Community Electrification and its contribution in Energy Efficiency

Context: Fund Allocation Efficiency in Nepal

A Case Study by

Pramod Raj Pokharel

February. 2014

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List of Abbreviations

CFL Compact Fluorescent Light Danida Danish International Development Cooperation DCS Distribution Consumer Service DSM Demand Side Management EE Energy Efficiency ESAP Energy Sector Assistance Programm EU Electricity Users EUCs Electricity User’s Cooperatives FY Fiscal year GA General Assembly GIS Geographic Information System GON Government of Nepal GWh Giga Watt Hour KKREP Kailali Kanchanpur Rural electrification Project KKREUO Kailali Kanchanpur Rural Electrification Umbrella Organization Km Kilo meter kV Kilo Volt kVA Kilo Volt Ampere kWh Kilo Watt Hour LC Load Centre LV Low Voltage MIS Management Information System MoF Ministry of Finance MVA Mega Volt Ampere MW Mega Watt MWh Mega Watt Hour Ncell Ncell Pvt. Ltd., Nepal NACEUN National Association of Community Electricity Users-Nepal NEA Nepal Electricity Authority NRs Nepalese Rupees NTC Nepal Telecom RE Rural Electrification SP Service Provider S/Ss Sub-stations TOD Time of Day TSU Technical Support Unit WECS Water and Energy Commission Secretariat Yrs Years

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Abstract

Integrated Nepal Power System (INPS) under Nepal Electricity Authority (NEA) has been

sustaining massive system loss and in FY 2012/13 alone INPS bore 1056.7 GWh of loss which

accounted 25.03% of the total available energy in the grid (NEA 2012). Out of these lost units,

738.3 GWh loss (19.03%) was under 33 kV level. This loss termed as Distribution Consumer

Service (DCS) loss includes losses in 33 kV lines, 33/11 kV step-down facility, 11 kV lines,

11/0.4/0.23 kV step-down facility and 0.4/0.23 kV lines. Without loss segregation it is always

confusing to general public to locate the most loss prone areas among these four. Case study of

community electrification can be an advantage in this regard to judge and compare NEA

controlled distribution area in terms of system loss and energy efficiency measures. In the

context where 33 kV lines have at least 10,000 times and 11 kV lines have at least 1,000 times

less losses compared to LV lines for the same amount of power flow in the same circuit

configuration, one can easily guess where significant DCS loss is occurring from. Furthermore,

NEA charges 3% extra on top of the community TOD meter reading to take care of transformer

losses. Knowing the fact that transformers are the most efficient devices and have losses within

1% up to 75% loading, margin contribution from community makes them as if they are metered

at 33 kV level. Under such circumstances, if comparison shows that performance of community

electrification is better than NEA controlled distribution area in terms of loss and load

management then it’s time to think about it seriously. As electrical network is interwoven, better

performance within one tiny segment, though small, may improvise the overall system

performance. Unfortunately, this contribution cannot be quantified easily and is invisibly

absorbed within claimed NEA performances. Case study “Community Electrification” has been

chosen to highlight these features in detail, and to show positive impacts of DSM/EE

intervention through community based distribution services. This study also provides the insight

into the structural and procedural barriers for such interventions.

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Highlights of the Report

Residential sector is one of the major users of energy (and electricity) in Nepal. In the context

where nation has provided electricity services to less than 50% of the population, there exists a

huge potential to replace biomass and fossil fuel needs by electricity. But the way present

Integrated Nepal Power System (INPS) is performing, the system loss figure of 25.03% is too

much disappointing. Nepal needs a complete transformation from this loss prone electrical

system and on that accord the least cost approaches is Demand Side Management and Energy

Efficiency Measures (DSM/EE). Individual household characteristic greatly influences the overall

electricity consumption behaviour. Types of lighting bulbs and appliances, electricity use

pattern, avoiding household loads during peak hours (shifting loads) are few of the approaches

within the control of households and this must be strictly followed. And in this regard the

traditional distribution system of NEA does not bother much on this. And community based

distribution system in this regard has an edge over NEA distribution business. So, Nepal has

adopted various model for electrification on trial basis, grid extended community electrification is

one of them. In case of community electrification, electricity cooperative buys bulk power from

Nepal Electricity Authority in subsidized rate and distributes electricity within its areas. The

community organization sets its own tariff and oversees overall distribution business.

Presently there are more than 390 operational community based distribution entities in Nepal.

