Consequence of Rolling Blackouts

Electricity is the backbone of the economy driving mainly services, industrial, tourism, and residential sector. With rolling blackouts expected more in the future, the country has to be prepared for even worse times ahead.

By Shankar Karki

We feel dignified on our enormous hydropower resource; because it is the only tangible and realistic potential we can envisage for our future economic development. Nepal is endowed with about 42,000 Megawatts (MW) of economically exploitable hydropower potential of which less than 2 percent has been explored so far. Nepal’s power system is predominantly hydro based – contributing about 90 percent of the total generation capacity. The share of reservoir type hydro plants capable of providing firm capacity during the peak hours is very minimal. As a result, we are suffering from one of the worst load-shedding problems. The power system is not only unreliable, but one of the costliest, and that too harnessed from one of the cheapest energy resources. Harnessing electricity by simply tapping the continental free water with a turbine – which we simply think - should be one of the cheapest. But the fact is that Nepal’s average electricity price is one of the highest in the region, if not in the world. This is comparable to the average electricity retail price in the US.

Electricity is treated as a commodity and should strictly satisfy technical requirements (i.e., quality and reliability). Reliability is characterized by: adequacy – the ability to satisfy market demand at all times; and security – the ability to withstand sudden technical disturbances in the system. A poor adequacy (shortfall), which is a lack of generation capacity to meet the increased demand, causes to a phenomena called load shedding – also referred to as rolling blackouts. Utilities treat rolling blackouts as a last resort to avoid a complete blackout in the power system. There are very few countries (South Asian and African countries) in the world, including Nepal, where rolling blackouts are a common part of daily life.

Rolling Blackouts in the Country

As we know, the country is facing one of the worst rolling blackouts problems ever. The time on rolling blackouts had gone up to 16 hours a day, severely crippling the normal and daily economic activitivities of the people. According to the recent NEA (Nepal Electricity Authority) report for load shedding improvement, there is a generating capacity deficit of about 41%, which means the system peak load is about 300 MW higher than the firm generating capacity in the dry season. Due to this, the government has declared a state of emergency to deal with such severe energy crisis. The poor water levels in the reservoirs of several hydropower plants are blamed for this consequence. Hence, if there are no immediate measures taken by the government, the situation will further deteriorate. Even though NEA claims that there will be a surplus power after 5 years, there is a very little validity to the statement and it looks like the problem will continue easily for next 10 years, if not more.

The Scenario in the Future

The future scenario looks no different than what we saw in the past. In year 2004, NEA forecasted the installed capacity deficit of about 15 MW for year 2008, and apparently the firm (production) capacity deficit came to be about 300 MW in early 2009. This is because majority of the hydroelectric plants in Nepal are non-dispatchable and they can not be considered firm capacity. The firm (production) capacity of such plants can go as low as 50%. NEA claims that about 800 MW of new capacity will be added in the system in next 5 years, making the total system capacity about 1400 MW in order to meet the peak load demand of 1271 MW. This is about 10% capacity reserve of installed capacity. But, the firm capacity deficit could go up to 30-40%, as most of the planned new power plants will not be able to provide firm capacity significantly. Moreover, hydro power plants in the Nepalese context have a higher probability of construction delays that are associated with controversies from political, environmental, and financial issues thereby making the power deficit problem even worse.

Furthermore, NEA has committed to add additional 10,000 MW capacity implausibly with the installation of big hydro projects (in the range of 600 MW) including storage types in next 10 years. Without doubt, the commitment looks highly ambitious and timely completion of such big hydro plants is a big question mark for NEA within the given time frame. Larger power plants relying on foreign contracting firms and investment have a poor track record of timely completion in Nepal.

Consequences of Rolling Blackouts

Electricity is the backbone of the economy driving mainly services, industrial, tourism, and residential sector. With rolling blackouts expected more in the future, the country has to be prepared for even worse times ahead. The value of reliability varies on various sectors serving customers or activities. For information oriented economies requiring more dependence on computer and telecommunications network, the magnitude of lost output is unbelievably high. For example, the outage cost for credit card companies in the United States is more than 2.5 million dollars per hour, whereas cellular communications cost about 41, 000 dollars per hour. Hewlett-Packard – an information technology company – reports a financial loss equivalent of 1.5 million dollars per hour at a circuit fabrication plant. Hence reliability requirements on such activities are extremely high – greater than 99.9999 percent (32 seconds per year or 6 nines). To meet such requirements is extremely difficult; and the present electric networks in the U.S. are capable of providing 99.0% (3.7 days/year or 2 nines) to 99.99% (53 min/year or 4 nines) reliability level. To meet 6 nine figure (32 seconds per year) reliability, such companies have to keep their standby generators, what is called as distributed generations.

In the Nepalese context, rolling blackouts affect the industrial sector most in terms of lost economy followed by service (tourism and commercial), residential, and agriculture sectors. Without any detailed study, it is difficult to assess the economic loss of power interruptions in each sector. However, looking at the load-shedding schedule of the country, the loss of power interruptions is high. This is because the electricity is critical to maintaining modern lifestyles and is a basic prescription for industrial output. Production loss in industry is a direct consequence of unreliable power system. Some of the previous studies have found out that the average cost of unplanned outages (load-shedding) is about 0.14 $ per unit (kWh) in Nepalese context. This means the economic loss associated with lost power is about 1.5 million dollars per day. For some energy intensive industries in Nepal, the cost of un-plannend outage may go up to $1/kWh. In some industrialized countries, the value of lost load could be as high as US$ 25.0 per unit. This is about 100 times the average retail price paid by household consumers. This is because the opportunity cost of electricity in industrialized economy is extremely high and reliability on such system is very critical and hence required.

(The author is an electrical engineer by profession and can be reached at shankar.karki@gmail.com)

(Editor’s Note: Nepalis, wherever they live, as well as friends of Nepal around the globe are requested to contribute their views/opinions/recollections etc. on issues concerning present day Nepal to the Guest Column of Nepalnews. Length of the article should not be more than 1,000 words and may be edited for the purpose of clarity and space. Relevant photos as well as photo of the author may also be sent along with the article. Please send your write-ups to editors@mos.com.np)

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