Hydropower Sector

With perennial rivers flowing all across and steep slopes and gradient that provide ideal topographic conditions, Nepal is ideally suited for the generation of hydroelectricity. The total exploitable hydropower capacity of Nepal is around 83,000 MWs out of which only about 650 MWs is currently being produced domestically. All the hydropower projects in Nepal are run-of-river (ROR) projects, except Kulekhani hydropower project (92 MWs). According to National Planning Commission, at the end of 9th Five Year Plan, 40% of the population in Nepal had access to electricity. This means that 60% of the population still has no access to electricity, indicating that there is a solid market for electricity in Nepal. Further, it also needs no reminding that most of those who have access to electricity are facing severe load-shedding and the magnitude of which is likely to increase further in the near future. All this confirms that an abundant market for electricity exists within Nepal. If one is to include the potential export market of electricity to India then the size of the market increases by a magnitude. The tremendous market for electricity manifests investment opportunity. In other words, the scope for investment in hydropower in Nepal is limitless. In this respect, it needs to be remembered that ramification of investment in hydropower sector is equity investment by the entrepreneurs with complementary debt financing from financial intermediaries (FIs). It is not possible for an entrepreneur to implement a hydropower project just by making an equity investment.

Just India-Nepal agreement on "Electric Power Trade, Cross-Border Transmission Interconnection and Grid Connectivity" new cross-border transmission lines are under construction which will more than double the transmission capacity over the next two years.

This agreement will also provide a framework for imports, by Indian entities, of surplus power generated from future hydroelectric plants in Nepal.