Among them Kailali Kanchanpur Rural Electrification Umbrella Organization (KKREUO) has a

larger cooperative group of 216 members serving more than 50,000 consumers. These load

centre-based electricity user’s cooperatives (EUCs) were established through KKREP/Danida, a

grid extended rural electrification project in Kailali-Kanchanpur area. The case study has

revealed many encouraging facts about this intervention. The intervention includes a huge

infrastructure development works (hardware part under Danida funding) followed by a software

part implementation under NEA/GoN responsibility.

These community entities till now are performing well and are maintaining distribution system

loss within acceptable range (below 8%) which is far better than nationwide NEA average of

19.03%. All three NEA distribution branches (Dhangadi, Mahendranagar and Tikapur) are

enjoying benefits from their presence and are having quite low annual system losses (in the

range of 15%). But unfortunately these outcomes are not credited to community electrification,

rather have been invisibly absorbed within NEA’s claimed improvement. Through this case

study, an attempt has been made to highlight contributions of this intervention in terms of

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energy efficiency and demand side management. The summary table below gives observation

summary of KKREP/Danida and 80:20 RE schemes together with approximate outcomes from

the interventions.

Summary table: Highlights of community electrification interventions

S.N. Particulars Quantity

A KKREP model

i. Public fund Investment to community (Danida + GoN); Euro 5,222,945

ii. Community Fund Investment; Euro (approx) 120,000

iii. Functional EUCs (total); nos. 216

iv. EUCs annual energy consumption; GWh 17.67

v. EUCs average annual system loss (@ 7.7%); GWh 1.36

vi. Annual energy saved (compared to NEA @ 19.03% loss); GWh 2.00

vii. Approximate annual net profit from energy business to EUCs; NRs 37,500,000

B 80:20 Scheme under NEA/GoN

i. GoN fund investment; NRs 3600,000,000

ii. Community fund investment, NRs 900,000,000

iii. Functional Community distribution entities (total); nos. 174

iv. Annual energy consumption; GWh 57.33

v. Community average annual system loss (@ 10%); GWh 5.73

vi. Annual energy saved (compared to NEA @ 19.03% loss); GWh 5.17

vii. Approximate annual net profit from energy business; NRs NA

(Source: various, Consultant compilation)

Funds so far accumulated and other regular earnings of these communities if utilized properly,

community based distribution system can be a real alternative to loss prone NEA DCS

business. But this needs strong political commitment which for the time being is missing.

Furthermore, there are various other factors which are hindering the proper adoption of DSM/EE

whether in distribution business or industrial and other sectors. Factors like Investment

biasness; lack of information; low energy price, lack of energy efficient technologies & services,

absence of policy, standards and regulations together with low priority on DSM/EE investments

are few of them. Besides these, unwillingness to change is other hidden social factor which

needs much deeper attention.

Contents Abstract ........................................................................................................................................................ iii

Highlights of the Report ............................................................................................................................... iv

1. Introduction .......................................................................................................................................... 1

2. Objective of the Study .......................................................................................................................... 1

3. Scope of Work ....................................................................................................................................... 1

4. Outputs ................................................................................................................................................. 2

5. Methodology ......................................................................................................................................... 2

6. Limitation and Assumptions ................................................................................................................. 3

7. Sector Overview .................................................................................................................................... 3

7.1 Case Description ........................................................................................................................... 5

7.2 Investment .................................................................................................................................... 7

7.3 Energy Efficiency ........................................................................................................................... 7

7.4 Allocation Efficiency .................................................................................................................... 10

7.5 Energy Efficiency Potential ......................................................................................................... 12

7.6 Barriers ........................................................................................................................................ 14

8. Conclusion and Recommendations..................................................................................................... 16

9. REFERENCES ........................................................................................................................................ 18

List of Tables Table 7.1: Sample EUCs data in Constituency 2 (KKREUO) ........................................................................... 8 Table 7.2: Sample Annual Loss Status of NEA/DCS Branch after EUC operation ......................................... 9 Table 7.3: Data related to Cooperative based distribution entities in Kailali and Kanchanpur .................. 11 Table 7.4: NEA annual data for energy and loss ......................................................................................... 11 Table 8.1: Highlights of community electrification interventions .............................................................. 16 List of Figures Figure: 7-1 Annual Report (NEA 2012/13) .................................................................................................... 4

Figure 7-2: Energy Consumption by Sector; Source: MoF, 2013 .................................................................. 5

