Nepal : South Asia Subregional Economic Cooperation Power System Expansion Project

Project Name

South Asia Subregional Economic Cooperation Power System Expansion Project

Project Number

44219-014

Country / Economy

• Nepal

Project Status

Active

Project Type / Modality of Assistance

• Grant
• Loan
• Technical Assistance

Source of Funding / Amount

Grant 0397-NEP: South Asia Subregional Economic Cooperation Power System Expansion Project

Source	Amount
Government of Norway	US$ 60.00 million

Grant 0398-NEP: South Asia Subregional Economic Cooperation Power System Expansion Project

Source	Amount
Strategic Climate Fund	US$ 11.20 million

Loan 3139-NEP: South Asia Subregional Economic Cooperation Power System Expansion Project

Source	Amount
Asian Development Fund	US$ 180.00 million

Loan: South Asia Subregional Economic Cooperation Power System Expansion Project

Source	Amount
European Investment Bank	US$ 120.00 million

TA 8678-NEP: Supporting Rural Electrification Through Renewable Energy

Source	Amount
Technical Assistance Special Fund	US$ 500,000.00

Grant 0520-NEP: South Asia Subregional Economic Cooperation Power System Expansion Project

Source	Amount
Strategic Climate Fund	US$ 20.00 million

Loan 3721-NEP: South Asia Subregional Economic Cooperation Power System Expansion Project-Additional Financing

Source	Amount
Concessional ordinary capital resources lending	US$ 20.00 million

Strategic Agendas

• Environmentally sustainable growth
• Inclusive economic growth
• Regional integration

Drivers of Change

• Gender Equity and Mainstreaming
• Governance and capacity development
• Partnerships

Sector / Subsector

• Energy / Electricity transmission and distribution - Renewable energy generation - small hydro - Renewable energy generation - solar - Renewable energy generation - wind

Gender

Effective gender mainstreaming

Description

ADB assisted the Government of Nepal in increasing capacity of national power grid and enhancing renewable energy development. The South Asia Subregional Economic Cooperation Power System Expansion Project is building more than 200 kilometers of power transmission lines, as well as substations, along Kali Gandaki corridor in the Himalayas and Marsyangdi-Kathmandu route. The project is also building or upgrading more than 1,000 kilometers of power distribution lines in the east, central, and west regions of the country. To bring affordable renewable energy to remote areas, the project is building small hydroelectric power plants, as well as mini-grid based solar and solar/wind hybrid energy systems.

Project Rationale and Linkage to Country/Regional Strategy

Nepal is facing chronic power shortages. Only 65% of the country's households have access to electricity and per capita electricity consumption is 102 kilowatt-hours per year, one of the lowest in the world. The installed capacity is 762 megawatts, well below the peak demand of 1,095 megawatts. As a result, consumers connected to the national grid experience scheduled power cuts of 12 hours per day or more during the dry season. In addition, the limited power transmission and distribution network is a bottleneck both for meeting domestic power demand and for potentially trading power with neighboring countries.

Impact

Increased electricity access in Nepal and improved power exchange across the border

Project Outcome

Description of Outcome

Increased capacity of national grid and enhanced renewable energy development by 2025

Progress Toward Outcome

Project implementation is ongoing in line with the set outcome.

Implementation Progress

Description of Project Outputs

1. Power transmission capacity increased

2. Power distribution network improved

3. Mini-grid-based renewable energy systems in off-grid areas increased

4. Capacity development support to NEA and AEPC provided

5. Utility scale solar photovoltaic projects developed.

Status of Implementation Progress (Outputs, Activities, and Issues)

1. Power Transmission Capacity Increased. Grid substations in Dhalkebar, Lahan, Damauli, Baneshwor, Banepa, New Kawasoti, Butwal, Bharatpur, Butwal and Gandak are in operation after reinforcement works. Dana -Kusma 220 kV transmission line and associated substations have come into operation in 2021. 220 kV New Butwal substation was also charged in 2021. Marsyangdi- Kathmandu 220 kV transmission line has been charged in 2022. Construction of Matatirtha and Markichowk substations are ongoing. Kusma-New Butwal and New Butwal-Bardaghat 220 kV transmission lines are also under construction.

2. Power distribution network improved. Construction of distribution lines and substations, rehabilitation of distribution lines, and augmentation in existing distribution substations are ongoing. Upgraded Dhalkebar- Mujeliya 33 kV line has been charged after stringing of HTLS conductor.

3. Mini-grid-based renewable energy systems in off-grid areas increased. Nine Wind/Solar Mini Grid Systems of 565 kW completed. Out of 9 Mini Hydro Projects (MHP) planned to be implemented under the project, 4 MHPs of total capacity 1100kW completed; 4 MHPs of 2,496kW are under construction; and Procurement of the final 750kW MHP (Aankhe Khola) has commenced with publication of IFB on 27 Feb 2022.

4. Capacity development support to NEA and AEPC provided. Required numbers of people have been trained. AEPC act (Renewable Energy Promotion Board Act) has been prepared by AEPC and line ministry is preparing for submission to the parliament for its consideration. Regulation related to its implementation will be prepared after approval of the act. NEA has approved Distribution System and Rural Electrification Master Plan in 2021 and is under implementation.

5. Utility scale solar photovoltaic projects developed. Contract has been signed with 5 Independent Power Producers (IPPs) for a total size of 24 MWp. Out of these, 3 IPPs commenced construction of its plant, with size of 11 MWp.

