World Bank Aid for Energy Crisis Management

The World Bank today approved $89.2 million to help Nepal implement its Energy Crisis Management Action Plan. Nepal is experiencing an energy crisis of unprecedented severity, caused by years of under-investment and sharp growth in electricity demand. This long-term problem exacerbated last year due to drought in parts of the country and loss, through flooding, of a transmission line that was used to import electricity from India.

As a result, by January 2009, grid-based consumers were being supplied with electricity for only eight hours per day. This has had a highly negative impact on all aspects of the economy and imposed a heavy burden on Nepalis. While re cent rains have brought some relief against the power supply crisis, the shortage of storage capacity in the system means that the power supply deficit will continue to be severe in the coming winters.

The government has de- clared a ‘national energy crisis’ and its immediate priorities are to identify and implement quick investments to prevent in the coming winters a repeat of crises of similar magnitude while implementing medium-tolong term development plans on a parallel basis. The government also intends to ensure the continued expansion of its successful micro-hydro rural electrification programme.

“Increasing access to electricity is one of the major human and economic development challenges facing Nepal,” said Susan Goldmark, World Bank Country Director for Nepal.

“While it is clear that chronic power shortages will continue to be a defining feature of life in Nepal for several years to come, the bank is stepping up its assistance to help Nepal minimize economic impacts and hardships in the short term and also to implement medium to long term development plans. Some 36,000 rural households will benefit from the expansion of Nepal’s micro-hydro programme.” The additional financing for the Nepal Power Development Project, which was approved on May 22, 2003, will include investments in rehabilitation of the Kali Gandaki ‘A’ Hydro Electric Plant (HEP), the largest plant in Nepal’s power system as well as of two existing thermal plants in Duhabi and Hetauda. It will also finance construction of the Bharatpur-Bardaghat transmission line, strengthen the old and severely overloaded distribution network in Kathmandu Valley and expand the government’s offgrid micro-hydro rural electrification programme.

The investments are aimed at boosting Nepal’s power system by increasing energy production through reduction of down-time at Kali Gandaki ‘A’ HEP, making available an estimated 22 MW of capacity at existing thermal plants. It will improve reliability of the Kathmandu Valley distribution network by adding 500 MW transmission capacity to relay power from existing and expected future projects. An additional 4.25 MW will be installed through the microhydro programme, said Michael Haney, Senior Energy Specialist at WB.