Figure 7-3: Untapped irrigational loads in AC 9A and AC 13 respectively .................................................... 8

Figure 7-4: Sample Economic activities in the project area after KKREP implementation ......................... 10

Figure 7-5: Radial feed Vs. Distributed Generation feed ............................................................................ 14

Figure 7-6: Concept barrier in operational mechanism .............................................................................. 15

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1. Introduction Energy is the backbone of overall development of a country and it is the most essential

basis for people‘s livelihood. However, energy has been a thorny issue in Nepal as it is

neither sufficient to meet the demands nor it is efficiently used. Energy crisis has become

daily rituals in the country and no major investments are made to reduce the demand-supply

gap of electricity for last 10 years. And despite good potential of demand side management

(DSM) and energy efficiency (EE) initiatives in Nepal, neither government nor private sector

has taken these opportunities into priority. Implementation of CFL program under Nepal

electricity Authority is only such notable program showing positive impact of DSM/EE.

Otherwise, recommendations made so far by various national and international studies for

implementing DSM/EE as one of the most cost effective tools for reducing demand supply

gaps have not been adequately considered for public and private investments.

In this context, “Fund Allocation Efficiency” is one of the hot issues in Nepal and many

studies are being carried out to figure out whether the investments justify in terms of return.

Like other sectors, significant amount of investment (both public and private) has already

been poured to Nepalese energy sector. But still, the desired performance is not attained.

To notify relevancy of investment for the deemed objectives, a small area like community

electrification has been chosen for a case study. This study investigates the actual

happenings within the sphere and comes up with its contribution to energy efficiency and

demand side management aspects. This study mainly focuses community based rural

electric entities in far-western part of Nepal.

2. Objective of the Study The objective of this study is to support the main idea of “Fund Allocation Efficiency” through

comprehensive analysis of community based RE entities chosen for the case study. It seeks

and analyses the performance of community electrification, an intervention in rural Kailali

Kanchanpur area and evaluates its contribution in terms of demand side management and

energy efficiency effectiveness against the fund allocation. The case study also focuses on

the main barriers which resisted the sector performance as envisioned by the intervention

program.

3. Scope of Work The scope of work includes, but not limited to;

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1. Review all relevant documents related to public and private expenditure for distribution infrastructure, demand side management and energy efficiency for consistency

2. Collect information on public and private investments on intervention; including distribution infrastructures, energy efficiency and demand side measures

3. Collect data / information on distribution system performances and system losses (NEA and community based area)

4. Analyse and compare NEA verses community based distribution operation focusing accountability, transparency, accessibility and socio-economic justice issues

5. Analyze allocation efficiency of private and public spending in the case study area for supply side versus DSM/EE

6. Closely quantify the contribution of community electrification intervention in terms of DSM/EE

7. Identify structural and procedural barriers for DSM/EE investments and determine misallocation of funds if any

4. Outputs The following outputs are expected from this assignment for the specified study area:

1. A comprehensive case study of community electrification in terms of;

Investment

Energy efficiency

Allocation efficiency

Energy efficiency potential

2. Critical factors influencing investment decisions in energy infrastructures and DSM/EE in Nepal

3. Recommendations to overcome the identified structural and procedural barriers for making appropriate investment choices in energy infrastructures

5. Methodology The methodology followed is presented below:

Review of all relevant literature (as mentioned above)

Key informants’ interview and stakeholder meetings

Collection of all relevant data from secondary sources

Field visit and first hand data collection (as mush possible)

Data entry, analysis, interpretation and presentation

Concluding final figures and findings

For estimation of potential saving;

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Potential electrical energy saving; PE =

Where;

Ex is the existing electrical energy intensity (on per unit basis)

Eo is the observed optimized electrical energy intensity (on per unit basis)

n is the number of sample

Q is the total population

And (Ex – Eo) is non-negative (≥ 0).

Here, Ex applies for NEA operated load centers and Eo applies for community operated

load centers (electricity distribution area).

6. Limitation and Assumptions Regarding electrical data, if operators are not using MIS (management information system)

data collection becomes ad-hoc and tedious. Faulty meters (TOD meter, household energy

meters, and feeder tracking meters) can’t be monitored timely and chances of error data are

high. Systematic loss segregation and point to point tracking system can minimize the error.

Unfortunately, neither NEA nor community has adopted such measures. So, our first

assumption is, the data that we collected somehow are acceptable for analysis purpose.

