1.      Background

         The Micro-hydropower Sector development started in  the late sixties.  In order to fill up the gap of the central nodal agency to promote and disseminate the alternative energy in the country, Government of Nepal established Alternative Energy Promotion Centre (AEPC) under the Development Committee Act in 1996. AEPC helps the government to formulate national policies and programmes and facilitates in implementing the plans and programmes related to use of alternative energy technologies.  AEPC works closely with various donors, INGOs, NGOs and private sector in order to implement various programme activities.

         Government of Nepal with the assistance from the Kingdom of Denmark has jointly initiated Energy Sector Assistance Programme (ESAP). ESAP is the sector programme with a long-term (10 to 15 years) vision and is executed by the Alternative Energy Promotion Centre. The Energy Sector Assistance Programme aims at improving the living conditions of rural people by easing its access to rural energy technologies with better performance in terms of productivity, use versatility and environmental impacts. Among its five components, Micro hydro component is involved in promotion of appropriate institutional, organisational and regulatory frameworks with a view to facilitate development of cost effective and appropriate (Technical and Social) isolated micro hydro grids.

         Mini-Grid Support Programme (MGSP), is a management unit under AEPC/ESAP. MGSP manages the programme activities of the Micro-hydro Component. Among many programmes run by AEPC/ESAP, Mini Grid Support Programme (MGSP) aims to promote and support the micro-hydro power supply for isolated and scattered settlements which are not connected to the national grid. At present MGSP has institutional linkage with Interim Rural Energy Fund (IREF), which is a functional unit providing subsidy to alternate energy technologies like micro hydro and solar energy. The present subsidy policy allows MGSP to support the hydro power schemes up to 100 kW including the pico units such as Peltric set.

         Various types of MH plants ranging from 1kW to 100kW are based on technologies like propeller turbine, cross flow turbine, pelton turbine, multipurpose power unit (MPPU), peltric set, and improved ghatta. Around 2,200 such schemes have been developed and installed in the past decades totalling about 14,600 kW power output till mid-July 2003 benefiting about 146,000 rural households in Nepal.

2.      Potential  Opportunity for Development of MH

         Nepal's hydro power potential is estimated to be about 83,000 MW, of which about 43,000 MW is assumed to be economically feasible. However these figures relates mainly to large-scale hydro power development. Study reports show that 63 out of 75 districts have the potential for hydro power generation. Due to various reasons, government's focus on hydro power development in Nepal has been on development of large hydro power only.  The focus on micro hydro power came only at later stage with starting of subsidy on electrical parts by government and through Agricultrual Development Bank-Nepal (ADB/N) in late eighties.

         The current 10th National Plan aims to increase the electrification rate to 55% compared to current rate of 40%. The increment in electrification rate by 15% by the end of tenth plan is attributed to grid (10%) and non-grid including MH and  Solar (5%). This provides a large market to be served by the technologies like micro-hydro.

3.      Comparative advantages of MH

Micro hydro can provide electricity to rural communities which otherwise might take years to be served by national  electricity services. Its comparative advantages are:

·        The components of MH can be locally manufactured & the schemes can be locally built;

·        MH Plants are comparatively simple in its construction;

·        The scheme can be locally managed, operated and maintained with training input to the local.

Other specifics may include:

·        Hydro electricity is a clean and renewable form of energy;

·        Comparatively low  cost technology for rural areas & it has possibility of diverse productive end-uses;

·        The communities themselves can set tariff rates;

·        It can provide increased access to information through use of TV and radios;

·        It can promote use of various household electric appliances.

4.      Characteristic of Potential Target Sites and  Target Group for Installing MH

         The possible target sites for MH schemes are the isolated areas, which are not connected to the national grid.

         The target beneficiaries are the rural people residing at a considerable distance away from transmission line and distribution networks. Access to the nearest road head on foot for these people may vary from few hours of walking to several days. But then, these rural area is expected to have following characteristics:

·        It should have potential to generate power (water source flowing from considerable height)

·        There should be enough household demand for electricity

·        People should be willing to pay local tariff

·        People should be willing to take up productive end-use activities for at least 10% of the energy generated.

5.      Legal Provisions on Micro Hydro Development in Nepal

         Government has provided following legal flexibility among public & private sectors in promoting MH projects:

·        No license is required for conducting surveys or for building and operating plants.

·        No royalty is imposed on the electricity power generated

·        Exemption from income tax

·        The private producers may fix the selling price of electricity