About Ted Categories and Clusters

     CASE NUMBER:        355
     CASE NAME:          Nepal Hydro-Power

1. The Issue

The United Mission to Nepal (UMN), an international NGO, coordinated the creation of a technical institute with the government of Nepal. The Butwal Technical Institute (BTI) manufactures and installs hydroelectrical systems in rural Nepal, providing an appropriate, environmentally friendly, electrification source. One of the unmet goals of this project was to reduce deforestation. However, the project does offset the air and noise pollution that might otherwise have been created with diesel or gasoline generators. Electricity has improved the welfare of those people and communities with access to it.

2. Description

The UMN is a Christian Protestant organization formed in 1954. It now represents churches from about twenty countries. The UMN has worked in health, education, engineering, industry, and rural development.

The UMN, with the cooperation of the government of Nepal, created several private companies. In the early 1960s UMN located a technical institute at Butwal (BTI). They formed the Butwal Power Company (BPC) to construct a 1 MW hydro-electrical plant for the Institute and the surrounding area. Named the Tinau Khola plant, it was completed by the late 1970s. The experience convinced UMN that hydropower was worth further involvement.

Hydropower was chosen because it was the most cost-effective option. Grid extension is prohibitively expensive. Remaining options include gas or diesel generators, photovoltaics (solar energy), wind energy, or hydroelectricity. Renewable-based electricity is usually much more reliable than gas and diesel generators, eliminates the need to continually purchase and deliver fuel, and eliminates the pollution associated with gas and diesel generators.

Transport of goods to and from villages is severely restricted by the mountainous terrain and lack of roads. The villages have learned to be as self-sufficient as possible. Their electrical systems need to be similarly independent if they are to be appropriate and sustainable.

Nepal is blessed with many streams. The larger ones have sufficient flow to power a turbine year-round. The smaller streams can be used for 6-9 months per year.{1} The theoretical hydroelectric potential of Nepal is 83,000 MW. Of this, to date approximately 42,000 MW has been determined to be economically feasible.{2} Nepal currently has a total installed electrical production capacity of 282 MW, 235 MW of that from hydropower.{3}

Many villages already had extensive hand- built irrigation systems that diverted water from nearby mountain streams. Thus the Nepalese were already experienced and comfortable with the concept of using water and with the creation of simple civil works to divert it.

BTI began designing micro-hydro (5-15 kW) turbines and associated hardware for farmers in the 1970s. BTI decided to sell complete water-powered grain mills to farmers for the establishment of new milling businesses. The systems were deliberately designed to be produced in Nepal, requiring as little importation as possible.

A Nepalese grain mill typically consists of a primemover (either a diesel engine or a water turbine) and three milling machines, a flour-grinder, rice-huller, and oil-expeller to produce cooking oil. BTI was able to produce the turbine, penstock, and belt- transmission components, but the grinder, huller and expeller were purchased ready-made from India. The design was kept as simple as possible to allow untrained farmers in remote areas to operate and maintain them.

The turbine type used is called a crossflow. Crossflows are popular in developing countries because they are easier to manufacture than other types, requiring only cutting, welding, and grinding. Other turbines require more complicated, precise placement of the components to work properly.

The total cost of a water-powered mill ranges from $1,400 to $8,000 depending on size, location, physical terrain and equipment quality.{4} The Agricultural Development Bank of Nepal provided subsidized loans that allowed the farmers to finance their systems.

If a farmer was interested in a water powered mill a survey team would visit the site and prepare a preliminary design. The design would be costed out. The farmer would then apply for a loan. If his collateral and credit eligibility were in order, the bank would issue a "coupon" to the company, with the bank guaranteeing payment to the value of the coupon. This avoided the misuse of cash, a frequent problem in Nepal.{5} Once a loan was approved, the mill would be assembled and tested. The farmer arranged for transportation, usually by truck and porters. The farmer also transported all necessary materials (cement, sand, gravel, rocks) for the construction of the mill foundation, forebay, and penstock support blocks. If an existing irrigation canal was not available, the farmer would construct a canal to bring water from the stream to the forebay.

Once this was in place, an installation team would build the foundations, install the equipment, and provide basic training to the farmer.

One such system was installed in Khaireni. Khaireni is located in the midlands, approximately 190 km west of Kathmandu, the nation's capitol, and has approximately 100 households, shops, and offices. While electrical production is less profitable than milling, it provides the owner with a constant source of income, whereas milling is seasonal.

The crossflow turbine powers an 8 kW, 220 V synchronous generator. "Electricity has been provided regularly for five hours each evening (aside from periods of required maintenance) since July 1983."{6} Electricity is provided to 62 homes, businesses, and offices.{7} Users desire electricity during early morning pre-dawn hours but the mill owner refuses to provide it.