Furthermore, the limitations of the study can be summarized as;

NEA does not have loss segregation below 33 kV means inherent point to point energy tracking is missing and data is not precisely verified

The secondary data available in NEA annual reports are not enough for critical analysis (many data missing) and needs interpolation / pre-assumptions

It was not possible to collect NEA DCS losses from all three branch offices and only Dhangadi branch data has been used for analysis

NEA/DCS branch data are always critical and controversial and many of them do not seem to be realistic

Community consumption and loss data are also not up to date

Due to time and budget constraints, recent data could not be collected and used; only trends were verified

7. Sector Overview Residential sector is one of the major users of energy in Nepal. Compared to other sectors

(Industrial, transport, and agriculture) so far, its energy need is much higher (please refer

Figure 7-2 below). In total energy consumption by fuel types in Nepal (2010/011), the share

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of electricity is just 2.2% where as fuelwood has highest share of 74.8% (MoF, 2013).

Among the consumed electrical energy, residential sector so far dominates the share with

over 44% as shown in Figure: 7-1 below. In the context where nation has provided electricity

services to less than 50% of the population (MoF, 2013), there exists a huge potential to

replace biomass and fossil fuel needs by electricity. But the way present Integrated Nepal

Power System (INPS) is performing, the system loss figure of 25.03% is too much

disappointing. Nepal needs a complete transformation from this loss prone electrical system

and on this accord the least cost approaches is Demand Side Management and Energy

Efficiency (DSM/EE) measures.

Figure: 7-1 Annual Report (NEA 2012/13)

For efficient electrical distribution system, effective DSM/EE interventions are essential that

helps system loss reduction by reducing circulating load current throughout the network.

Individual household characteristic greatly influences the overall electricity consumption

behaviour. Types of lighting bulbs and appliances, electricity use pattern, avoiding

household loads during peak hours (shifting loads) are few of the approaches within the

control of households and this must be strictly followed. And in this regard the traditional

distribution system of NEA does not bother much on this. And community based distribution

system in this regard has an edge over NEA distribution business. So, Nepal has adopted

various model for electrification on trial basis, community electrification is one of them. In

case of community electrification, electricity cooperative buys bulk power from Nepal

Electricity Authority and distributes electricity within their areas. The community organisation

sets its own tariff and oversees the overall electricity distribution business.

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It is believed that there exists ample opportunity for efficient operation. There are, however,

no such studies carried out in the past that reveal the load pattern, load curve, types of

bulbs used and other operational characteristics. There are more than 390 operational

electricity cooperatives in Nepal and among them Kailali Kanchanpur Rural Electrification

Umbrella Organisation (KKREUO) has a larger cooperative groups under its umbrella

electrifying more than 50,000 users.

Figure 7-2: Energy Consumption by Sector; Source: MoF, 2013

This case study will reveal many insights on energy efficiency and demand side

management opportunities within community electrification specially focused to KKREUO

area.

7.1 Case Description

In line with 10th Five-Year Plan of GoN where electrification rate was planned to be

extended from 39% to 55% of the population, Danida funded grid extended rural

electrification program “Kailali Kanchanpur Rural Electrification project (KKREP)” came into

scenario (2001-2008) as part of ESAP I. In contrast to NEA’s traditional electrification

approaches, KKREP/Danida was an attempt to enhance service delivery mechanism in

Energy Consumption by Sector

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distribution sector fostering demand side management and energy efficiency in rural

electricity business.

The model assumed to establish an efficient and cost effective electrical distribution system

owned and operated by local communities in rural areas of Kailali and Kanchanpur. In total,

216 load-centre based Electricity User’s Cooperatives (EUCs) were established. These

EUCs are united under an umbrella called the Kailali Kanchanpur Rural Electrification

Umbrella Organization (KKREUO). This EUC apex body is primarily responsible for

overseeing all the administrative, managerial and technical issues pertaining to the

distribution business of these tiny entities. The program included huge electrical

infrastructure development works. The area had very limited infrastructure available for

distribution purpose before KKREP/Danida was in picture. Three distribution branches

Dhangadi, Mahendranagar and Tikapur had total 13.5 MVA, 33/11 kV capacity serving only

about 16,000 consumers. As 33/11 kV system was overloaded, chances for new consumer

access was limited. All three distribution branches had huge annual loss figures.

