February 26. 2008 at Felix conference centre, Aker Brygge, Oslo.The Royal Norwegian Embassy, Kathmandu and Norad
03/04/2008 :: State Secretary Raymond Johansen, Ministry of Foreign Affairs opened the seminar, followed by opening remarks from Secretary Rameshore Khanal, Ministry of Finance, Government of Nepal and HE Ambassador Tore Toreng.
New developments in the hydropower sector in Nepal
In the morning session representatives from the Government of Nepal (GON), led by Secretary Rameshore Khanal from the Ministry of Finance, gave presentations covering investment regulations, licensing procedures, new projects and progress with the new transmission lines being built to enable cross-border power-trade with India.
A lively discussion after the first session focused on the technical and legal requirements concerning the licensing progress. The representatives from the GON confirmed that there has been substantial progress in updating the financial and regulatory environment that will help promote increased investment in the hydropower sector in Nepal. Including:
• more transparent licensing-procedures to, among other things, combat licence trading
• foreign export projects are usually issued a 30 year licence
• the GON’s EIA-regulations are strict and fulfil the requirements from the international financing institutions
• the GON presented an extensive list with possible future projects from 10 to several hundred MWs
• note that some of the new legislation still awaits approval in Cabinet/Legislative Assembly
• the National Electricity Regulatory Commission is planned to be established in 2008.
GON were also pointing to some of the challenges: long decision making process and low transmission capacity. Both areas are of priority to address by GON.
The Independent Power Producer’s Association of Nepal, IPPAN, pointed out the abundance of promising opportunities in their presentation, and noted that many of the problems private investors had encountered earlier now had been solved. However, some improvements in the business environment could still be made, such as better follow-up of the single window policy and a more rapid progress towards the development of the power-trade with India, including building sufficient transmission lines. Several speakers noted the synchronisation issues with India.
A presentation from Nord Pool noted the continued opportunities – and challenges – for Nepal in trading power with India. However, the disparity between India and Nepal – both on technical issues such as synchronisation, but also in the development of the regulations and infrastructure to enable power trade- are serious issues that need to be clarified as soon as possible. All parties – the GON, the private sector and the consumers, can substantially gain by trading high-value peaking power from Nepal to India – and buying back cheap base-load power from India. Nepal needs a strategic approach to meet the rapidly evolving power market in India.
The glaciers in the Himalayas are particularly vulnerable to climate change and NGI presented some options for researching and warning-systems for Glacial Lake Outburst Floods – or GLOFs.
Norwegian hydro-power sector capacity and development aid
In the afternoon session a series of presentations covered the Norwegian experiences from Nepal from both the Norwegian Government and the private sector. HE Ambassador Tore Toreng emphasised that the aid program will be adjusted to the needs of the country and that Nepal should be in the lead of the development work.
Integrating an environmentally and socially sustainable approach following international standards in the commercial sector was covered by SNPower. Moving from merely mitigation to improving local conditions is an important step – and Norway has cooperated with SNPower (former Statkraft) in the Khimti-project to promote rural development. One important lesson learned is to begin the dialogue with the local community as early as possible in the process of project development.
The Norwegian hydropower sector was outlined in a series of presentations, covering the extensive private sector, government institutions, NTNU and research – and also financing options through development aid. These different institutions work closely together and have been active in Nepal over several years. There is substantial interest from Norway in Nepal and the regional possibilities, and several of the Norwegian participants are already active in both India and Nepal. Energy is a priority sector for Norwegian development policy. Note that development aid cannot finance large projects alone - but can help to off-set some risk-related costs.
In the discussions the GON challenged the Norwegian side - the Embassy, Norfund and SNPower – to acknowledge the dilemmas in both promoting Norwegian interests and Nepali interests. The Embassy and SNPower responded by re-emphasised that national ownership (for development aid) and CSR (for SNPower) are high priorities. Working in a regional perspective with different partners, Norfund is also aware of potential dilemmas.
In conclusion
While Policy Director Morten Svelle noted the heightened expectations of the Nepali people after the Peace Agreement, he also commended the progress in the Government’s approach to the hydropower sector. Investors were made aware that the agenda in Nepal has moved forward, the large potential of Nepal’s hydropower resources is now ready to be developed together with regional power trade. There have also been positive developments on the Norwegian side, and new actors are showing interest for investments abroad. The challenges and possibilities set by climate change will dominate the agenda in the coming years, and clean hydro-power from Nepal should have a bright future. Co-operation between Norway and Nepal should focus upon how to leverage limited resources efficiently.
Follow-up
The seminar will be followed up with the Nepal Government on priority areas for bilateral cooperation on hydro power development and develoment aid. We will also actively encourage the process of networking and dialogue to continue between the public and private sector in both countries, and are planning for a visit of a Norwegian delegation to Nepal during the second quarter of 2008.