ADB helped Nepal increase its capacity to produce clean energy, and faced some challenges along the way.
The Challenge
In the mid-1990s, Nepal was facing an energy crisis. Individuals and businesses went without electricity about 16 hours a day. The lack of a dependable power supply was significantly affecting the country’s gross national product and its economic growth.
The Nepal government recognized that not only was there a need to close the gap between electricity demand and supply, but that the need for additional supply was growing steadily. The growing demand needed to be addressed in a way that was environmentally sustainable, socially inclusive and cost effective.
The Strategy
It was clear that additional power generation capacity was needed. The Kali Gandaki “A” Hydroelectric Project on the Kali Gandaki River, which began in 1996 and was completed in 2002, sought to address this need.
The project included the construction of a dam at Mirmi village, near the confluence of the Andhi Khola and Kali Gandaki rivers. This diverted water into a tunnel linked to a 144-megawatt (MW) power station in nearby Beltari. The project included sufficient water storage behind the dam to allow the power plant to operate at full capacity for six hours a day, even during the dry season.
The Results
The project effectively contributed to economic growth by producing on average close to 592 gigawatt-hours per year since it was commissioned. This benefited consumers nationwide, according to a report by ADB’s Independent Evaluation Department, which gave the project an overall rating of “successful.”
As part of the project, about 4,142 households were connected to the power grid.
The project was found to be efficient and cost-effective. Though it was not completed at the least effective cost, due to higher than expected maintenance costs and possible design errors, the total capital cost was below original estimates. The project came in $98 million under budget in terms of construction costs.
The Lessons
Though the project was successful, there were important areas noted where there could be improvement.
The project has improved the electrical supply situation in the area it serves but there continued to be “load shedding” - or periodic electricity outages - due to power supply limitations that could have been more efficiently addressed during project development.
In addition, the project experienced delays related to disagreements between government agencies that could likely have been addressed more efficiently had ADB’s local office in Nepal been engaged in the process to a greater degree.
Moving Forward
In line with the project’s overall goal of increasing access to cost-effective, sustainable energy, ADB’s Independent Evaluation Department has recommended that the Nepal government should revise electricity tariffs to encourage cost recovery and foreign investment in the energy sector
ADB and the government of Nepal should also work together to formulate comprehensive environmental and social mitigation measures that ensure a “do good” approach, in addition to the “do no harm” principle. This is particularly important in light of the fact that many future hydro projects will likely be undertaken by the private sector or as public-private partnerships and will require more streamlined approaches to addressing environmental and social impacts.