Bindu Lohani
Undoubtedly, the development of hydropower is a critical concern for Nepal. Nepal has significant hydropower potential due to its abundant water resources from the Himalayan Rivers. The country has been actively developing hydropower projects to meet its growing energy demands and reduce dependence on traditional energy sources.
CLIMATE CONCERNS
In recent years, the most pressing issue has been climate change and its profound impact on hydropower development in the country. Currently, two crucial aspects warrant attention: understanding the likely climate change impacts on Nepal and addressing the awareness of risk and uncertainty issues, particularly within the private sector engaged in hydropower development.
Firstly, regarding Nepal's likely climate change impacts, the country is experiencing shifts in weather patterns, alterations in precipitation, and temperature changes, all of which significantly affect water resources crucial for hydropower generation. These climatic variations pose challenges to the reliability and predictability of water flows, potentially impacting the performance of hydropower projects.
Secondly, the awareness of risk and uncertainty issues, particularly in the private sector involved in hydropower development, is a pivotal concern. It is crucial for private developers to fully comprehend the potential risks associated with climate change, including extreme weather events, altered water availability, and evolving regulatory frameworks. Proactive risk management strategies and adaptation measures are essential for ensuring the resilience and sustainability of hydropower projects in the face of a changing climate.
Changes in precipitation patterns and the timing of water runoff further complicate the scenario. Adaptation measures, such as adjusting reservoir management and exploring alternative energy sources, are becoming imperative for Nepal’s hydropower sector to remain resilient in the face of climate change impacts on glacier dynamics. This creates complexity and uncertainty for hydropower planning and operations. Balancing hydropower energy needs with environmental sustainability and climate vulnerability is essential for a sustainable and adaptable energy future in the country.
Climate change is accelerating the melting of glaciers in the Hindu Kush Himalaya region, including Nepal. The retreat of glaciers poses a dual challenge for hydropower in Nepal. Initially, the increased meltwater may lead to a short-term boost in river flow, potentially enhancing hydropower generation. However, in the long run, as glaciers recede, they reduce the availability of a crucial water source.
The Himalayan glaciers sustain not only the ecosystems but also the rich and diverse cultures of eleven countries, with over two billion people dependent on rivers originating from these glaciers – almost one-third of humanity– rely on them. From Afghanistan to Vietnam, from the Yangtze in China to the Ganges in India, these glacier-fed rivers serve as the lifeblood of mountain and lowland communities, providing them with water, fertile lands for agriculture, and sources of livelihood. Additionally, the Intergovernmental Panel on Climate Change (IPCC) and various scientific studies have also highlighted the impacts of the melting of the Himalayan glaciers on water resources, ecosystems, and communities in the region.
CLIMATE RISKS AND UNCERTAINTY IN HYDROPOWER
Climate change is one of the most pressing challenges of our time, and it poses significant risks and uncertainties. Let us first mention what probability, risk, and uncertainty mean in the context of climate change and what are applicable in hydropower development.
Probability is the likelihood of a particular event occurring. In the case of climate change, scientists use probabilistic models to estimate the likelihood of different outcomes. For example, they may estimate the probability of a certain temperature increase, precipitation, or the likelihood of a particular weather pattern occurring. Risk is the potential for harm or loss resulting from an event. In the context of climate change, the risks are numerous including more river flows, flooding, more frequent extreme weather events, and changes in ecosystems that can impact food security, public health, and livelihood. The degree of risk can vary depending on the severity and frequency of the event and the vulnerability of the affected population.
Uncertainty refers to the lack of knowledge or understanding about a particular event or outcome. In the case of climate change, there are many sources of uncertainty, including the behavior of feedback mechanisms, the effectiveness of mitigation strategies, and the impacts on regional climate patterns. Uncertainty can make it challenging to make informed decisions and take appropriate action.
The concepts of probability, risk, and uncertainty are crucial to understanding the challenges posed by climate change, and it is highly relevant for hydropower projects in Nepal. By acknowledging and addressing these factors, we can make more informed decisions and take actions to mitigate and include adaptation measures due to the impacts of climate change. At the current moment, the incorporation of risk and uncertainty of addressing risks and uncertainty in hydropower projects in Nepal needs strengthening. There is also much work to be done, and continued research and innovation will be essential and, should be promoted and supported /funded in the country.
CHALLENGES FOR THE PRIVATE SECTOR
Private sector engagement in hydropower development presents both opportunities and challenges in Nepal. Investment risks, environmental and climate change concerns, legal hurdles, and social impacts pose significant challenges to private sector participation. To encourage private sector involvement,
the country must address several key issues.