Under this intervention, total 19.5 MVA, 33/11 kV system was added through 7 numbers of

new area substations scattered all around Kailali and Kanchanpur. Over two thousand

kilometres of electrical lines (33 kV, 11 kV and 0.4/0.23 kV) were constructed so that

consumers today in the area are almost 7 times up i.e. over 110,000. KKREP/Danida alone

provided service connections to about 50,000 rural households. With these distribution

system reinforcement works, NEA/DCS branch annual loss scenarios in the area have

decreased significantly in recent years. With a communal approach of collective joining,

almost 100% electrification ratio was achieved in the program. This served as one of the

landmark in program’s success where disadvantaged groups (like Dalits and Kamaiyas)

received equal treatment. To transfer distribution system ownership to community, a

household based subsidy of NRs 7200 was provided to grid extended consumers for the

first time. As the subsidy provided to electricity users was not enough to cover costs of the

low voltage distribution system, a 20 year Index loan was implemented.

The success of the program lies in the fact that how the earnings provided to these

community based entities are managed and utilized. Properly using these funds and

opportunity, community owned and operated distribution system can prove that it can deliver

services more efficiently and cost effectively compared to NEA controlled area and can take

care of better DSM/EE roles.

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7.2 Investment Total investment for KKREP/Danida was Euro 13,407,351 (NRs 1,338,455,850) where

Danida and GoN contributions were as follows;

Out of this total investment, the community was handed over an infrastructure costing Euro

5,222,945 (NRs 513,892,416). The breakdown is given below;

Furthermore, the community got three years of operational support till June 2011 through

ESAP II and investment involved was NRs 15,600,000. In addition to these public

investments in KKREP case, the community itself has constructed over 80 km of electrical

lines (11 kV and LV), installed 19 additional transformers (1,030 kVA, 11/0.4 kV) to electrify

over 3200 new consumers collectively after the project, whose present market value is more

than NRs 120 millions.

Besides KKREP model, 80:20 scheme under NEA is other model of community

electrification where community provides 20% of the electrification cost and rest 80% is

borne by GoN. As per NACEUN, community throughout Nepal so far has contributed NRs

900 million and GoN has added NRs 3600 million to electrify thousands of people under 174

cooperatives scattered all around Nepal.

7.3 Energy Efficiency

As expected, emergence of cooperative based distribution entities has started contributing

better demand side management and energy efficiency in the area. Despite over 365

industrial and 510 irrigation consumers injecting over 6 MW of load burden (source:

KKREUO), EUCs are maintaining their annual system loss within acceptable range. EUCs

do not allow their industrial and irrigation consumers to operate during peak hours (evening

5-9 pm) and follow this as thumb rule for DSM/EE concerns. Every industrial load is bound

to install adequate size of capacitor bank so that good power factor and healthy voltage

profile is maintained. So it’s not surprising to see low range system loss in EUC system. The

Danida Support: Euro 12,199,178 (NRs 1,217,933,957) GoN Support : Euro 1,208,273 (NRs 120,621,894) Source: KKREP Project Completion Report

Part Handed Over to Community LV line cost : Euro 3,159,642 Transformer cost : Euro 855,030 Service Connection Cost : Euro 1,208,273 Source: KKREP Project Completion Report

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Table 7.1 below shows the average annual loss of 20 EUCs under constituency no. 2 of

KKREUO in FY 2065/66 (2008/09) which is appreciably low with mere 6.6%.

Table 7.1: Sample EUCs data in Constituency 2 (KKREUO)

Source: KKREUO

To keep system loss within acceptable range, many EUCs do not allow connections to new

industrial and irrigation loads until and unless EUC is ensured that new connections do not

deteriorate system loss scenario. Figure 7-3 below show two diesel operated water Pump

Sets both owned by EUC executives, one from AC 9A and other from AC 13 respectively.

They are waiting for right time when their respective EUC will have additional transformer

close to these loads and they can replace them with electric drive. Presently these loads are

far from the existing transformer and will add significant line loss to the system.

Figure 7-3: Untapped irrigational loads in AC 9A and AC 13 respectively

In the beginning EUCs started connecting industrial loads haphazardly and as a result the

line loss scenario increased significantly (15-18%) from the designed value of less than 7%.

Technical Support Unit under KKREUO (under ESAP II funding) then conducted various

load management training sessions to educate technicians of service providers. EUCs were

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encouraged to invest on CFL for their own benefit. Line up-gradation, use of additional

transformers, relocation of industrial loads, phase balancing like activities were initiated to

take care of undesired system loss. Today in average the EUC system has annual loss

within 8% which is far better compared to NEA controlled distribution areas.

