Industries that switch to wind power protect not just the ecology, but the economy as well

There are more than 30 cement factories in Nepal producing 2 million tons of cement annually. Even at the best of times that barely meets half the national demand. Nepal imported more than Rs 3 billion worth cement last year and with the earthquake that figure is expected to soar.

Why isn’t supply meeting demand ? A look into another industry would clear the mystery. Tea is one of our major exports and is gradually losing ground in the international market. Despite growing consumption of tea, we have not been able to increase our market share proportionately as our tea has become more expensive than our competitors’, due to increasing production costs. The main reason for this is the need to use diesel electricity, which has increased production cost by Rs 50-100 per kg.

It’s the same story in all industries: during power shortages, industries have to rely on high-cost diesel power, which doubles their operating cost. A majority of the industries do not work at full capacity which, in turn, is hurting Nepal’s economic growth and is threatening the livelihoods of millions of people who are directly or indirectly dependent on these businesses.

Production cost can be reduced by finding cheaper and reliable alternative energy sources, besides increasing efficiency. Captive renewable energy generation primarily for an industry’s own consumption can reduce costs. Electricity generation from diesel power is not only expensive, but also climate unfriendly. Renewable energy is cheaper and cleaner. Reducing our reliance on diesel through increased use of renewable energy sources such as wind, micro-hydro, solar, waste heat recovery, and biomass is crucial in shaping Nepal’s image, not just to save the ecology but the economy as well.

Nepal’s wind map (pic, above) shows that most tea factories and big cement industries in Nepal are situated in areas that are feasible for wind energy generation. None of them has so far exploited this available source of captive renewable energy resource. There is one big barrier for many of these industries to switch into wind power generation: initial capital cost which is higher than for a diesel plant.

The average ex-factory cost of a megawatt size wind turbine is around $1 million. On top of this, an energy storage system will increase costs. The government provides a subsidy on capital cost for small scale projects through the Alternative Energy Promotion Center (AEPC) but there is no provision for bigger industries. Even the AEPC’s newly launched financial intermediation mechanism Central Renewable Energy Fund (CREF) doesn’t address such big capital projects. Nonetheless, it is imperative to come up with different support mechanisms and innovative business models to overcome this issue of initial capital.

Despite the heavy capital cost, the payback period for a wind farm located in an area with a good wind speed is only up to five years. Given the fact that a wind farm can be built quickly, it would be a lucrative option for industries that are now relying heavily on diesel for backup power. A wind project needs at least one year of wind data for technical feasibility study and it takes less than a year to complete even a wind farm of up to 10MW provided there is good road access and equipment is available on time.

Wind is a quick fix for tea, cement and other energy-intensive industries. If we can have a mechanism to address capital cost, wind is the way to go.

This article is part of a monthly series prepared jointly with the Energy Development Council of which Kushal Gurung, Wind Power Nepal is a member.