Energy situation of Nepal

Kamal Raj Dhungel, Central Department of Economics, TU

Water and Energy Commission (WECS) has estimated that Nepal’s per capita final energy consumption of 12GJ (Giga Joules). It reflects that the energy consumption per capita is low. The level of economic development is largely determined by per capita energy consumption and hence this indicator shows the living standard of people. The World Bank (2000/01) estimates that Nepal’s per capita GNP equivalents to US dollar 220 and that 51 percent of the total population lives under absolute poverty with an incomes less than one dollar a day (World Bank: 2000/10; UNDP 2000). This is the scenario now Nepal is facing. The main source of energy in Nepal is bio-mass that accounts for over 90 percent of the total energy consumption. The historical trend of energy consumption by fuel type is presented in Annex.

To relate our society to energy use it is necessary to analyse different strata of the people in the society. Over 86 percent of the population lives in the rural areas and their livelihood is a based on agriculture. Recently, it is partly diverted to other sectors; also there is high labour mobility outside the country. The rural people earn some money as a remittance derived from other countries of the world. There is a wide variation between the distribution of income, consumption patterns, attitudes, aspirations and life styles of the people in Nepal. The above variables separate the elites of Nepal from the masses. There is a great disparity in the energy consumption pattern of the people as there is a disparity in the income, consumption, attitudes, aspirations and life style of Nepali People.

Fuelwood has always been the dominant source of energy in Nepal. It fulfils over 80 percent of the primary energy requirement of the people. The major sources of fuel wood are public forests, shrub lands, grasslands and private holdings. The annual growth rate of fuelwood consumption during 1984/85-1994/95 was 2 percent. Fuelwood is likely to remain the principal sources of energy in the foreseeable future. However, it is important to note that the depletion of forest is the major concern of the recent times. The growing demand of firewood coupled with the mismanagement of its sources is exhausting the forest cover and resulting in (a) increase usage of agricultural waste and the same of animal dung. (These increased with a growth rate of 4.5 percent and 1.3 percent per annum during 1984/85-1994/95 respectively). Increased usage of animal dung as primary source of energy directly imposes adverse effect in agricultural productivity because it is used as a source of energy rather than a supplement to crop as fertilizer.(b) Environmental degradation through soil erosion and (c) increased wastage of manpower in gathering firewood.

Forest resource, a major source of energy, has dwindled over time due to continuous extraction for domestic and commercial use. WECS (1994/95) has estimated a total forest and shrub land of 4520.94 thousand hectares of which 2127.81 thousand hectare are accessed for fuel wood collection. While making this estimation, kit has been assumed that the rate of depletion is 2 percent per annum.

As for the availability of commercial energy source Nepal has no proven deposits of fossil fuel. The use of fossil fuel as energy is growing substantially at present and it is expected that it will grow at a faster rate in the near future. The imported hydrocarbons are used as energy not only for transportation, industrial and other requirements but also for domestic cooking and lighting. Hydrocarbon imports contribute to a significant proportion of the country’s import bill. The total amount of hydrocarbon imports is about 226 thousand tonnes per annum (Ramani, et al,: 1993).

While dealing with the situation of energy consumption in Nepal, it is necessary to analyze various factors, which are economic in nature. Energy consumption is affected by many factors, the main ones are population size, GDP per capita, prices charged for energy (particularly for POL products), the structure of the economy including the energy intensity of different sectors and particularly the average temperature of winter season (Gama, et al. 1986). However, this article does not attempt to take all these factor under consideration. Energy consumption in Nepal is presented in the following table on the basis of energy sources.

Table 1: Annual growth rate of energy consumption (in percent) in different periods.

The overall annual growth rate of energy consumption during 1984/85-1989/90 was 2.7 percent (Table 1). The annual growth rate of fuel wood, agricultural waste, animal dung, coal, petroleum and electricity were 1.2, 2.8, 2.6, -14.2, 7.8 and 17.5 respectively. The annual growth rate of coal remained negative meaning that the coal consumption as energy during this period of time had decreased. However, the annual growth rate of coal consumption increased and reached 6.9 and 27.2 percent during 1989/90-1995/96 and 1995/96-2000/01 respectively. The annual growth rate of petroleum product was 7.8 percent during (1984/85-1989/90). However, it increased alarmingly during the periods of 1989/90-1995/96 and 1995/96-2000/01. During these periods the annual growth rates remained 12.6 and 12.7 percent respectively. The annual growth rate of electricity was 17.5 percent during the period of 1984/85-1989/90. During 1989/90-1995/96 the growth rate of electricity dwindled to 8.7 percent. However, the annual growth rate of electricity increased and reached 10.4 percent during the period 1995/96-2001/01.

Table 2: Energy Consumption (in thousand Tons of Oil Equivalent; TOE)

Energy consumption in Nepal is dominated by traditional sources. Traditional sources of energy accounted for 95,94.9,91.7 and 86.4 percent of which fuel wood alone contributed 84.5, 84.8, 81.9 and 77.2 percent in 1984/85, 1989/90, and 1995/96 and 2000/01 respectively. The share of commercial energy consumption was 5.5.1, 8.3 and 13.6 during these periods. The per capita commercial energy consumption is very low revealing the low level of economic development.

(Courtesy: The Economic of Nepal, Vol: 25, No: 3, July-September 2002, issue No. 99)

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