The history of electricity development of Nepal is not so old and has crossed 95 years since the start of

construction of Pharping Hydroelctric Plant ( 500 KW) in 1911. Today, Nepal has an electric power of
total installed capacity 609 MW in Integrated Power System with the major contribution from 25
numbers of hydroelectric plants. Out of total electric power, about 91 % is contributed from
hydroelectric plants and rest of 9 % is supported from diesel plants. The existing largest hydroelectric
plant in the country is Kaligandaki-A (144 MW). The generated electric power has been transmitted
through 132 KV double circuit transmission line of 2076 km, 66 KV double circuit of 586 km, 66 KV
double circuit underground cables of 7 km and 33 KV single circuits of 2485 km within the country. The
country has a total sub station capacity of 1089 MVA to date.

Energy consumption by source in Nepal can be divided into three categories: traditional, commercial
and renewable. The traditional source meets the bulk of total energy consumption with an 85.5 per cent
share, followed by commercial and renewable energy sources at 13.54 per cent and 0.61 per cent,
respectively. Fuel wood, agriculture residue and animal residue provide 88.68 per cent, 4.85 per cent
and 6.47 per cent of the total traditional energy consumption, respectively.Comparative status of per
capita electricity consumption (KWh) among some SAARC countriesThe hydropower generation
potential of Nepal is estimated at 83,000 Mega Watts (MW) among which 42,000 MW is a commercially
viable capacity. At present mere 0.75 per cent (i.e., 619 MW) of its total generation capacity is exploited.
All 75 districts have access to electricity facility (MoF, 2007). The Nepal Electricity Authority (NEA), the
state-owned utility has coverage of 41.5 per cent of the total 48.5 per cent people access to electricity.
Nepal is at lowest in the list of ascending hierarchy in per capita electrical energy consumption among
the other SAARC countries which accounts just 68 KWh in 2003, a slightly inclined from 35 in 1990
status.

Nepal Electricity Authority (NEA), founded in August 16, 1985 is the parent generator and distributor of
electric power under the supervision of the government of Nepal.[1]

NEA owns 28 Hydroelectric Plants connected to the grid amounting to 480 Megawatts. It also buys
power from 33 Independent Power Producers (IPP) amounting to 230 Megawatts. It also operates two
fuel operated plants generating 53 Megawatts of Electricity. The total capacity of the Integrated Nepal
Power System (INPS) which NEA operates stands at 757 Megawatts.[2] With the demand for electricity
ever increasing, NEA has not been able top cope with the huge demand. As a result of which Nepal faces
loadshedding for up to 16 hours a day during the dry season. Various projects are underway to help
meet the electricity demand but these have been plagued by delays.[3][4]
Power Shortage & Load-Shedding

The general shortage of electricity is manifesting itself in scheduled power cuts (so-called load-shedding), which became an
incremental part of power supply in Nepal within the last years. Especially during dry-season Nepal’s dependence on hydropower
becomes obvious, forcing the NEA to cut power in Kathmandu up to 16 hours per day (as in April 2011). The situation has even
worsened as only two hydropower plants with an installed capacity of 92 MW are storage types, while the rest are run-off river
plants.[16]

Follwoing figure illustrates the growing gap between electricity demand and supply and corresponds with the appearance of load-
shedding. Since 2006/07 the supply gap increased from 105 GWh to 678 GWh in 2009/10, with the temporary peak in 2008/09 with
745 GWh. Furthermore, the figure shows the seasonal fluctuations due to irregular run-off rivers. Due to glacier melt and intensive
rainfall during the monsoon season, electricity supply almost matches the demand between June and October. However, during the
winter (where precipitation is far less) generation capacity decreases along with diminishing run-off rivers.

Coping with load-shedding is challenging both the industrial and commercial sector. Despite preferential treatment of the industrial
sector (which is partly spared from load-shedding), manufacturing suffers hard from the power crisis. Newspapers report, that
manufacturing industries have to cut their production between 25 and 80 % in peak times. Small commercial businesses are
similarly affected by load-shedding, as many are dependent on power and are thus forced to use generators or backup
systems.[17] The long-term impact of poor power supply is observable as the share of manufacturing sector among GDP declined
from 9 to 6 % since 2000/01.[18]

As the construction period for new power generation projects and new import transmission capacities is very long, a rapid
improvement of energy supply cannot be expected. An emergency supply through diesel power plants is unrealistic, because of the
high power generation costs associated. Therefore, the power supply crisis affects public life and especially economic development
negatively. Electricity provides nearly one fourth of the total industrial energy consumption. It has to be expected that more industrial
enterprises and service providers make themselves independent from the unreliable public power supply by using diesel generators.
Although this costly practice allows at least profitable companies to maintain their business, it places a huge burden on the national
economy as additional fuel imports will be necessary.

