Energy Efficiency as an Energy Resource for Nepal

It goes unsaid that Nepal is undergoing a drastic energy crisis. More than 40% of the Nepalese population is not connected to the electric grid. For the rest of Nepalese citizens who do have access to electricity, they face upto 16 hours of daily blackouts. Energy conditions are even worse due to periodic shortages of petroleum products and natural gas. Energy shortages are anything but new to Nepal, and the issue continues to appear dire. While the population and economy grows, the demand for electrical energy continues to skyrocket.

 Although, in a certain light, there is still reason to hope; Nepal is blessed with an abundance of natural resources. For instance, studies suggest that Nepal has tremendous potential for hydro power. In addition, Nepal also has significant potential for wind and solar energy. If we are able to tap into these natural resources, then there is no doubt that we shall be able to achieve energy independence and also to do so in an environmentally sustainable manner. While this should be our goal, and I am optimistic that we will be able to achieve in the future, it is imperative that we also try to seek immediate solutions to mitigate the energy shortage we face today.

  Solution to this maybe much closer to us then we think. Energy Efficiency is the single most resource that has the potential to help mitigate some our energy needs in significantly shorter period of time. Energy Efficiency essentially means meeting same or more of the electrical demand needs with less amount of energy without compromising the quality of service.

 Nepalese culture does not view energy efficiency as an energy resource. We generally perceive it as something secondary. An energy resource for most of us is tangible, like a hydropower station, generator or solar panels. Instead, if we look at energy resource as a mechanism that helps to manage our energy needs, then energy efficiency will be on the top of the list as one of the cheapest resources that can yield immediate effects.

 Typical examples of energy efficient practices would be replacing energy hungry incandescent lights with LED or CFL light, using higher voltage transmission lines to reduce losses, replacing or tuning up compressors and motors to work efficiently and many more. These simple-enough measures, if applied in our homes and factories, would add up quickly and result in large savings. This saved energy can be used to meet the extra load and thus decrease load shedding time.

 Although these techniques are straightforward, it is much harder to materialize in real life because they depend on individuals’ commitment and finances. Energy efficient products usually cost much more than their alternative. Although investing in them can be recouped many times over the products lifetime, people usually still opt for cheaper alternatives. Research has shown that human beings generally are more inclined to make their decisions based on short-term impacts. Thus, when one sees that energy efficient products are much expensive than alternative, they have very less incentive to buy them. This is where government and policymakers have an important role to play.

 Leaders in the field of energy efficiency in Nepal have already begun important discussions. The Nepal Energy Efficiency Program (NEEP) was established in 2009 with the support of German Development Cooperation (GTZ). This organization works independently to promote energy efficiency in different sectors of the Nepalese economy by launching different programs for both industrial and residential sectors. NEEP’s Energy Standards & Labels program provides energy efficient ratings for electrical products in order to better inform the customers about efficiency. In the industrial sector, NEEP advocates for energy audits and works closely with industries to identify custom energy efficiency measures. Meanwhile, Nepal Electrical Authority (NEA) also conducts a few of its own programs to support Energy Efficiency by promoting CFL and LED light bulbs.

 Unfortunately, these programs have been suffering through a lackluster performance because their creators have only conveyed Energy Efficiency as an alternative, rather than an immediate need. Rather than a mere suggestion, energy efficiency should be portrayed to policymakers as the direct means of fulfilling the electrical energy demand in Nepal. Most of the energy efficiency programs that exist today are supported by the INGO or foreign governments. Although this is a start, energy efficiency programs in Nepal are only scheduled to exist as long as they are supported by an external party. Relying on someone’s outside philanthropy is not a sustainable business model. We need to realize that energy efficiency practices are a lucrative investment opportunity for Nepalese customers as well as their energy providers. Together, we need to develop market-based business or policy opportunities that are self-sustaining and make a direct impact.

 One of the possible market-based options would be to have NEA ‘buy’ the energy saved from energy efficiency. For example, a contractor could pledge to save a certain measure of KWh at the market rate of electricity. The contractor would then go to households and industries to promote energy efficiency methods to the public. If the energy saving is realized in that period of time then the contractor gets the money from NEA. This ‘reverse auction’ is a proven technique that has been employed in different energy markets across the world.

 These energy efficiency methods could also be funded by a modest increase in the utility bill. This rate could be adjusted as a progressive tax, which minimizes the burden on families with low-incomes. Since energy efficiency programs help to keep the rate of electricity low over a long period of time, this ratepayer-funded model is often looked at as a viable solution to fund energy efficiency practices.

 The potential for energy efficiency in Nepal is not just limited to energy savings. Proper management of energy resources tremendously benefits the environment as well. There numerous spill-over benefits of energy efficiency help us to save our money and better our lifestyle. With these outstanding benefits, it is imperative that the more direct action would be taken towards energy efficiency in Nepal.

Need to ramp up energy efficiency efforts

The power system in the U.S. is amidst a major crisis. Some of the major challenges that our energy sector is facing include meeting the ever-increasing energy demand, maintaining old energy infrastructures and finding cheap sustainable energy sources. Although various renewable energy sources, smart grids and other technologies offer viable long-term solutions, Energy Efficiency (EE) measures offer the most cost-effective and immediate means to reduce our energy consumption.

 EE is an attractive measure for both power utility companies (PUC) and consumers. Power companies’ major challenge is to fulfill the peak demand. If the peak demand increases beyond its supply capacity, power companies would need to invest in additional electric generators, which are often very expensive. Also, they would have to worry about increases in transmission costs due to increased congestion. Effective EE practices could smooth out the load, making it manageable for the utility companies. Consumers on the other hand, would be required to pay less in utility charge for reduced electric consumption.

 Industries are one of the major consumers of electric power. Various manufacturing industries are often energy intensive and require large volumes of electricity to operate. As the cost of electricity directly affects the overall cost of the product, it is in the interest of the industries to keep the prices of electricity low. Also, even a few percentage savings in large energy bills would be a substantial amount of money, which would be a strong incentive for industries to implement EE measures. Research has shown that EE measures in manufacturing industries could decrease their energy consumption up to 25%. This incredible potential in savings should make EE measures extremely attractive to all parties.

 Although EE is very cost-effective, it has been lacking in implementation. Split incentives, requirement of upfront capital costs, ignorance among PUC and consumers have been shown to block investments in this sector. To overcome this market failure, governments have created various policies that act as incentives for industries, as well as PUC, to invest in this sector. There is a need to assesses the cost-effectiveness of such policies for industrial energy efficiency by demonstrating power companies’ savings from investments in EE measures. Such data could confirm that the existing policies are working as planned and could also illustrate potential models for other states and nations to emulate. If the results show that policies are costly and ineffective, the project would enable policymakers to assess their options and to take necessary steps toward other energy-saving possibilities.