It becomes imperative for stakeholders, including the private sector, to actively engage in ongoing climate impact assessments, risk evaluations, and adaptation planning. Building a comprehensive understanding of these issues will empower the private sector to make informed decisions, enhance project resilience, and contribute to the sustainable development of hydropower in Nepal amid the challenges posed by climate change.
The private sector is inherently susceptible to investment risks that erode investor confidence in the security and return of their investments. Risks associated with project delays, regulatory uncertainties, and geopolitical factors deter investors from committing funds to proposed ventures. Additionally, hydropower projects involve both generation and transmission components, necessitating extensive land use, road upgrades, structural development, and alterations to water flows. The acquisition of such land, whether privately or government-owned, including cultivated and forested areas, raises environmental and climate change concerns. Environmental issues, risks, and uncertainties linked to climate change impacts are inherent in hydropower project development. Private developers must navigate stringent regulations and public scrutiny to secure project development successfully. Furthermore, the development of hydropower projects brings about social impacts, including community displacement and cultural concerns, leading to conflicts between private developers and local populations.
Addressing these challenges requires a comprehensive approach, involving proactive risk management, clear regulatory frameworks, and effective community engagement strategies. Balancing the interests of the private sector with environmental sustainability, legal compliance, and social responsibility is essential for fostering a conducive environment that promotes private sector participation in hydropower development in Nepal.
STRATEGIC SOLUTIONS
To mitigate the inherent risks associated with hydropower projects, governments can implement various strategies. These include providing appropriate investment guarantees, establishing stable regulatory frameworks, and introducing insurance mechanisms to diminish private sector risk. As part of environmental and climate change safeguards, it is crucial to conduct robust environmental impact assessments and ensure compliance with sustainability standards. These measures are essential in addressing ecological concerns, mitigating climate change vulnerabilities, and managing risks and uncertainties.
Project developers should prioritize regular community engagement activities to secure support from local stakeholders for project initiatives. Involving local communities and other concerned stakeholders in the decision-making process, as well as sharing project benefits with them, can effectively alleviate social tensions, promote sustainable development, and foster a sense of ownership towards the project. This inclusive approach not only enhances the project's social acceptance but also contributes to the long-term success and positive impact on the local community.
Achieving a harmonious balance between private sector interests, environmental sustainability, climate change mitigation and adaptation, and social well-being is imperative for the successful development of hydropower projects. Enhancing the capacity of private developers to comprehend and address the risks and uncertainties inherent in the project development process is crucial. The concept of Public-Private Partnership (PPP) entails collaboration between the government/public sector and private entities to share risks and leverage the expertise of the private sector in developing, financing, and operating hydropower projects. However, there is room for improvement in facilitating enhanced and effective engagement of the private sector in Nepal. Addressing these areas of improvement can lead to more robust partnerships, fostering a conducive environment for sustainable hydropower development that aligns with economic, environmental, and social priorities.
Hydropower heralded as a renewable energy source with a low carbon footprint, has garnered attention for its environmental benefits. Nonetheless, it introduces valid concerns about its impact on the environment and climate, issues that demand serious consideration in the context of Nepal. In response, green investments are being promoted to address these concerns, fostering innovation in hydropower technology and supporting projects prioritizing environmental and climate sustainability. Achieving a delicate equilibrium between meeting energy needs and respecting ecological and climate considerations is paramount for cultivating a resilient and environmentally friendly energy future.
Nepal aspires to position itself as the "water tower" of South Asia, emphasizing its potential to contribute significantly to regional water resources. However, several challenges, including funding constraints, regulatory complexities, and environmental and climate change concerns, have impeded the pace of hydropower development. Achieving political stability and fostering cross-border cooperation are deemed essential for optimizing hydropower potential, particularly in attracting private-sector investments and foreign direct investment.
Despite these obstacles, Nepal stands at a crucial juncture with a substantial opportunity to harness its hydropower potential. The country must translate its commitment into tangible action, leveraging hydropower for sustainable development and actively contributing to the achievement of climate change goals by 2050. Through strategic initiatives and concerted efforts, Nepal can position itself as a regional leader in sustainable hydropower, exemplifying a commitment to both economic progress and environmental stewardship.
Lohani is a former Vice-President of Asian Development Bank, This article is taken from a memoir titled ‘Urja Samriddhi‘ published by IPPAN on 18th january, 2024.
