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Energy Sector


Nepal relies heavily on traditional energy resources, as no significant deposits of fossil fuel are available. Nepalese use the lowest commercial energy (around 500 kWh per capita per year) of all South Asians by far. The total energy consumption in Nepal for the year 2003/04 was 363 million GJ of which the residential sector consumed 90% and agriculture sector 1% as shown in the figure. Based on the fuel type, biomass provided 86% of the total energy consumption, petroleum 9%, which is mainly consumed by urban areas, electricity only 2% and renewable 1% of the total energy. About 40% of the total population has benefited from electricity by the end of the Ninth Plan. This 40% is reported to include consumption of 33% from National grid and 7% from alternative energy.

About 84% of Nepal population lives in rural areas, and agricultural work is the mainstay of the rural population. For the year 2003/04, total rural energy consumption was 288 million GJ of which the rural residential consumed 97%. From end use perspective, of the total energy consumed in rural Nepal, 63.9% was used for cooking, heating accounted for 8.5%, lighting 1.31%, agro processing 3.4%, animal feed preparation 16.5% and others such as religious occasions and ceremonies 4.3%. of the total energy consumption of 288 million GJ in rural Nepal, biomass accounts for 98% while electricity accounts for only 0.1% of the total energy consumes and petroleum products comprise 1.6% and renewable source 0.5% of the total energy consumed. Among the entire energy resource base, biomass is the dominant resource base of the country with respect to its utilization. Though, Nepal has a huge potential for hydropower production, currently this remains mostly untapped. Other commercial forms of energy are not known to exist in any significant amounts.

Energy Source Contribution in %
Biomass 88.0
Petroleum Products 9.0
Electricity 2
Renewable 1
Total ~ 100

Figure 1: Energy Sources of Nepal


Nepal relies heavily on biomass fuel as a result of the lack of development of other energy alternatives and the overall poor economic condition of the nation. Fuel wood is the main source of energy in Nepal and will continue to remain so for a long time. The theoretical estimated sustainable annual yield of fuel wood in Nepal is 25.8 million tonnes, or an average of 2.8 tonnes per hectare of forest. However, only 42 per cent, or 10.8 million tonnes, of the theoretical sustainable supply is accessible.

Forest resources are under increasing threat from the burgeoning human and livestock populations and their need to meet annual requirements for fuel wood, fodder, timber, and other minor forest products. About 44,000 ha of forest area is believed to be degraded and deforested annually, while only about 4,000 hectares are reforested. Conversion of forestland for cultivation, high population growth, and a low level of development have all aggravated the pressure on forests throughout Nepal. Where forests are becoming relatively scarce, people are relying increasingly on crop residue and animal waste, resulting in the degradation in fertility of the agricultural land. In 1994/95, the supply of crop residues in the country that could be used as energy was estimated to be 112.13 million tonnes. Likewise the country has 4.8 million tonnes of animal dung annually potentially available as fuel.


The hydropower potential of Nepal's river systems is about 83,000 MW. Hydropower utilization is currently less than one per cent of the proven potential. The total installed hydroelectric generation capacity is around 650 MW. This power has been made available to 2,053,259 consumers through 1980 km of transmission and distribution lines (2011 data). The national grid represents the overall hydroelectric industry of Nepal as it accounts for almost 98 per cent of the capacity and 99 per cent of the energy supplied. Apart from national grid, both the public and private sectors and independent power producers manage isolated supply systems. At present there are 11 major hydroelectric plants, 16 grid connected small hydroelectric plants, 23 isolated small hydroelectric plants, 22 Private Sector Hydro Projects known as Independent Power producers (IPPs) connected to Integrated Nepal Power System (INPS) in operation in the country. During 2010/11 Nepal Electricity Authority (NEA) signed Power Purchase Agreements (PPAs) worth 714.77 MW, which was almost double the total capacity of power purchase agreement signed in the past. Total capacity of power purchase agreement signed by NEA so far has reached 1,118.35 MW. There are 4 major hydro power projects under construction and 8 small scale hydropower projects under 10MW being developed by IPPs.


So far no proven reserves of petroleum suitable for commercial exploitation have been found in Nepal. Thus all petroleum products consumed are imported in refined form for direct consumption. Alternative fossil fuel, natural gas, etc. has not yet been discovered in any significant amount.

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[Source: Hydroelectricity Investment & Development Company Limited]