The mill is operated by a paid employee. During the loan repayment period, the ADBN collected monthly fees for electricity from the users, but this task is now performed by a friend of the owner. When there have been conflicts between the users and the mill owner, the ADBN manager often assumes the role of arbitrator.

Although one of the development goals of the UMN was to reduce deforestation, in practice, electrification has not yet achieved this goal. Deforestation is the result of population pressure, which electricity does not directly affect, and the use of fuelwood for cooking. Fuelwood costs less than electricity and is therefore preferred for cooking.

Hydroelectricity provides an environmental benefit chiefly by offsetting the use of gas or diesel generators which are not only less reliable but create air and noise pollution.

In rural Nepal, electricity is chiefly used for radios and lighting. Although electricity costs more than kerosene, it provides superior quality light, safer use, convenience, and cleanliness. The people report the benefits of electrification to be greater personal satisfaction, enhanced local prestige, improved study habits of children, and less crime and littering.

3. Related Cases

Key words

  1. energy
  2. Nepal
  3. deforestation

Keyword Clusters

  1. Trade Product = [FABMET]
  2. Bio-geography = TEMPerate
  3. Environmental Problem = DEFORestation

4. Draft Author: Gwendolyn S. Andersen (August, 1996)

II. LEGAL Cluster
5. Discourse and Status
AGReement and COMPlete.

Nepal has several pieces of legislation protecting its water resources. The one most relevant to this program is The Canal, Electricity and Related WaterResources Act of 1967. The act explicitly prohibits any activity which adverselyeffects the environment during the production of electric power or utilization of water resources.{8}

6. Forum and Scope: NEPAL, UNILATeral

7. Decision Breadth: 1 (NEPAL)

8. Legal Standing: NGO
The United Mission to Nepal is an NGO, but the Butwal Technical Institute and the Butwal Power Company are companies set up for development purposes. These private, limited companies were organized under the Companies Act. Shares are held by the UMN, government departments and semi-government agencies.This allowed a development agency and the government to work together in a way that encouraged efficiency and businesslike operation. The company board, representing each shareholder, set company policy and hired a General Manager.

Mountainous with a large number of streams and rivers.

9. Geographic Locations
a. Geographic Domain: Asia [ASIA]
b. Geographic Site: South Asia [SASIA]
c. Geographic Impact: NEPAL

10. Sub-National Factors: no

11. Type of Habitat: Tropical [TROP]
The climate varies from subtropical summers and mild winters in south to cool summers and severe winters in north. Most of Nepal receives monsoonal rains. Nepal contains three distinct geographical zones. The southern lowland is called the Terai and is a mixture of forested and cultivated land. The central section has mid-altitude hills and mountains. The Himalayas run acrossthe northern section.

IV. TRADE Cluster

This program "imported" technical expertise. Two European technicians spentapproximately 5 man-years developing an appropriate turbine.

Foreign technical assistance was also used to develop a loadcontroller.Electric loads vary throughout the day, the week, and the year. Increases in load are increases in resistance, and slow generators down. Decreases in load cause generators to speed up. If the load drops too low or disappears, a generator can run so quickly that it runs out of control and eventually flies apart. "Electric only" turbines needed a hydraulic governor to maintain a steady load on the generator in spite of fluctuations in load. Importedhydraulic governors were too expensive. When one was eventually produced, it opened up the possibility of electrical installations with capacities up to 50 kW.

Although it used foreign technical assistance, UMN believed developing indigenous capability was preferable to relying upon overseas consultants. UMN therefore, in partnership with the government, established several local companies to supply engineering and industrial services and training.

The basic hardware issue was to design a reliable turbine that could bemanufactured in Nepal, with locally available components. This was important for affordability, sustainability, and job creation. It was critically importantthat untrained farmers in remote villages be able to operate and maintain the turbines. Therefore, very little international trade resulted from thisprogram. However, European bearings were initially imported. Suitable Indianbearings were eventually substituted.

While rural electrification has increased rural production, it is unclear whether it has increased exports. "Approximately 49 percent of the respondents at Khaireni noted...increased working hours in the bazaar's one large dhaka (cloth) factory that employs a considerable number of local persons."{9} Furthermore, nearly 20 percent of the Khaireni survey respondents report an increase in income. Given the transportation difficulties, it is unlikely that the factory is able to sell the cloth, directly or indirectly, outside the country.

12. Type of Measure Subsidy [SUBSIDY]
Of great importance to the success of this program was an alliance formed with the Agriculture Development Bank of Nepal (ADBN) The ADBN is asemi-governmental organization with offices spread across Nepal. The bank agreed to promote water powered mills to farmers and finance mill investments on attractive terms. These terms varied but typically a farmer could finance 80% of the cost of the mill over seven years with slightly less than commercialinterest rates. The bank accepted land and gold ascollateral.{10}

The provision of loans at below commercial ratesrepresented a substantial subsidy. Actual cost of loans to rural customers is generally much higher than commercial rates. This is because the costs involved (credit checks,administrative costs, collection costs) are significantly higher as a percentageof the loan amount. In fact, "...average programs will have to charge around 36 to 48 percent in annual interest...to breakeven."{11} However, there was no study done to determine whether farmers would purchase the systemswithout the subsidies, so it is not possible to know their actual impact.