Table 7.2: Sample Annual Loss Status of NEA/DCS Branch after EUC operation

The Table 7.2 above shows the annual loss figures of NEA/DCS Dhangadi branch which

has 37 numbers of EUCs under its supply chain. During 2008/2009, when two area

substations (Jhalari 3 MVA, and Sripur 1.5 MVA) were not charged all 97 EUCs in the area

were supplied by Dhangadi DCS branch. Despite poor voltage profile and heavy loss in

long 11 kV feeders, Dhangadi DCS had amazingly low figure of loss within 21% range. By

that time, connections of industrial and irrigation loads were limited within EUC system and

had mainly household loads from lighting. In 2009/010, project got completed and all 11 kV

feeders got charged. This left Dhangadi DCS with only 37 numbers of EUCs. By this time,

these EUCs also started connecting industrial and irrigation load haphazardly without

following the norms. The result was obvious. The overall system loss scenario increased

drastically. Dhangadi DCS branch’s loss figure for 2009/10 depicts the fact. Then KKREUO

came into action and conducted various DSM/EE awareness programs and trainings. The

result one can see in the following years of 2010/11, 2011/12 and 2012/13. This shows the

usefulness of community based electrification at least to address DSM/EE issues. However,

the loss decreasing trend may also have some implications from NEA’s loss reduction

strategy.

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7.4 Allocation Efficiency Community electrification in the area has paved ways for enormous economic activities.

Rice mills, sawmills, tailors, computer institutes, electric shops, communication towers

(Ncell, NTC), cold storages, dairy industries, chicken farming etc are few of them. In addition

to these, community earns handsome amount of money from the sale of electricity. These

altogether has changed the overall economical situation of the area in last couple of years.

But even better contribution of community electrification is that, community is expanding its

service area to serve more and more rural people. Few of EUCs are investing their own fund

to initiate network expansion activities. And the best part is no one is left un-electrified. If

needed, EUC provides energy meters, service cables and other accessories to be refunded

later. And here, NEA versus community electrification differs.

Figure 7-4: Sample Economic activities in the project area after KKREP implementation

Although economic activities in these areas would have been similar even under NEA

distribution system, but on the aspects mentioned above NEA stands nowhere in front of

EUCs. Service delivery mechanism, operational approaches with accountability and

transparency and dedication for energy efficiency are definitely superior under community

electrification. Being bulk consumer and an integral part of NEA/DCS branch, efficient EUC

operation in fact gives direct benefit to NEA system in many ways. Improved annual loss

scenario of Dhangadi NEA/DCS branch can be taken as a good example. Seeing

distribution loss trends elsewhere in NEA system, bigger part sharing for loss reduction in

this branch can be assumed from efficient EUC operation. EUCs under Dhangadi branch in

average consume about 5 GWh of annual energy (Table 7.3 below). This annual

consumption figure would have been much bigger if EUCs were not much sensitive about

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system loss. As mentioned earlier there are many industrial and irrigation loads waiting for

connection. EUCs knowing its limitations (transformer and LV line capacity) are not

connecting these loads within the existing system. These EUCs rather are trying to install

additional transformer near these heavy loads. And in the process, the connection uptakes

are slow. However, If this part of system were not handed over to community and would

have been a part of traditional NEA distribution system, inadequate connection permissions,

haphazard extensions, hooking and pilferage problems would have sealed its fate in similar

fashion like elsewhere under NEA practices.

Table 7.3: Data related to Cooperative based distribution entities in Kailali and Kanchanpur

To figure out actual allocation efficiency one needs to know NEA trends of distribution loss.

Table 7.4 below shows NEA energy data and trends of losses in last two years. Comparing

data of two fiscal years (2011/12 and 2012/13), some good signs are seen at least in terms

of system loss scenario. However, loss figure of 19.03% for the combined Distribution and

Consumer Services (East and West Business Groups) is too high. Compared to such high

loss figures, EUCs in Kailali and Kanchanpur are maintaining very efficient distribution

system with average annual loss figure below 8%.

