Demand of Electricity will Definitely Rise if we are able to supply more….

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The government recently appointed Kulman Ghising as the Managing Director of Nepal Electricity Authority — the country’s sole power off-taker. Ghising has been associated with NEA for over two decades and has experience of power trade, distribution and other fields under his belt. After being appointed as NEA’s managing director, Ghising said that his focus will be on three areas — ending load-shedding, improving the financial health of NEA and making the country self-reliant in energy. Pushpa Raj Acharya of The Himalayan Times caught up with Ghising to learn on how he is planning to work on the issues that he has mentioned will be his focus. Excerpts:

Interview with Kulman Ghising, Managing director of Nepal Electricity Authority at Ratnapark in Kathmandu on Sunday, September 25, 2016. PHOTO: Balkrishna Thapa Chhetri/THT

There have been many announcements made by the political leadership to end the load-shedding in the country. How long will it really take to end this perennial problem?

It will take two more years from now to end the load-shedding problem as some of the projects like Upper Tamakoshi, Chilime, Kulekhani III and an additional 300 megawatt from independent power producers (IPPs) are set to start power generation and we also have been also talking with neighbouring India to increase power import during dry season. Nepal Electricity Authority (NEA) has projected that the demand of power in the next two years will hover around 1600 megawatt but we will have installed capacity of 2,000 to 2,200 MW.  The demand of 1600 MW is for the peak hours, which is for around four hours (in the morning and evening) in a day and the remaining 20 hours is off-peak hours when demand significantly drops compared to peak hours. We will also be importing energy and have solar power in our energy system. We will be able to import 500 to 600 MW from India and generate 150 MW through solar power. But the concern is not only about generation capacity to end the load-shedding problem. There are other constraints also that need to be addressed simultaneously.

What are the other constraints that need to be addressed?

We need to improve our transmission and distribution system as well. There is a huge problem regarding transmission and distribution. For example, if we generate an additional 500 MW of electricity immediately, we will not be able to supply it to the major load centres like Kathmandu. The peak demand of Kathmandu is 500 MW but the distribution system of Kathmandu cannot handle supply of more than 450 MW. To manage the smooth distribution capacity of the substation, transmission and distribution transformers and cables of double the supply capacity have to be installed. All the transformers and feeders are overloaded, so at present we will not be able to end the load-shedding problem. If we are able to supply 450 MW to Kathmandu we will be able to end the load-shedding problem immediately. But it will be temporary if we do not improve the capacity of substation, transmission line, transformers and feeders. Another critical area is that we have to install transmission lines at the earliest to connect the hydroelectricity projects that are going to be completed very shortly. If we cannot improve transmission and distribution system properly the problem of power outage will recur after a few years. We have assumed that we will require transmission and distribution planning for at least 2000 MW for Kathmandu Valley alone within the next decade. This is why to end the power outage situation in a sustainable way, we have to develop generation, transmission and distribution plans and act accordingly.

Till date, why has NEA not formulated any plan to improve transmission and distribution system in major load centres like Kathmandu?

Definitely we have. But we have to make it more pragmatic because demand of electricity that NEA has been projecting is based on suppressed demand. Now that the government has unveiled a plan to develop 10,000 MW of electricity within 10 years, we do not have to stick to the energy forecast that has been based on suppressed demand. Demand of electricity will definitely rise in coming days if we are able to supply more. We can take Kathmandu as an example for this. The government has planned to develop outer Ring Road and once this materialises, there will be expansion of settlements and they will demand power. It is the right time for NEA to develop transmission and distribution system for outer Ring Road. If we develop 220 kv transmission along the outer Ring Road and mono ring of 132 kv along the inner existing Ring Road and 33 kv lines along the river corridors we can improve the transmission and distribution system in Kathmandu. NEA may launch transmission and distribution improvement project very soon. We have had initial discussions with Asian Development Bank (ADB) for loan worth $500 million to strengthen the distribution system of Kathmandu including underground cabling and installing GIS system. Simultaneously, we have to strengthen the distribution and transmission capacity across the country in a massive way because we cannot do anything without upgrading the transmission and distribution system. If we see the capacity of trunk line — East-West transmission line (132 kv double circuit) — it has the capacity to transmit 200 MW of electricity. We need to develop 765 kv trunk line and install north-south transmission line along the corridor of major rivers and along the mid-hill highway. Likewise, some of the cross border transmission lines namely, Duhabi-Anarmani, Butwal–Gorakhpur, Ataria-Baraily and Rasuwagadhi-Kyirong need to developed to access the power market.

The energy demand projection of NEA and the government varies significantly. What do you have to say on this?

As I have mentioned earlier demand forecast of NEA is suppressed demand. NEA should be pragmatic regarding demand forecast. Demand of electricity will increase if we are able to supply more electricity and we have to manage the load portfolio accordingly. The vision paper of the government to generate 10,000 MW in 10 years is realistic. Another crucial aspect is that almost all the projects under construction currently will start power generation within three years from now and then after that there are no more projects to generate power for another five to seven years because none has been initiated in recent years. If we initiate projects immediately it will take at least another seven years for them to be completed. We have to initiate projects with capacity to generate 5,000 MW immediately, either through NEA, the government or the private sector. NEA should focus on reservoir and peaking run of the river projects. NEA has some reservoir projects like Dudhkoshi, Tamor and Uttarganga and some peaking run of the river projects like Upper Arun, which are in the phase of preparation of detailed project report. Similarly, if the government and private sector initiate Budhigandaki, Nalsing Gad and West Seti projects then we can have portfolio of 5,000 MW. Construction of these projects need to be expedited.

You have mentioned that there will be demand of 10,000 MW in next ten years but the NEA — single power off taker of the country — is reluctant to sign power purchase agreement with developers citing there will be surplus energy after 2018. What do you have to say about this?

NEA has developed a fund for power purchase agreement (PPA) on take or pay basis, which private investors have been seeking since long. We have to encourage private sector in hydropower development. I think the government and NEA should not be involved in projects below 100 MW. The private sector should be encouraged for this.

You have also said that NEA will execute PPA on the basis of take or pay provision. If NEA cannot sell power that it purchases from the developer then it will have to bear a huge loss. What is your view on this?

We do not have to hike electricity tariff to make NEA a profitable organisation. There is the issue of financial restructuring and sales maximisation. Profitability of NEA depends on sales maximisation and energy planning. Around 150 IPPs have signed PPA for over 2,000 MW. If we are able to implement the concept of energy banking with neighbouring India, we can reap huge benefit from it. Energy banking concept is exporting power to India in wet season when we have surplus energy and importing energy from India during the dry season when we have power deficit from our own generation. Similarly, we have to restructure NEA. NEA will soon enhance its power trading companies, generation companies and transmission companies. I am also thinking about opening an engineering company as a subsidiary of NEA.

What is your view on signing PPA with foreign developers in US dollars?

The government has been mulling over developing a hedge fund to manage the fluctuation in the value of the US dollar. The Ministry of Energy has been preparing a guideline for such a hedge fund. The initial concept is that the developer will have to pay a certain amount as premium to the hedge fund and NEA will also contribute to it and it will be utilised to compensate the developer if the US dollar exchange rate vis-a-vis Nepali currency goes down. The hedge fund is to cover the risk of foreign exchange, which will provide necessary security to foreign investors in hydropower sector.

Source : The Himalayan Times