Dr Divas B. Basnyat from the  Nepal Development Research Institute (NDRI) discusses Nepal’s dependence on hydroelectricity and the work being done by CDKN and its partners to help the Government overcome climate change challenges faced by this sector.

Hydropower provides around 90% of the current electricity generation in Nepal. The existing hydropower projects - with a total capacity of 733 MW - are all run-of-river (ROR) installations without storage reservoirs, except for one seasonal storage plant, the 92 MW Kulekhani Reservoir Project. Electricity generation from most of the run-of-river projects is much lower than what they were designed for. This is true for projects developed and owned by the state electricity utility, the Nepal Electricity Authority (NEA), as well as for those owned by independent power producers (IPPs).

The power projects are severely affected by the huge seasonal variations in river flows, with abundant flow during the monsoon period (May to October) and low flows during the remainder of the year, particularly from January to April, compounded by inter annual variations. During the dry season, river flows are insufficient to fully operate run-of-river plants, leading to high economic costs to the nation from unmet electricity demands. Hydropower plants are also affected by water-induced natural disasters, notably floods and landslides associated with the summer monsoon, severe erosion and sedimentation problems and the risks of Glacial Lake Outburst Floods (GLOFs).

Current climate variability and extreme events already cause major impacts and economic costs in Nepal. A recent study of the economic impacts of climate change in Nepal -published by the Government of Nepal on the 28th of April 2014- estimated that the annual costs of the current climate and water resources variability is equivalent to 1.5% to 2% of current GDP. The study also found that climate change could aggravate these impacts, leading to potentially larger costs in the future.

A key risk of climate change identified in the above study concerned the hydroelectricity sector. The risk may increase with climate change, and is thus critically important as Nepal has a very large potential for hydroelectricity. Moreover, the development of the hydroelectricity sector is a key part of future development plans and crucial for domestic and export growth, with planned investments of billions of dollars in the near-term.

Responding to these climate-related risks with adaptation requires decision-making in a rapidly changing world. This is due to the high uncertainty over future climate change in Nepal, particularly regarding future precipitation and runoff variability. Nepal has a complex and variable climate across regions and seasons, due to the high variations in elevation across the country, as well as the regional influence of the Himalayas and the annual monsoon. These factors make the computer modeling of future climate change seven more difficult than elsewhere. Current climate projections show large differences in projected future rainfall changes – even in terms of the sign of change – highlighting the need to recognise uncertainty in the planning of adaptations.

Against this background, and at the request of the Government of Nepal, a new two-year study on "Adaptation to Climate Change in the Hydroelectricity Sector in Nepal" commenced in early February 2015. The project is funded by CDKN and led by the Nepal Development Research Institute (NDRI),working in collaboration with Practical Action Consulting Limited (PAC), Nepal and the Global Climate Adaptation Partnership (GCAP), UK.

Consultations held with key stakeholders from the government, private developers and national and international financiers during the Inception Phase of the study showed that the sector is ill-prepared to deal with the risks of the current climate variability, let alone with the risks expected from future climate changes.

The government agencies tasked with the rapid expansion and regulation of the hydropower sector, both for domestic consumption and export, have limited understanding of climate change impacts, and are thus unable to embed climate change concerns into project licensing, supervision and approval processes and project negotiations with developers.

Large investors are more aware of the current and future risks in the sector, but find it difficult to manage these risks due to the inadequate regulatory framework for addressing climate risks. Small private developers lack the resources and knowledge to undertake any such risk assessment and commensurate adaptation measures, and rely on support from the government and other partners. International financial institutes and development partners have started climate risk screening and due diligence before committing project investments but no common methodology exist as yet.

To meet the objectives of this study and based on the needs of the hydroelectricity sector in Nepal, this study has adopted a number of innovative steps. First, for the analysis of the climate vulnerability of the sector, the study is using a Climate Risk Assessment (CRA) methodology, based on a "bottom up decision scaling” approach. This starts with assessing the sensitivity of the performance of Nepal’s present and planned future hydropower systems to future climate changes (“stress test”) and then assesses how likely climate changes are that could significantly impact the systems’ performance.

Second, in response to these risks and the high uncertainty involved, the study is building iterative adaptation pathways. These start with the identification of early low and no-regret options for addressing the impacts of the current climate variability (i.e. options which are good to do anyway, even without future climate change). They then identify opportunities for including low-cost measures, flexibility or robustness in the planned hydropower investments over the next few years. Finally, they advance early planning and iterative responses to address the challenges facing the sector in the long-term.

Third, the study will consider how to mainstream(i.e. to integrate) adaptation into the hydroelectricity sector of Nepal. As well as raising awareness and building capacity, the study will investigate the entry points for mainstreaming and relevant institutional issues. To enable this, the study design includes the strong participatory engagement of stakeholders from the very start, including government planners and regulators, project designers, financiers, owners and operators(including the private sector) and civil society, taking into account their roles and interests in the sector.

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