Table 7.4: NEA annual data for energy and loss

In the year B.S. 2068/69 (2012/13) total energy sold to 216 EUCs is 17.67 GWh (see Table

7.3 above). This figure also includes 3% additional charges on top of the community TOD

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meter reading to take care of transformer and line losses. This makes as if the community is

metered at 33 kV level and this is how these two NEA’s and community losses are

comparable. Taking average loss figure of 19.03% (as in NEA area), almost 3.36 GWh

annual system loss of KKREUO community can be derived. But in reality, less than 1.36

GWh loss (@ 7.7%) has occurred within community system in the year 2012/13. This

means, KKREUO community has contributed almost 2 GWh of saved energy to INPS. With

the average energy price of NRs 7.95 (Avg. per kWh sale value of NEA, 2012/13), the

community is contributing almost NRs 16 million annually to NEA/Nepal from loss reduction.

And this figure definitely justifies community electrification concept of Danida in Kailali and

Kanchanpur in addition to enormous socio-economic benefits brought into the area.

Moreover, business of 17.67 GWh enables these communities to earn millions annually.

Even with the changed tariff structure, for about 50,000 household consumers the

community gets annually 12 GWh at subsidized rate of NRs 3.6. With an average price of

NRs 7.5/kWh, the gross electricity purchase-sale margin is about 48 millions. EUCs also

collect demand charge per month based on the installed capacity of its consumers. In

average NRs 25 per month per consumer enables community to collect NRs 15 million

annually. So collectively, community has about NRs 63 millions of gross business margin.

Even if 40% is spent as operational expenses, the community is making about NRs 37.5

millions of net profit annually from this distribution business.

KKREP model in this regard should be praised that the benefit of distribution business is

directly reaching to community hands. Now it’s up to the community people how they use

these funds and resources; they either can assume a role of societal changer or become

like small NEA, choice is theirs.

7.5 Energy Efficiency Potential With available funds and resources there exists ample opportunity for energy efficiency in

community electrification. Community based distribution entities throughout Nepal

collectively purchase more than 75 GWh of energy from NEA annually. With KKREUO

experience, one can easily imagine how beneficial this distribution business can be to the

entire rural community. With simple funda “more GWh is consumed, more profit

cooperatives will make”, many fossil fuel based industrial and irrigation loads can be

replaced with electricity. This not only helps cooperatives and consumer businesses but will

equally relieve nation from currency drain-out on fossil fuels.

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Cooperatives should also promote more efficient electrical appliances in its distribution area.

They can optimize their distribution system as well. Installation of additional transformers

and relocation of existing transformers closer to bigger loads are few most practiced

traditional approaches. Use of bigger sized conductor to reduce radial feed system losses

can still be beneficial to present context. However, the thumb rule of distribution system is:

less the LV line length, better is the system performance. Unfortunately many EUCs have

bigger sized transformers (160 kVA, 100 kVA) with LV lines extending over 4/5 km. Effective

distribution system usually has many small sized transformers each serving only few

consumers in closer periphery.

System optimization as mentioned above costs significant amount of investment and the

process is never ending. So it’s time to think differently and to use the existing infrastructure

as much as possible. The best alternative is to think opposite of radial feed system and go

for hybrid system with distributed generation from renewable resources. Widespread use of

bulk solar generation and injecting power in community owned LV system will be one of the

easiest options. As there is already a bulk consumer meter to monitor cooperative

consumption of NEA energy, there won’t be need for much talked bi-directional meter. And

due to cost constraint no community will be able to generate solar energy more than they

are consuming for the time being. Energy fed in this way avoids the need of bigger sized

conductor and expenses in additional transformer and rehab lines. It will also reinforce the

entire distribution system as the current flowing in the network reduces significantly. The

figure below shows how load sharing can be useful for distribution system reinforcement.

Though theoretical, effective current flowing in the circuitry if is reduced to half and

conductor type throughout circuitry is assumed same, half load sharing from both the ends

can reduce system line loss figure by 75%. Not only this, the improved voltage profile in a

segment provides positive feedback loop to other nodes of the network helping more loss

reduction.

To present context where NEA supply system is highly congested and needs thorough up-

gradation, the best way is to create local generation as much as possible to meet local

energy demand. For the time being, the best loss reduction strategy is – to avoid

transporting much from distance.

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Figure 7-5: Radial feed Vs. Distributed Generation feed

For bulk generation, now a day solar system are available in less than NRs 250/W. EUCs

under KKREUO alone can install solar system of over 150 kW annually with average local

energy generation of 380 MWh (i.e. saving of about NRs 2.8 million from NEA billing). This

is in addition to the improvised voltage profile and loss reduction (to both NEA and EUC

area). If the same is projected nationwide, almost 600 kW of bulk solar system in total can

be installed per year providing almost 1.5 GWh of local energy and saving of over NRs 11.4

million from NEA billing annually. And perhaps, over 1 GWh loss reduction in entire INPS

system with distributed injections of power reinforcing the system.

