Leveraging Private Sector Collaboration to Harness Nepal’s Hydropower Potential

Nepal possesses a substantial commercially exploitable hydropower potential of around 42,000 MW, yet only 7 percent has been tapped into thus far. Remarkably, the private sector in Nepal has outpaced the government in both electricity generation and export. The current installed capacity in Nepal stands at approximately 3,000 MW. With various hydroelectric projects led by private developers either under construction or in the planning stages, there is a concerted effort to boost the country’s power generation capabilities. Significant progress in electricity generation can be noticeable in the upcoming years.

The government has formulated a long-term energy development strategy to generate 28,500 MW in the next 12 years. Under this strategy, Nepal has set the target of 13,000 MW for domestic consumption, while targeting the export of 15,000 MW to neighboring countries. Hence, achieving the target of generating 28,500 MW capacity in the next 12 years necessitates increased investment from the private sector. Given the substantial financial requirement for hydro projects in Nepal, relying solely on government funding would be a formidable challenge. 

Private sector participation is a key element in Nepal’s development strategy, aligning with the government’s economic growth and poverty reduction goals. The collaboration with the private sector in hydropower development is aimed at not only addressing domestic power consumption but also earning foreign exchange through electricity exports. This shift towards private projects in electricity export has positively impacted Nepal’s trade deficit with India and has played a role in bolstering the country’s foreign exchange reserves. Currently, Nepal is exporting close to 632 MW in India and the contribution from private developers has surpassed that of the government. 

India has already pledged to purchase up to 10,000 MW of power over the next decade. Given the expected expansion in exportable power potential, it is imperative to secure additional investments from private developers, local institutions, private banks, and international entities. This increased financial support will play a vital role in achieving the set target.

Enabling Mechanism to encourage more private sector participation. 

 As opportunities for electricity trade are anticipated to grow in the coming years, it is vital to enable the private sector to protect its investments and engage in trading with neighboring countries. Aligning regulations and reforms with the interests of the private sector is crucial in fostering a conducive business environment. Moreover, ensuring the stability of policies, contracts, and incentives over the long term is pivotal for instilling confidence among industry players. A stable and supportive regulatory framework will not only attract more private investments but also contribute to sustained economic growth in the region.

  (Chaudhary is Deputy Manager- Marketing of PTC India)- From IPPAN Souvenir 'URJA SAMBRIDHI'