to 12 percent per annum.

In fact, economic transformation and development of energy substitution technology in transportation, industry business and household consumption will create energy demand for geometrical growth in power consumption, he said.

Oli emphasised that the creation of higher power demand at home calls for restructuring the transportation, industrial and business systems, and the country needs to create new electric infrastructure by building electric trains, electric metros, electric vehicles and electricity based cooking.

"The result of such will be replacing of imported fossil fuel which in turns preserves the environment of Nepal and provides pollution free future for all our citizens," he said.

Traditional fuel source such as wood covers three fourth of energy demand in Nepal. Industrial, commercial and transport energy are mostly based on fossil fuel. Current energy consumption at 140 KWh is very low compared with the South Asian average of more than 700 KWh.

Oli said that Nepal intends to increase the consumption of 1500 KWh in 15 years which calls for rapid growth in electricity generation.

He also shared that his party, CPN-UML, aims at generating 15,000 MW of energy in 10 years with an energy mix of hydro, solar, wind, geothermal and other alternative energy sources.

Meanwhile, speaking at the summit, experts and industry insiders have called for more optimizations and innovative ways of financing in a bid to further develop Nepal’s hydropower sector. Speaking during a panel discussion, 'FDI in Nepal’s Power Sector', the developers said that at a time when the per capita energy consumption in Nepal was low, there was no way than attracting foreign investment in Nepal’s power landscape.

“However, since hydropower projects are capital intensive and have longer gestation period, innovative financing solutions like equity financing is the game of the time,” says RajenKandel, Director of Kandel Group.

According to him lack of investment opportunity within Nepal and the growing demand of energy every day offers high level of investment scope to the international investors to build hydropower projects in Nepal.

N. L. Sharma, Chairman of Satluj Jal Vidyut Nigam, however, pointed out political instability, lack of tax incentive, hassles during the land accusation and clearance of forest and environment as some of the factors distracting FDI in Nepal’s energy sector.

The speakers also called for independent power sector regulator to check the demand and supply side situation as well as to fix the energy tariff.

Apar Neupane, Vice-President, Finance at Equicap Asia Pvt Ltd said that the mismatching of several stakeholders’ interest was a biggest hindrance for FDI to come to Nepal. “From the government to the project affected area, from the developer to contractor and financer, there are multiple stakeholder involved,” he said. “Unluckily, they have their own interests. The more their interests collide, the project less likely to succeed.”

Joseph Hoess, Director of Dragon Capital, Vietnam says that the hassles that any foreign investors have to go through while doing ground works were what was aggravating the situation. “We are private sector who look maximized return within short period of time, but here in Nepal we have to invest more than five years doing basis things, getting approvals and clearances,” he said. “Nobody is interested in spending such a longer time for all those trifles.”

Gorakh Rana, Head of Commercial and Global Banking at Standard Chartered Bank, said that the Nepal’s banks had not been able to extend sufficient financing for the hydropower projects due to the lack of communication.

Naoki Nishimura, a JICA representative, urged for a strong local partner to attract the FDI.“The efficient local partner with ability to equity financing and doing background work for the foreign investor can play a significant role in bringing in huge amount of foreign investment of Nepal’s energy sector,” he said.

Published in The Rising Nepal daily on Jan. 29, 2018.