Hydropower is Nepal's key to development and the country has an economically-viable potential of 40,000 MW of generation capacity of which it can export the surplus to neighbouring South Asian countries including India, a US government funding agency has said.
Developing sustainable hydropower generation will enable Nepal to balance its supply deficit in the dry season with the revenues made through exports during the season when river flows are high, US Agency for International Development said.
USAID said Nepal heavily depends on water resources to meet its energy demands as more than 90 per cent of its total electricity generation capacity is hydropower based.
"Hydropower plays a particularly important role in Nepal's economic future because of the scale of its potential," the agency said, estimating that Nepal has an economically-viable potential for more than 40,000 megawatts (MW) of hydropower generation capacity.
"If such potential is realised, it could easily meet Nepal's suppressed demand and create a surplus that could be exported to neighbouring countries in South Asia," it said.
However, a lack of access to reliable, grid-supplied electricity is a major constraint to economic growth and an obstacle to reducing poverty, it said.
Amid growing demand, imports from India grew over the past 15 years, according to USAID. In 2014-15, imports from India accounted for 27 per cent of Nepal's total energy supply.
Therefore, investments in hydropower can help the country address its crippling power shortage and can be best addressed by the private sector given the financial limitations of Nepal Electric Authority (NEA) and the Nepal government, it said.
As such, USAID's five-year USD 9.9 million Nepal Hydropower Development Project supports Nepal's efforts to expand its access to modern, quality hydropower services and realise its potential as an energy exporter in South Asia.
The project will help Nepal facilitate and encourage private sector investment in hydropower in an environmentally and socially sustainable manner, USAID said.
It will support Nepal in transforming the energy sector to create viable and efficient national power services and promote electricity trade between Nepal and India, USAID said.
According to USAID, the expected long-term results of the NHDP project include, improved economic growth, job creation, and quality of life and strengthening economic relationships between Nepal and its neighboring countries, and an improved balance of payments due to energy exports.
It is also likely to result in greater energy security due to enhanced domestic generating capacity and integration with the Indian market and a lower carbon generation future for both India and Nepal, USAID said.