The Brief: Nirjan Rai on the Political Economy of Mainstreaming Renewable Energy in Nepal

[00:00:05] - [Saurav Lama]
Namaste, and welcome to Pods by PEI, a policy discussion series brought to you by Policy Entrepreneurs Inc. My name is Saurav Lama. It's COP-27 season. As the world gathers in Egypt for COP-27 this week, the discussion on climate change, its global impact, and the need to curb the dependency on carbon intensive sources of energy take center stage. In this episode, we bring you my conversation with Nirjan Rai on mainstreaming renewable energy in Nepal.

[00:00:34] - [Saurav Lama]
Nirjan is a researcher with over a decade long experience in designing, managing, and leading analytical studies in the areas of energy and water governance in Nepal. He helped establish PEI and Niti Foundation, two Nepali policy research institutions, and has also worked at the Asian Development Bank and the Asia Foundation. In this episode, Nirjan and I discuss his 2021 paper, The Political Economy of Mainstreaming Renewable Energy in Nepal. The paper explains the significance of renewable energy in Nepal's pursuit of its energy goals and how the politics of institutions in the sector obstructs its mainstreaming. As we explore the findings of his paper, we also evaluate the hydro dominant narrative extent in the Nepali energy sector and the recommendations that are rooted in the realities of the sectoral politics.

[00:01:24] - [Saurav Lama]
We hope you enjoy the conversation. Nirjan, welcome to Pods by PEI. I'm really excited to have you on the show. Shall we get started?

[00:01:37] - [Nirjan Rai]
Sure. I'd like to thank you for inviting me to the show as well.

[00:01:41] - [Saurav Lama]
Okay. So first off, I think I'd like to start off with the title of the report itself. So it's called the political economy of mainstreaming renewable energy in Nepal. What is political economy, and what does mainstreaming renewable energy mean for Nepal?

[00:01:59] - [Saurav Lama]
Alright. Thank you. This is a good question to start off with. Gives me the opportunity to explain some of these concepts that people may know, but be good to break it down in a way that everybody can understand. So let me begin by actually describing the the last term term that you use, which is renewable energy, then we'll go to mainstreaming, and then we'll go to go to economy.

[00:02:23] - [Nirjan Rai]
That'll make it much easier for me to to give you an idea of what we're trying to do with this paper. So with renewable energy, if you look at from a global term, includes non fossil fuel based energy, which would refer to hydropower, solar, hydrogen, and many others. But in the case of Nepal, given that there's lot of discussion around hydropower, hydropower constitutes about over 90% of our energy source, the discussion around renewable energy that we are focusing in on is other than hydro renewables. This would be solar, wind, so and so forth. But given the situation in Nepal that solar is quite advanced and the other sources of energy are not so advanced or not applicable for Nepal, I would be referring largely to other than hydro renewables with a particular focus on solar power.

[00:03:19] - [Nirjan Rai]
So that's renewable energy. Now discussion of mainstreaming is is another concept that we need to understand at the outset. There may be different opinions that people may have as to what constitutes mainstreaming. But in our research, for the purpose of our of our research, we're defining these to mean that the policy conditions have been established by the government for the full integration of the other than hydro renewables into the national grid. This in no way is meant to negate all of the important work that has been done other areas of RE in Nepal.

[00:03:54] - [Nirjan Rai]
But for the sake of the paper, that is our definition. Now how this paper differs from other paper is the lens that we use to do our analysis. Could do from a technical analysis. Could do other forms of analysis. But the lens that we use to look at this particular policy problem is a political economy.

[00:04:16] - [Nirjan Rai]
And what we mean by political economy is to look at the institutions that are engaged in the policy process in Nepal and to see what interest and incentives they hold in terms of putting for forth a particular policy. This being mainstream of renewable energy. So what we are trying to do in the paper is to look at the different institutions that are engaged in the pulse renewable energy sector and and and to see how they position themselves and the interest they have in terms of pushing for this particular policy.

[00:04:49] - [Saurav Lama]
Absolutely. So we'll come back to the major findings in a bit, but I just wanted to quickly ask. So Nepal's hydropower story is one of great potential but very low achievements. So where does this report find its rationale for mainstream renewable energy in Nepal?

[00:05:08] - [Nirjan Rai]
Despite the fact that hydropower constitutes a a large part of our narrative, there is a good argument to be made that we should be diversifying our energy source away from hydropower. So now the and and the further we have a more of a mixed source, we'll have better energy security. This comes from the fact that there is also the issue around climate change and the changes in hydrology that is impacting hydropower development already. So going thirty years down the line when the hydrology changes significantly, it may be a good bet to start putting it into other sources of energy. The second one is the market.

[00:05:47] - [Nirjan Rai]
We see that the cost of renewables, particularly solar power has dropped immensely. Globally, it has come down to a fraction of what it was about a decade ago. And for us, it it would be wise to actually cash in on that if possible, where possible. So there is this this good reason to to be investing in in solar power and other other renewables.

