Washington, D.C., June 18, 2009 – The World Bank today approved US$ 89.2 million to support the Government of Nepal implement its Energy Crisis Management Action Plan.
Nepal is experiencing an energy crisis of unprecedented severity, caused by years of under-investment and sharp growth in electricity demand. This long-term problem was exacerbated in the last year by drought in part of the country and the loss, through flooding, of a transmission line that was used to import electricity from India.
As a result, by January 2009, grid-based consumers were being supplied with electricity for only 8 hours per day. This has had a highly negative impact on all aspects of the economy and has imposed a heavy burden on Nepalis. While recent rains have brought some relief to the power supply crisis, the shortage of storage capacity in the system means that the power supply deficit will continue to be severe for winters to come.
The Government of Nepal has declared a “national energy crisis” and its immediate priorities are to identify and implement quick investments to prevent a repeat in coming winters of crises of similar magnitude, while implementing medium-to-long term development plans on a parallel basis. The Government also intends to ensure the continued expansion of its successful micro-hydro rural electrification program.
“Increasing access to electricity is one of the major human and economic development challenges facing Nepal,” says Susan Goldmark, World Bank Country Director for Nepal. “While it is clear that chronic power shortages will continue to be a defining feature of life in Nepal for several years to come, the Bank is stepping up its assistance to help Nepal minimize economic impacts and hardships in the short term as well as to implement medium to long term development plans. 36,000 rural households will benefit from the expansion of Nepal’s micro-hydro program.”
The additional financing for the Nepal Power Development Project, which was approved on May 22, 2003, will include investments in rehabilitation of the Kali Gandaki ‘A’ Hydro Electric Plant (HEP), the largest plant in Nepal’s power system, as well as of two existing thermal plants in Duhabi and Hetauda. It will also finance construction of the Bharatpur-Bardaghat transmission line, strengthen the old and severely overloaded distribution network in Kathmandu Valley, and expand the Government’s off-grid micro-hydro rural electrification program.
These investments are intended to strengthen Nepal’s power system by increasing energy production through reduction of down-time at the Kali Gandaki ‘A’ HEP, making available an estimated 22 MW of capacity at the existing thermal plants. It will also improve the reliability of the Kathmandu Valley distribution network by adding 500 MW transmission capacity to relay power from existing and expected future projects. An additional 4.25 MW is expected to be installed through the micro-hydro program.
Nepal’s total grid-connected generation capacity amounts to a meager 683 MW, and the actual available capacity at any point in time is generally considerably lower. “Load-shedding”, or rotating outages, has long been a facet of the hydro-dependent power system in Nepal, where protracted conflict, and weak institutions and finances have hampered the addition of power generation capacity. Electricity supply is worse in the dry season (October to May) when river flows are lower.
“In the absence of a concerted scale-up of grid-supplied power, Nepal will continue to be burdened by a heavy reliance on costly, and often polluting, alternative means for meeting the demand for electricity", said Michael Haney, Senior Energy Specialist at the World Bank. “While some cite the high costs of hydropower development as an argument against developing Nepal’s great potential in this area, the cost to the economy of doing without electricity or relying on the alternatives is enormous.”
The additional financing is a blend of credit (US$73.7 million) and grant (US$15.5 million) from the International Development Association, the World Bank’s concessionary lending arm. The credit has 40 years to maturity with a 10-year grace period.
For more information on the Bank’s work in Nepal, please visit http://www.worldbank.org.np
For project information, please visit http://www.worldbank.org.np/external/projects/main?pagePK=64283627&piPK=73230&theSitePK=223555&menuPK=286969&Projectid=P116190