CDKN’s partners report on a workshop on private sector engagement in Nepal’s hydroelectricity sector organised by the Nepal Development Research Institute (NDRI) and Practical Action Consulting (PAC) under the CKDN supported project ‘Acting on Adaptation in the Hydroelectricity Sector’.

Climate change is most likely to impact Nepal’s hydropower production capacity over the next few decades by affecting river flow especially during the dry season. Experts have said that ‘the impact of climate change on Nepal’s hydropower production capacity will require more investment for meeting the country’s hydroelectricity demand by 2050’.

So what can be the solution? The private sector’s engagement in the hydroelectricity sector can act as a catalyst; the unique expertise of the private sector, its capacity to innovate and produce new technologies for adaptation and its financial leverage can form an important part of the multi-sectorial partnership that is essential between governmental, private and non-governmental actors.

In an effort to further explore linkages with the private sector as part of a CDKN Technical Assistance project, a well-attended mini-workshop on ‘Engaging the Private Sector in Adaptation to Climate Change in the Hydro-electricity Sector in Nepal’ was organised by the Nepal Development Research Institute (NDRI) and Practical Action Consulting (PAC) on 31 August 2015 in Kathmandu, Nepal.The objective of the mini-workshop was to increase awareness on the various adverse effects of Climate Change and on how private sector investment can ensure sustainability in the long run.

Potential for Hydropower Development in Nepal till 2050 under different economic scenarios:

Prof. Dr. Ram Manohar Shrestha presented three economic scenarios with outlining different GDP growth rates. His first scenario was the high GDP growth rate of 9.7%, second, medium growth rate 6% and third, low growth rate 4.3%. He further elucidated his results with additional data on the energy consumption in different economic scenariosin 2050. The primary energy usage increases by 3.1 times by 2050 and hydro increases by 42 times (22,200 MW) in the high GDP growth rate scenario. Similarly, under the medium economic scenario, the total primary energy increases by 1.1 times in 2050 and hydro increases by 20.8 times (10,800 MW); under the low economic scenario shows that total primary energy consumption will increase by 0.8 times in 2050, hydro increases by more than 14.4 times (7,700 MW).

Based on his assumption, Nepal will require a staggering $46.6 billion investments in hydropower projects under high economic growth scenario; $19 billion will be required under medium economic growth scenario and USD 12.9 billion will be required to develop the hydroelectricity under low economic growth scenario by 2050.

The presentation further illustrated that the private sector has an important role in developing the hydropower in the coming years and that hydropower companies can benefit from the carbon revenue.

Linkage between Private Sector and Policy Makers

Prof. Dr. Govind Nepal, a member of National Planning Commission presentation focused on the importance of private sector for the Nepalese economy, especially the hydropower sector. Private companies are reluctant to invest in adaptation measures, he said, not only because their project cost will increase but also there is no such scientific evidence to support business specific impacts of Climate Change, higher uncertainties of future climatic impacts and the short-term horizon used in many private sector business planning processes may reduce companies’ incentives to adapt.

Nevertheless, private sector and policy makers are interdependent, he continued, and private sector partnerships with thepublic sector, scientific organisations and academia can encourage research-based adaptationby providing companies with proper guidance. The government needs to be more proactive Prof. Nepal stressed; it must carry out scientific research, facilitate technology transfer, develop human resources, help manage financial resources, and collaborate in innovative projects, and incentivise when necessary. For the regulatory mechanisms andmarket to function well, he concluded, the private sector and policy makers need to work together hand for the greater involvement of the private sector in investment and adaptation process.

Private Sector Perspective in adaptation of Climate Change in hydroelectricity sector in Nepal

Mr. Khadga Bahadur Bisht, President of IPPAN, highlighted the private sector’s point of view. The hydropower plants have observed the cloud bursting phenomenon in many hydropower plants - excessive rainfall for few hours followed by no rainfall for a week, resultingin landslides and high sediment flow in the catchment area of hydropower projects.

The impact on smaller hydropower projects, between 5-10 MW, is felt the most, Mr. Bisht said. The small hydropower sector lacks historical data and uses various hydrological methods to estimate water flow in the river; this lack of accessibility of precise data leads to various problems in power generation as a result of which, some companies falter on the promised energy generation. Therefore, Mr Bisht stressed, Climate Change impacts need to be categorised and should be included at the design stage.

Mr Bisht said that the other issue is the increase in consumptive water use due to the extension on agriculture, road construction and other development activities. This issue has led the small hydropower to suffer from inadequate water availability in the catchment area.

Climate Change Adaptation in the Hydroelectricity Sector.

Dr. Divas Basnyat, Team Leader, NDRI illustrated CMIP5 climate projections for different regions of Nepal in 2050. The available 23 GCM models predict a widerange of annual precipitation and temperature changes. For instance, the RCP 8.5 climate projections vary from about 10% decrease to upto 30% increase in annual precipitation and from an increase of about 1.5oC to almost 5oC in annual average temperature.

He concluded that if we were to rely on climate projections only, the analyses and findings would be contradictory. He explained the ‘bottom up’ decision scaling approach the project is taking which promotes the concept of determining the vulnerability domain, seeing critical climate parameters that affect our system's performance and defining system performance indicators through stakeholders’ consultation.

This approach differs from the ‘traditional top-down GCM-led’ approach that counts on downscaling a few climate projections, generating a few water supply series and determining whether system performance is acceptable for these series.

The session moderated by Mr. Vishwa B Amatya, Head of Programme, Practical Action highlighted the following key issues:

1. There is a gap between policy framework and implementation. It isn’t possible for a policy to incorporate all elements of hydropower development. Hence, an universal policy will not work for all types and sizes of hydropower projects (e.g. below and above 500MW) rather it should be categorised or segregated according to sector, capacity etc. The adaptation options should also be framed according the type of scheme such as ROR and storage. The same adaptation option will not work for ROR and storage based hydropower plants.
2. The hydrological database doesn’t comprise of relevant and reliable information, which indeed affects the study that is being conducted on different facets. Hence, policy needs to support and enhance the quality of current database. The hydropower companies themselves can setup a small hydrological station within their power plant, which can collect quality data and can be used to analysis how climatic factors have impacted the power generation.
3. The study should also look on the existing hydropower projects and their performance under changing climatic conditions. In other words, details on how much energy has been generated by existing projects against the expected or committed energy should be analysed. Similarly, mitigation policies can be developed to combat Climate Change impacts accordingly.

The event’s closing remarks were delivered by the CDKN Country Representative, Mr. Ram Chandra Khanal, who mentioned that a previous study funded by CDKN entitled ‘Economic Impact of Climate Change in Key Sectors of Nepal’ recommended that further studies need to be conducted to take suggestions to the policy level. Hence, three studies are currently underway in hydropower, agriculture and irrigation.

(Prepared by Dipendra Bhattarai, Project Development Officer at PAC and member of the Study Team, Dipendra.Bhattarai@practicalaction.org.np; For further information on the Project activities, please contact Divas B. Basnyat, Team Leader, NDRI, divas@ndri.org.np, Telephone: +977-1-5537362, 5554975)