[00:06:14] - [Saurav Lama]
Absolutely. So coming back to the main topic at hand, which is mainstreaming renewable energy in Nepal, does Nepal actually have other than hydro renewable potential? If yes, what are the various sociopolitical hindrances that have limited the mainstreaming of renewable energy in Nepal?

[00:06:34] - [Nirjan Rai]
There there is some potential. Now I don't wanna go into into into the technical aspect of how much there is. There there are lots of studies that do talk about it. But what I do wanna talk about the hindrances is that there it it is in in in different it comes from different avenues, particularly from the interest and incentives established by the the institutions that pay a role in this sector. The first being, as I mentioned earlier, there is a strong hydro centric narrative.

[00:07:02] - [Nirjan Rai]
It is a resource that is endowed nature has endowed upon us, and we have used this to develop a narrative around which national prosperity is based on. So we talk about 80,000, 40,000 megawatt of our potential, and the ability to exploit that and to sell it in the India market is something that we have relied on quite a lot. This narrative is is ingrained not only in the bureaucracy, but in the overall sentiment of the the the Nepali public as well. So to to change from that to something else is gonna be a major challenge. And going with that, the the second hindrance comes from the fact that our institutions, our infrastructure has been all developed around hydropower development.

[00:07:53] - [Nirjan Rai]
And so for a new technology to come, there is a resistance from the institution that we have already who do not or who do not have the capacity to to update this new source of electricity. And the third one is that we already have. We're talking about a surplus of electricity. We already have that in in some of the months, and we're projected to have throughout the year in the next five to ten years. So having an intermittent source of of energy does not fall in place with the the projections of where we are going to have surplus.

[00:08:29] - [Nirjan Rai]
And we haven't figured out a way to to utilize all of this. And so these issues make it very difficult for us to mainstream or to talk about mainstreaming renewable energy into the mix.

[00:08:44] - [Saurav Lama]
Absolutely. That has indeed been a challenge in the case of Nepali electricity sector. I found this one very interesting line that's written on the report that mentions that political economy analysis is an attempt to find out what is going on. So what is going on in the Nepali electricity space in terms of renewables? Who are the key entities within this space?

[00:09:09] - [Nirjan Rai]
In terms of the policy making space of the renewable energy, we have three primary players at the moment. The first one is is the ministry, of course, which has the the responsibility of the overall sector, not just renewable energy, but electricity energy. Then we have the Nepal Electricity Authority, NEA, which is the primary off taker of all electricity generated in the country, which is our sole monopolistic public utility. And then we have the alternative energy agency, AEPC. So among these, as as I said before, where we have the the ministry and the NE, they both come from this very hydro centric mindset that they have developed over the years.

[00:09:59] - [Nirjan Rai]
And so their their projection of what they want to do with with water is around exploiting that. And so for them, it is it is difficult. Now five years ago, when there was a large deficit in our system, and so we were undergoing a significant power chronic power crisis, there was an incentive for the bureaucracy to try to find a way in which to increase generation in the mix. And so there was a window of opportunity that had opened up for renewable energy to be placed in the mix. And that was when you saw this this commitment towards putting about five to 10 megawatts of sorry, five to 10% of the overall composition of our electricity source from renewable energy.

[00:10:47] - [Nirjan Rai]
But that was about five, ten about five years ago when there was a crisis. Today, when we do not have the power cuts or we do not have scheduled power cuts, and we have pretty good supply from the Indian system and also have increased our own generation, then there is less of an incentive for the ministry to actually want to be be increasing the the uptake of the renewables. Now there's also other issues around the ministry's interest around land use of the the newer renewable energy sources. The amount of land that is taken up by solar parks is immense and in the country with limited land, that's always a problem. There's also issues of managing the water that the government wants to do.

[00:11:38] - [Nirjan Rai]
The bureaucracy wants to hold in terms of its capture over hydroponic. So they had a a time when they had an interest, but now that is waiting. Similarly with NEA, they had an opportunity where the window of opportunity where they did want to update some of this renewable energy. But like I said before, the institution is the infrastructure that the institution holds is less amicable for that now, and the fact that they have been decreasing the preferential tariff that they have been offering to support, to promote renewable energy. So these are the where the resistance is coming from.

[00:12:18] - [Nirjan Rai]
We have the AEPC. Right? The the the agency now with the responsibility to be promoted. But it can only do so in a it has a limited role in terms of promoting the mainstreaming of renewable energy. The way that AEPC was established was not to mainstream renewable energy, but as a means to increase access to electricity of rural population.

[00:12:41] - [Nirjan Rai]
And that was why renewable energy was initially introduced in Nepal, and that is decreasing. And so AEPE is in an existential crisis of how it wants to survive. And it is trying to get this as one of its mandates. But there's a fourth agency that is also at play, which has a a lesser role, but there is some tussle with with AEPC is the Department of Electricity Development. Now DOED was established largely to promote hydropower electricity through hydropower, there is now, given the fact that it is it has been charged with development.

