Nepal is once again facing the prospect of significant electricity wastage during the rainy season due to a lack of adequate transmission lines and substations. Over the past two years, 20 projects with a combined capacity of 339.07 megawatts have experienced electricity wastage, and with additional projects coming online, the potential for wastage has increased, according to hydropower producers.

The Nepal Electricity Authority (NEA) has instructed producers to generate electricity based on demand, placing some projects in ‘contingency’ due to transmission or substation shortages. Hydropower producers argue that this approach leads to electricity wastage, as the NEA does not compensate for ‘non-dispatchable’ electricity, thus keeping projects in ‘contingency.’

The Association of Independent Power Producers (IPPAN) reported that electricity worth NPR 2.835 billion was wasted across 20 projects last year. The previous fiscal year saw wastage valued at NPR 1.63 billion. Despite these claims, NEA Executive Director Kulman Ghising maintains that no electricity should be wasted except in cases of line interruptions caused by weather conditions. “We didn’t get electricity. Therefore, there is no waste,” Ghising stated. “We meet internal demand and also export electricity. We have not been able to fulfill the country’s demand.” Ghising added that the completion of some transmission lines and ongoing construction of others should prevent wastage this year.

During the dry season, production drops to 20 percent capacity, but it can operate at full capacity with the onset of the rainy season. However, promoters argue that projects in ‘contingency’ cannot operate at full capacity, leading to wastage. Atramam Ghimire, a promoter, cited losses of NPR 22 million last year due to limited operations of the 25 MW Upper Cable ‘A’ project.

Sujan Poudel, another promoter, highlighted that projects like the 20 MW Lower Modi cannot operate at full capacity due to incomplete lines such as the Kushma to New Butwal line under the Kaligandaki Corridor. While the line has been completed, the New Butwal substation’s limited capacity still poses dispatch problems, potentially leading to electricity wastage again this year, especially with the addition of new projects.

Chandan Ghosh, NEA spokesperson, noted that Nepal’s internal demand is between 2200 to 2300 MW, while production is at 1800 MW, with plans to produce an additional 650 MW to meet domestic needs. The total connected capacity has reached 3200 MW.

Mohan Dangi, senior vice president of IPPAN, expressed hope that electricity from the Koshi Corridor would not be wasted this year due to the construction of transmission lines, though he acknowledged ongoing corridor-specific issues. More than 35 hydropower projects have signed ‘contingency’ power purchase and sale agreements (PPA), indicating a systemic issue.

During PPAs, if projects are delayed, promoters must pay 5 percent compensation to the NEA, and vice versa for delayed transmission lines. Dangi emphasized that bank interest rates of 12 to 13 percent make the 5 percent compensation insufficient, forcing promoters to accept ‘take and pay’ under ‘contingency’ conditions.

IPPAN Deputy Secretary General Prakash Dulal warned that up to 1000 MW of electricity could be wasted this rainy season, a significant increase from the 3.5 to 4 MW lost last year, if the current issues are not addressed.