Geographical Location

Safeguard Categories

Environment

B

Involuntary Resettlement

A

Indigenous Peoples

B

Summary of Environmental and Social Aspects

Environmental Aspects

Initial environmental examinations and an environmental assessment and review framework for future unidentified off-grid subprojects have been prepared for both on- and off-grid components following ADB's Safeguard Policy Statement (2009) and the government's environmental regulatory framework. Potential impacts are mostly temporary and reversible, but some irreversible impacts on the natural habitat will occur because of the clearance of about 150 hectares of forested land. Available information on the habitat ranges and elevations of sensitive species indicates that critical habitat will not be directly impacted; potential impacts on natural habitat and potentially sensitive ecosystems have been identified and can be readily mitigated. Due diligence has determined that associated hydropower facilities comply with Nepal's regulatory requirements. Cumulative and induced impacts will have net positive benefits from easier access to energy and productive end uses of energy. Climate change risk screening was conducted and resulted to a medium climate change classification. Risks identified will be addressed through best practice engineering design. The initial environmental examinations and environmental management plans (EMPs) for all components include mitigation measures, monitoring, and budgetary provisions that are adequate to address the environmental impacts of the project. The EMPs' requirements are incorporated into bidding documents. The NEA and AEPC supervise construction contracts and EMP implementation, including preparation of semiannual monitoring reports. The EMPs will be updated as necessary during implementation. Public consultation and information disclosure requirements have been met. The environmental assessment for the project are disclosed on ADB's website.

Involuntary Resettlement

The project will require land acquisition and involuntary resettlement, which will primarily be economic displacements with limited impact from physical displacement. The transmission and distribution components will have permanent and temporary impacts. Permanent impacts are anticipated from land acquisition for the construction of new transmission substations, distribution substations, transmission towers, and distribution poles. The temporary impacts will be from the loss of trees and crops along the right-of-way. About 715 households will be affected by land acquisition and loss of crops and trees. An initial assessment shows that the project areas do not have any endangered indigenous peoples groups. The magnitude of the impacts on indigenous peoples is not significant. Impacts are limited to loss of portions of land which will be compensated at replacement cost. Where these groups are considered vulnerable, additional resettlement assistance will be provided, in addition to the compensation, and consultations will be carried out to make them aware of the project and to obtain their endorsement for land acquisition. The off-grid component will not have any resettlement impacts for subprojects and no adverse impacts on indigenous peoples. The minimum private land requirements for the subprojects will be met through voluntary land donation. A due diligence report has been prepared for those subprojects. The off-grid component allows for future subprojects, which have not been identified and are subject to due diligence. Therefore, a resettlement framework and an indigenous peoples planning framework have been prepared as required by the Safeguard Policy Statement and related national policies and legislation. AEPC will monitor the implementation of the resettlement and indigenous people plan, and will submit semiannual reports to ADB. Social safeguards measures will be achieved in line with the provisions stated in the PAM. A summary of the initial social safeguards assessment is presented in the summary poverty reduction and social strategy.

Indigenous Peoples

Based on surveys, two draft combined resettlement and indigenous peoples plans have been prepared for the on-grid components, in line with ADB's Safeguard Policy Statement and the government's legal framework.

Stakeholder Communication, Participation, and Consultation

During Project Design

Stakeholder communication and consultations were conducted during project design, with their active participation.

During Project Implementation

Stakeholder consultations are being conducted during project implementation as and when required.

Business Opportunities

Consulting Services

Consultants (individuals and firm) to be financed by ADB funds and ADB administered funds will be recruited in accordance with ADB's Guidelines on the Use of Consultants (2013, as amended from time to time). For the procurement to be financed by ADF loan, or jointly by ADF and Norwegian grant, a blanket waiver of member country procurement eligibility restrictions will be applied.

All earlier planned consultant recruitment under NEA is complete. NEA had signed contract with a new project supervision consultant firm on 5 July 2022.

Various individual consultants have been recruited under AEPC to support project implementation. Further required TA services for the project is being extended from UNDP/RERL.

Procurement

As per initial plan the project would be executed over a period of six years from the date of loan effectiveness. However, recently the project has been extended for two years (i.e., till 30 June 2024) to cover up the implementation delays.

All procurement to be financed by ADB fund and ADB administered funds will be carried out in accordance with ADB s Procurement Guidelines (2013, as amended from time to time). For the procurement to be financed by ADF loan, or jointly by ADF and Norwegian grant, a blanket waiver of member country procurement eligibility restrictions will be applied.

Under NEA component, all 13 procurement packages have been awarded. In addition, as the contract with the earlier project supervision consultant was ended on 30 June 2022, NEA has signed contract with a new project supervision consultant (firm) on 5 July 2022 to ensure continuity of project monitoring supervision and for the extended period of the project.

Under AEPC component, 20 contracts are already awarded while other are at different stages.

Contact

Responsible ADB Officer

Shah, Grishma

Responsible ADB Department

Sectors Group

Responsible ADB Division

Energy Sector Office (SG-ENE)

Executing Agencies

Alternative Energy Promotion Center (AEPC)

Nepal Electricity Authority (NEA)

Timetable

Concept Clearance

31 Jul 2013

Fact Finding

16 Mar 2014 to 21 Mar 2014

MRM

22 Apr 2014

Approval

04 Jul 2014

Last Review Mission

-

Last PDS Update

27 Jul 2022

Funding

Grant 0397-NEP

Grant 0398-NEP

Grant 0520-NEP

Loan 3139-NEP

Loan 3721-NEP

TA 8678-NEP