[00:13:19] - [Nirjan Rai]
Let's see. These two, a DOED and AEPC are at they have some sort of a turf war going on, and how this moves forward is difficult to say. AEPC has always been the darling or a a projectified project of donors and does not have a strong presence in the bureaucracy, and DOED has a a more of a presence. So together, all of these are playing in a way that the space of it is very limited. And but as I mentioned earlier, there is also this movement towards the the the environment is pushing towards an increased mainstreaming of renewable energy, but the institutions aren't designed or don't have the interest incentives to to do so.

[00:14:03] - [Nirjan Rai]
So how we get about doing this is the million dollar question.

[00:14:10] - [Saurav Lama]
That is indeed the challenge. So with everything that's been said about the challenges and the dominant narrative dominant narrative around hydropower projects. In my final question, what can be done in the short term and the long term to mainstream mainstream renewable energy in Nepal beyond hydropower?

[00:14:33] - [Nirjan Rai]
In the in the paper, we talk about large two areas. One is in terms of the the narrative that we discussed, and the other is more practical where we recommend that the government implement some of the immediate tasks that can be done. So the first one has to do with narratives. Now when we say narrative, it is it may it may sound a little superfluous, but the idea about we need to rethink how we approach our energy dilemma, our energy scenario is to reconsider how we approach renewable energy and hydropower. So the first thing we have to look at is to consider the the complementarities between the renewable energy that we're talking about and hydropower.

[00:15:19] - [Nirjan Rai]
Given that there is a a reluctance on our hydro bureaucracy, that they come from this particular approach to solving our XD crisis, they seem threatened when we're whenever we discuss in terms of offsetting electricity. So the idea would be to talk about complementarities. Now renewable energy is an intermittent source, and we have hydropower which can be developed in a way that it can complement. So if we invest in, say, something like a a reservoir type of projects, then we have complementarities where renewable energy such as solar provides during the daytime. Or when there is a lot of sun, we can have you can rely on that.

[00:16:02] - [Nirjan Rai]
And when we do not have that, we would rely on something like a immediate source of power through through storage. So that would be discussing the the complementarities. But, also, we can talk about how the the investments in renewable energy can go hand in hand with investments in hydropower. Now this is kinda more on on the narrative side, but something we we can work immediately is also to increase the demand for electricity. One of the reasons that the public utility, the NEA, is reluctant is because it it it has enough electricity for the the current consumption.

[00:16:39] - [Nirjan Rai]
And so it does not want to go into taking up additional electricity that it does not use. But the fact that our electricity consumption is one of the lowest in the world, which is around less than 300 kilowatt hours, is is very minimal. And so if we talk about increasing this to to to doubling or tripling this, it just means we'll need more electricity. And that sort can that can be sourced through a hydropower, through trade with India, or through renewable energy sources. And so the idea to increase this is is important.

[00:17:12] - [Nirjan Rai]
Along with this, the reason why we need to increase demand for electricity comes from the discussion around climate change. We have a lot of our energy use comes from fossil fuel. And if we can start changing that into something greener, then it is is gonna be useful for all of us. For example, we can talk about changing the consumption pattern for cooking. Most of this is happening through fossil fuel, through LPG, or through wood.

[00:17:40] - [Nirjan Rai]
So if you can change that into electricity consumption through through electric electric cooking, that can be a a major win for us. The other part of this is in terms of transportation. A lot of the fuel that we import from India at the moment is used for transportation. Now there is a push for using electricity EVs in the in the market, but that's largely in the in the private sector right now. But if the government can come up with policies to push for EVs in the public domain, that would be a win win for not just electricity, but also in terms of the climate for for all of us.

[00:18:17] - [Saurav Lama]
Absolutely. Thank you very much for those incredible concluding comments about mainstreaming renewable energy in Nepal. So one last thing. So where might our listeners be able to get an access of this report that you have published?

[00:18:33] - [Nirjan Rai]
Thank you for bringing me here. This has been a wonderful opportunity for us to disseminate our work. It can be found in our website at www.pei.center.

[00:18:46] - [Saurav Lama]
Thanks for listening to Pods by PEI. I hope you enjoyed my conversation with Nirjan on the case for renewable energy in Nepal and the political economy of the institutions that stand in the way of mainstreaming it. Today's episode is part of The Brief. It was produced and edited by me, Saurav Lama, with support from Kushi Hang. The episode was recorded at PEI.

[00:19:08] - [Saurav Lama]
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[00:19:37] - [Saurav Lama]
That's tweet followed by the number two and PEI and on Facebook at policy entrepreneurs inc. You can also visit pei.centers to learn more about us. Thanks once again from me, Saurablama. We'll see you soon in our next episode.