13. Direct vs. Indirect Impacts: INDirect
The presence of the subsidy made it easier to purchase a system, and may have increased the number of systems bought. This in turn may have resulted in the importation of greater numbers of bearings.

14. Relation of Trade Measure to Resource Impact none
a. Directly Related: NO
b. Indirectly Related: YES EQUIPment
c. Not Related: NO d. Process Related: NO

15. Trade Product Identification: Bearings
16. Economic Data
Due to their expense, the Khaireni electrical system does not use meters to determine how much electricity a household uses and to charge accordingly.Initially, seven circuit breakers were used to both protect the system andprovide a form of load control. However, when they wore out they were also too expensive to replace. Now, solid-state current-limiting devices are used,serving groups of three or four households. While an individual household can use more than its share of electricity, the amount used by the group at any one time is limited by the devices.

Fees are essentially based upon an honor system, where consumers pay monthlyaccording to the number and type of appliances they use.

DeviceMonthly Charge (Rs){12}
15 watt incandescent bulb 10
40 watt incandescent bulb16
20 watt fluorescent light18
40 watt fluorescent light20

17. Degree of Competitive Impact: none

18. Industry Sector: FABMET, EMACH

19. Exporters and Importers: NEPAL, ENGLAND, INDIA
BTI initially imported bearings from England but then substituted them forbearings from India.

20. Environmental Problem Type
-Deforestation [DEFOR]
One of the goals of the UMN was to reduce deforestation. Deforestation is the greatest environmental problem Nepal faces. The UN, in its report, "Towardsan Environmentally Sound and Sustainable Development of Water Resources in Asia and the Pacific" states that hydropower could serve as an alternative to fuelwood.{13} Over 75 percent of Nepal's total energy requirements are being supplied with fuelwood.{14}In practice, electrification has not yet been effective.

One of the chief uses for firewood in Nepal is for cooking. A low wattage cooker has been developed. However, electrical energy costs more to theend-user than collecting firewood. Furthermore, the bijulidekchi still costs about $30 per pot and requires a change in cooking style.{15} For electricity to displace fuel wood, one of two things must take place. Either the cost ofelectricity must drop relative to the cost of firewood (for example, bysubsidizing electricity or the electric cookers) or the per capita incomes of the rural population must rise so that the convenience of electricity becomes the dominating factor in decision making.

Another source of deforestation is a result of population pressures. The ever growing population (present rate of growth is 2.6percent{16}) has increasedpressure to cultivate more lands for by felling forests. Hydropower is notdirectly effective against population growth. Indirectly, electricity could spur development, reducing poverty and the need to use natural resources in an unsustainable fashion in order to survive. Unfortunately, there is a dearth of examples of income-generating activities made possible byelectricity.

If or when electricity reduces deforestation by reducing the use of fuelwood for cooking and/or by alleviating poverty, the accompanying problems oflandslides, erosion, sediment transport into the hydroelectrical system,decreasing yield of forest products (ex. construction timber, wild fruits and vegetables, resins and saps, nuts, and extracts for medicines) and loss of biodiversity would also be reduced.{17}

-Air pollution [POLA]
Hydroelectricity provides an environmental benefit chiefly by offsetting the use of gas or diesel generators which are not only less reliable but create air and noise pollution and contribute to global warming.

-Global warming [GWARM]
If electricity provision eventually reduces deforestation, more forests willremain to serve as a carbon sink, ameliorating global warming. Also, bydisplacing the use of firewood, electricity provision would reduce theaccompanying emissions of carbon dioxide, a greenhouse gas.

-Consequences of hydroelectrification [BIODIV]
However, there is a potential for loss of fauna and flora if too much water is diverted from natural waterways or if the water flow is obstructed to such an extent that the lifecycle of local fish is affected. Where dams arebuilt, the creation of an artificial body for water storage could encourage the breeding of certain disease- carrying insects.

21. Number of Species NA
The Terai is the home of numerous subtropical species, including water buffaloes, hyenas, leopards, deer, and tigers. The Himalayas also have diverse plant and animal species.

22. Resource Impact
Many villages already had extensive hand-built irrigation systems thatdiverted water from nearby mountain streams to village fields. There wastherefore little additional environmental impact resulting; water was simply used first for electrical generation and then for irrigation.

