During project appraisal in 2008, only 33% Nepal’s households were being served with grid electricity, and the country could not generate adequate power to totally meet demand. Nepal’s hydropower generation potential alone is estimated at 43,000 megawatt (MW) but the total installed generation capacity was only 615 MW in 2008. Developing new generation capacity requires time and large investments. Until additional generation capacity is developed, improving the reliability of existing generation and transmission facilities and pursuing energy efficiency, both on the supply and demand sides, will be essential.
Against this backdrop, the Asian Development Bank (ADB) approved the Energy Access and Efficiency Improvement Project in November 2011, after almost a 10-year gap in its energy investments in Nepal. Financed through a loan of $72.5 million equivalent, and a $4.5 million grant from two ADB-administered funds, the project was designed to improve the efficiency and reliability of existing assets and reduce the demand for lighting during peak hours, while augmenting distribution capacity to serve more households with electricity connections. It aimed to contribute to achieving government objectives of increasing the grid electrification rate to 45% by 2015 and adding 50 MW of generation capacity annually. Its scope included packages for transmission lines, distribution lines, and associated substations; expansion of the compact fluorescent lamp (CFL) household distribution program; establishment of solar/solar-wind street lighting systems; introduction of public−private partnership (PPP) in power distribution; and preparation of a loss-reduction plan to improve supply side energy efficiency.
Except for 1 transmission line and 1 switching substation that were terminated because of contractor nonperformance, all planned physical assets were completed, with outputs exceeding targets in 3 of 5 related components. Distribution substation capacity was raised by 64 megavolt-amperes (MVA). 32 kilovolt (kV) transmission lines and grid substation capacity were increased by 253 circuit-kilometer and 351 MVA, respectively. Two hydropower stations and 27 11-kV feeders and downstream networks were rehabilitated.
1,511 solar street lights were installed in Kathmandu Valley. However, as customers themselves became willing to purchase CFLs from the market, against a target of 1 million, only 750,000 CFLs were distributed. Because of the absence of clear policies, delays in establishing a legal and regulatory framework, and unfavorable site conditions, interest for and ownership of the PPP component waned. The establishment of power distribution pilot PPPs thus did not materialize.
Attainment of most of its output targets allowed the project to achieve its intended outcome, exceeding targets in 7 out of 8 indicators. Power transfer capacity between generation regions and load centers was increased by 80 MW and 21,046 new customers were connected to the grid. Hydropower generation capacity was increased by 5.1 gigawatt-hour (GWh). System losses were reduced to 8.7% by 2016. Energy savings from the reduction in system losses, CFL distribution, and solar street lighting reduced carbon emissions by 68,000 tons per year. Impact targets were consequently exceeded: grid electrification reached 60% by July 2015, and installed generation capacity increased from 631 MW in July 2009 to 729 MW in 2015.
The Nepal Electricity Authority was both the project executing and implementing agency.
