Energy Transition: The necessity for substantive dialogue

- Dr Narayan Prasad Adhikari

Background
In recent years, the progress made through the national transmission line, the achievement of 98% household electrification, and the expansion of cross-border electricity trade infrastructure have sparked new hope for the future. The qualitative improvement in the lives of people, who were previously burdened by frequent load-shedding, is a welcome change. Similarly, the promotion of electric vehicles and electric stoves has had a positive impact.

However, this progress seems to have overshadowed other critical aspects of the national energy sector and the pressing challenges that still need to be addressed.

According to a report from the Water and Energy Commission Secretariat (WECS), in the fiscal year 2079/80, Nepal's total national energy consumption (532.42 Peta Joules) was largely driven by traditional biomass sources (firewood, agricultural residues, and dung), which accounted for 63.87%, followed by imported fossil fuels (25.80%), electricity from the national grid (7.23%), and off-grid renewable energy (3.1%). These figures show that, despite its prominence in national debate, electricity still contributes less than 8% of the country's total energy consumption.

Although ongoing hydropower projects and the upgrade of transmission and distribution infrastructure are expected to improve electricity availability in the future, it seems unlikely that electricity will fully replace traditional and imported fossil fuels in the near term.

Globally, electricity now contributes about 20% to total energy consumption. This presents a significant opportunity for Nepal to increase its use of electricity through hydropower, thereby reducing its reliance on traditional and imported fossil fuels.

As most of Nepal's hydropower projects are based on run-of-the-river models, various reports suggest that electricity production within the country surges during the rainy season, which lasts for about five months. While this trend is expected to continue, it is unfortunate that this surplus cannot yet be fully utilized to expand productive sectors and realize the economic benefits it could bring.

Energy: Situational Analysis
From the perspective of electricity consumption, the inability to meet projections is evident. In 2014, the WECS projected a demand of 3,384 MW by 2020, assuming an economic growth rate of 4.5%. In reality, only around 1,800 MW was available, which was sufficient only to meet monsoon demands.

Nepal has the lowest per capita electricity consumption in the SAARC region and among the lowest in the world, with a consumption ratio of 1:20 compared to the global average. The World Energy Council's Energy Trilemma Index, which measures energy security, equity, and environmental sustainability, places Nepal in a difficult position. Despite improvements, Nepal has not yet fully transitioned into the modern energy era.

Electricity's contribution to total energy consumption is low across all sectors: 2% in households, 5% in agriculture, 10% in commerce, and 14% in industry. A 2023 study by Oxford Policy Management found that 22% of healthcare centers lack a regular electricity supply, and 12% rely on diesel generators. The World Bank also reports that over one-third of electrified areas face significant challenges in terms of electricity reliability and quality.

Additionally, despite more than half of households relying on firewood for cooking and heating, LPG consumption has increased tenfold over the past decade and now reaches 45% of households (CBS, 2021).

The government's aim of spurring economic growth through industrial development faces obstacles, as industries have been declining at a rate of 1.6% annually. This shows a gap between electricity production and its intended role in boosting productivity. In the industrial sector, thermal applications account for 15% of total national energy consumption, with over 60% of that being met by imported fossil fuels. Meanwhile, the agricultural sector, which employs 62% of the population and contributes 24% to the national GDP, accounts for only 1.6% of total energy consumption, 91% of which is met by imported diesel.

These trends highlight the urgent need to reduce reliance on traditional and imported fuels while expanding clean energy sources. At the same time, it's important to acknowledge the differing challenges between urban and rural electrification. While urban areas face intense media scrutiny over power outages, the poor quality and irregular supply of electricity in rural areas rarely receive national attention.

Efforts to upgrade electrical infrastructure are underway, but the rapid pace of local development in rural areas is not yet aligned with infrastructure improvements. A long-term plan to upgrade transmission and distribution systems while constructing new power plants requires a financial investment of around NPR 300 billion, with a lengthy implementation timeline. As such, decentralized renewable energy solutions, such as small and micro-hydro projects and solar mini-grids, must be deployed in remote areas to ensure equitable access to quality electricity.