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Demand Forecast & Outlook
According to estimations of the NEA energy demand will grow in the next 17 years with an average annual rate of 8.34 %. The
current demand of 4430 GWh annually is expected to double until 2018 and exceed 17,400 GWh by 2027. Along with the growing
demand it is projected that system peak load will increase with similar annual growth rates, reaching 3679 MW in 2027. [10]

These estimations require an immense increase in the exploitation of the vast hydropower resources in Nepal. Of the 42,000 MW of
economically feasible hydropower resources only the relatively small share of 1.7 % is tapped.[16] Despite long term development
plans targeting to reach 10,000 MW of installed capacity by 2020 (according to the 10-years hydropower development plan), current
development of the sector draw a rather different picture.

Currently, projects with a total capacity of 547 MW are under construction. NEA projects account for the major share (500 MW) of it.
Planned and proposed projects would furthermore increase the capacity by 1422 MW. But considering the relatively slow
deployment of new projects in Nepal, it seems unlikely that until 2020 more than 7000 MW of capacity will be contributed by projects
that even have not been proposed until now.

Though, actions to upgrade generation capacity within the next ten years were taken, the current situation of load-shedding is likely
to persist and may even get worse in the near future. Chamelia and Kulekhani-III with a capacity of 30 and 14 MW respectively are
expected to be completed in 2011. However, the first one is situated in the Far-Western region and is thus unable to contribute to
the major demand in the central and eastern part of the country. If at all, relief can be expected when the Upper Tamakoshi project
is connected to the national grid. With a total capacity of 456 MW it is expected to contribute 2281.2 GWh annually. Developed as a
PPP it is scheduled to start production in 2013/14.[10] Considering the estimated growth of energy demand, capacity will hardly meet
peak demand even after completion of the three above mentioned projects. Especially, in the dry seasons plants will operate far
below their maximum capacity, resulting in load-shedding or an immense increase of power imports from India.

As all projects that are currently under construction are run-off-river types, the Nepalese power sector will be even more dependent
on seasonal fluctuations of river flows. Furthermore, it is unclear how climate change will affect water security in Nepal. Linked to
many uncertainties, climate change affects run-off rivers by (a) glacier retreat and (b) changes in rainfall intensity and patterns.
Projections estimate that run-off could be reduced by 14 % due to climate change, reducing both generation capacity and
economically feasible hydropower potential.[19]

Limited financing: Inabilities to procure financing and foreign investment are major barriers. One assessment calculated that if you
take all of the available capital in Nepali markets - this for everything, not just energy - and directed it solely at building hydropower
projects, you would not even have enough for 200 MW. UNDP surveyed key lenders in the sector and noted that commercial banks
and financial institutions are “generally not interested” in investing in energy. A separate evaluation commented that Nepal lacked
“long-term debt financing” for energy projects and that the major lenders, the Agricultural Development Bank and National
Commercial Bank, have already “maxed out” their lending for microhydro, solar PV, and biogas. A third study remarked that in
Nepal, “financial institutions are not readily motivated to invest in renewable energy technologies because of the immature business
models, market insecurity and implementation and usage risks.”[3]

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Electricity Demand and Supply in the Household Sector

NEA provides approximately 1.5 million households with electricity. The subscriber growth rate was about 10% per year in recent
years. Private households account for 43.4 % of national electricity consumption. The average daily household consumption is
about 2 kWh which is used mainly for lighting. The other uses being running radios, TVs and to some extent cooking and water
heating.

The electricity tariffs for households with 4 to 10 NRs / kWh (approx. 0.04 - 0.10 EUR / kWh) are low to moderate in international
comparison. However, because of the high fixed monthly minimum rate households are not motivated to save electricity.

The electricity supply crises leads to cut offs that affect particularly large numbers of consumers, especially during evening peak
load hours. The households are disadvantaged in two ways. They have to pay a high monthly minimum rate for an unreliable supply
and moreover, they have additional expenses on lighting alternatives such as kerosene lamps, candles or battery lighting. The
increasing use of electrical appliances such as refrigerators, water pumps, rice cookers and water heaters lead to power supply
overload. Due to the lack of minimum standards for energy efficient appliances and a lack of labeling of the devices regarding their
electricity consumption, private households can make no conscious purchase decisions with regard to operation costs of the
appliances. Inefficient domestic appliances are usually cheaper than those with a higher energy-efficiency. Therefore, costumers
who have no access to information about the operating costs usually buy the cheaper but inefficient appliances. As a consequence,
households have to bear high operation costs, and the energy service companies have to make higher power generation capacities
available.

A social norm against collecting revenue for electricity further inhibits the profitability of hydro schemes. Many believe hydroelectric
facilities should serve the community for free, and that poor families should not have to pay for electricity. The problem with this view
is that it creates social opposition to charging rural households for hydroelectricity.[3]

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