Because the hydroelectrification plants are small, dams and therefore floodingare usually not necessary. Even when dams are used, the flooding is not extensiveand does not require social relocation. In some locations however, the damsnecessary would be so high that construction of fish ladders would not befeasible. This would inhibit the migration of certain fish species on thosewaterways.

23. Urgency of Problem: low

24. Substitutes Other options included:

VI. OTHER Factors

25. Culture

Culture and deforestation:
Conservation and the judicious use of natural resources are deeply rooted in Nepalese culture, tradition and religion. Bathing in rivers, worshipping and planting trees are examples of people's positive attitudes towardsmaintaining a healthy environment. However, in recent years the ever increasingdemands by a growing population have imposed immense pressure on the naturalresources, particularly land, forests, air and water...People driven by the necessity to survive, have foregone the traditional way of life as regards resource conservation and use.{18}

Culture and electricity:
A survey at Khaireni conducted by Dale Lee Nafziger for his thesis at CornellUniversity found that the most dominant response to an open-ended questionregarding changes attributable to electrification was of "achievement and/orpersonal satisfaction." With more specific questions, almost 82 percent of all electricity users indicated change in local prestige as a result of electrification. Over 60 percent noted improvement in children's study habits.Almost all respondents indicated greater cleanliness. Due to electric lighting,people are more hesitant to litter and pollute. Respondents also reported fewer petty crimes than before electrification. Finally, outmigration from Khaireni was reduced.

The economic impact of electrification would surely be greater if the electricitywere offered throughout the day, instead of only five hours in the evening.

26. Trans-Boundary Issues NA

27. Human Rights NA

28. Relevant Literature
Jantzen, Daniel E. "Energy for Sustainable Village-Based Development: Two Case-Studies From Nepal."

Economic and Social Commission for Asia and the Pacific. Towards an Environmentally Sound and Sustainable Development of Water Resources in Asia and the Pacific. Water Resource Series No. 71. New York: United Nations, 1992

Jantzen, Daniel E. and Koirala, Kiran. 1989 Micro-hydropower in Nepal. A study for AGKED, Stuttgart, Germany.

Nafziger, Dale Lee. "Impacts and Implications of Rural ElectrificationIdeology in Nepal's Domestic Sector." Thesis. Cornell University, 1990

Inversin, Allen R. New Designs for Rural Electrification: Private-SectorExperiences in Nepal. Washington, D.C.: National Rural Electric CooperativeAssociation, 1994


- the service electricity supplies, ex. lighting. load - the appliance or device electricity powers, ex. light bulb, or the sum of such loads. [Return]
- device used to maintain a steady load on a generator [Return]
- Asian Development Bank of Nepal watt - basic unit of power.  
- abbreviation for kilowatt, a thousand watts. [Return]
- abbreviation for megawatt, a million watts. [Return]
- refers to all energy supplied by moving water, specifically electrical and mechanical. [Return]
- refers to electricity generated by moving water.[Return]

{1} Jantzen, Daniel E. "Energy for SustainableVillage-Based Development: Two Case-Studies From Nepal." p. 3. [Return]
{2} Economic and Social Commission for Asia and the Pacific. Towards an Environmentally Sound and Sustainable Development of Water Resources in Asia and the Pacific. Water Resource Series No. 71. New York: United Nations, 1992 p. 157. [Return]
{3} Heidarian,Jamshid, and Gary Wu. Power Sector Statistics for Developing Countries, 1987-1991. World Bank, 1994, p. 233. [Return]
{4} Jantzen, Daniel E. and Koirala, Kiran. 1989 Micro-hydropower in Nepal. A study for AGKED, Stuttgart, Germany.[Return]
{5} Jantzen, p. 6. [Return]
{6} Nafziger, Dale Lee. "Impacts and Implications of Rural Electrification Ideology in Nepal's Domestic Sector." Thesis. Cornell University, 1990, p. 35. [Return]
{7} Nafziger, p. 36. [Return]
{8} United Nations, p. 165. [Return]
{9} Nafziger, p. 243.  [Return]
{10}Jantzen, p. 6. [Return]
{11} Holt, Sharon L. "The Village Bank Methodology: Performance and Prospects." The New World of Micro-enterprise Finance: Building Healthy Financial Institutions for the Poor. Ed. Maria Otero and Elisabeth Rhyne. KumarianPress, 1994. p.171. [Return]
{12} Nafziger, p. 63. [Return]
{13} UnitedNations, 1992.p. 157. [Return]
{14} UnitedNations, p. 159. [Return]
{15} Inversin,Allen R. New Designs for Rural Electrification: Private-Sector Experiences in Nepal. Washington, D.C.: National RuralElectric Cooperative Association, 1994, p. ii. [Return]
{16} UnitedNations,.p. 159. [Return]
{17} Inversin, p. 56. [Return]
{18} UnitedNations, p. 164. [Return]