Decentralized energy systems are crucial for marginalized communities in areas like Karnali and the Far West, where reliable electricity access remains a challenge. Many in these regions lack basic healthcare services due to power shortages, and women often walk miles to fetch drinking water.

A positive step in this direction is the 1 MW Chukeni Hydropower Project in Jumla, which provides 24-hour quality electricity to the district headquarters and surrounding areas. The project, supported by the Asian Development Bank, the Alternative Energy Promotion Center, and Patarasi Rural Municipality, has significantly improved daily life.

Historically, even areas connected to the national grid experienced unreliable power due to weak transmission lines, which forced small industries and institutions to rely on diesel generators. With consistent electricity availability, Jumla residents can now use electric heaters to combat extreme cold.

Six years ago, the National Planning Commission developed a technical plan to implement renewable energy projects at the local level, including solar, hydropower, and biomass, with a proposed capacity of 500 kW to 1 MW per local unit. If implemented, this plan could provide reliable, high-quality electricity to remote regions in a short period.

In regions with better-established electricity infrastructure, demand remains low in key productive sectors. Although surplus electricity generated during the monsoon could be traded, Nepal cannot achieve its development goals solely through electricity trade and remittance income. Immediate efforts must be made to boost electricity consumption in agriculture, industry, and tourism to stimulate economic growth.

Energy Efficiency and Future Strategies
Nepal's energy consumption density is nearly twice the South Asian average. It consumes 1.19 tons of oil equivalent (TOE) per $1,000 of GDP, compared to the regional average of 0.59 TOE. This inefficiency is driven by low energy efficiency and a high reliance on traditional biomass energy, which constitutes 64% of total energy consumption, with 60.59% used in households.

A USAID/Urja Nepal study suggests that replacing inefficient household and industrial appliances with energy-efficient alternatives could save up to 550 GWh of electricity annually. However, this would require an investment of around NPR 73 billion, which is far less than the cost of constructing a new hydropower project. Energy efficiency measures would not only save costs but also avoid the social and environmental impacts associated with new power plants.

Energy efficiency should be a priority in Nepal's energy policies and programs, aligned with the National Energy Efficiency Strategy, 2075. The recently issued "Energy Development Roadmap, 2081" encourages the replacement of inefficient cooking appliances with electric alternatives. However, given the current state of the electric infrastructure, replacing LPG consumption and traditional biomass fuels with electric stoves at the household level is unlikely to be feasible in the near term.

In the industrial sector, Nepal has strong potential to replace imported fossil fuels with domestically produced briquettes, pellets, and green hydrogen. Pilot projects, like the one at Galaxy Packaging Industries in Simara, show that replacing diesel burners with pellet burners can save up to NPR 500,000 per month. Scaling up such initiatives requires collaboration between ministries to introduce financial incentives for biomass adoption in the industrial sector.

The Electricity Regulatory Commission (ERC) should also set appropriate tariffs for renewable energy and energy storage systems to ensure year-round energy self-sufficiency and enhance grid stability. Battery storage systems, such as those used in countries like India and China, can provide critical support during dry seasons and natural calamities.

Summary
While large-scale hydropower projects continue to be discussed at the national level, it is vital that other energy dimensions—such as reducing dependence on biomass and fossil fuels—are not overlooked. Remote areas require reliable, affordable electricity for basic services like healthcare, education, and water supply. Decentralized renewable energy systems must be prioritized to ensure access to quality electricity in these areas.

Moreover, energy efficiency initiatives, strategic investments in clean energy, and inter-ministerial collaboration are essential to achieving Nepal's energy goals and ensuring equitable development. With the right policies and technologies, Nepal can move towards a sustainable, energy-secure future that benefits all citizens.

[The writer is an Energy Researcher and Deputy Executive Director of the Alternative Energy Promotion Center.]