7.6 Barriers The main barriers are legal and institutional. In KKREUO case, Danida envisioned KKREP

was an offer to GoN for an effective RE model with following features;

RE implementation with reproduction modality

To demonstrate RE implementation cheaper in contrast to artificial price hiking

Establishing cost-effective, transparent and efficient cooperative based distribution business

Distribution system with MIS/GIS

An alternative to NEA's traditional distribution management approach including 80:20 scheme

RE as a rural community based business through Electricity User’s Cooperatives (EUCs)

Distribution right delegation to community

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But unfortunately concept barrier became the biggest gap. The following Figure 7-6 below

show what was intended and what was accomplished in KKREP/Danida program.

Danida Envisioned KKREP NEA/GoN Implemented KKREP

Figure 7-6: Concept barrier in operational mechanism

Today EUCs under KKREUO has millions of annual earnings but these funds are not fully

and properly utilized. Political hijacking has jeopardized its mission. As a result, majority of

these EUCs have become like small NEA branch offices abusing funds and resources. The

main reasons for that are;

No one to monitor and control financial, administrative and managerial issues of EUCs

Neither NEA nor Cooperative Department are efficient to take care of such issues

NEA not willing to give Intermediate Authority role to any one (including KKREUO)

KKREUO struggling to get recognition and legal authority to control and look after EUCs affairs

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Same is the situation with other community based distribution entities elsewhere in the

country. Authorized institution to look after these cooperatives and guide them for better

roles are missing.

8. Conclusion and Recommendations Knowingly or unknowingly community electrification has contributed considerably in

DSM/EE. But unfortunately these outcomes are not quantified and observed, rather have

been invisibly absorbed within NEA’s claimed improvement. Through this study, an attempt

has been made to highlight the contribution of these community electrifications, though little

but significant. Table 8.1 below gives observation summary of KKREP/Danida and 80:20 RE

schemes together with tentative outcomes from the interventions.

Table 8.1: Highlights of community electrification interventions

S.N. Particulars Quantity

A KKREP model

i. Public fund Investment to community (Danida + GoN); Euro 5,222,945

ii. Community Fund Investment; Euro (approx) 120,000

iii. Functional EUCs (total); nos. 216

iv. EUCs annual energy consumption; GWh 17.67

v. EUCs average annual system loss (@ 7.7%); GWh 1.36

vi. Annual energy saved (compared to NEA @ 19.03% loss); GWh 2.00

vii. Tentative annual net profit from energy business to EUCs; mil. NRs 37.5

B 80:20 Scheme under NEA/GoN

i. GoN fund investment; NRs 3600,000,000

ii. Community fund investment, NRs 900,000,000

iii. Functional Community distribution entities (total); nos. 174

iv. Annual energy consumption; GWh 57.33

v. Community average annual system loss (@ 10%); GWh 5.73

vi. Annual energy saved (compared to NEA @ 19.03% loss); GWh 5.17

vii. Tentative annual net profit from energy business; NRs NA

(Source: various, Consultant compilation)

If accumulated funds so far and other regular earnings of these communities are properly

utilized, there exists ample opportunity for efficient operation of these systems. The study

finds it’s already been late to encourage these community entities to invest in the distributed

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generation concept as described above. After all, the thumb rule for best energy practice is

– “Meet local energy demand by local generation”.

Furthermore, for future interventions following structural and procedural barriers in energy

investment should be minimized and if possible avoided;

Investment biasness – government more focused on supply side (hydropower generation) and very low priority on DSM

Lack of information about DSM/EE; distribution system and Industry can gain a lot from it and financial sector needs to understand that saving is a kind of gaining - to promote financing product to DSM/EE interventions

Energy price being low for residential and industrial sector compared to other neighboring country does not motivate business entities to invest in DSM/EE interventions

Inadequate availability of services related to EE – Almost all the business entities and industries run without energy managers regardless of size of the industry

Unavailability of energy efficient technologies in local market

Absence of clear policy, standards and regulations on equipments and appliances

No financial incentive - Policy should distinguish between energy intensive and energy efficient technologies

Access to investment capital – investment focused more on productivity improvement projects than low priority EE

Unwillingness to change – a hidden social factor responsible for the continuation of bottle-necking attitude to sustain ongoing corrupt system

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9. REFERENCES

1. Energy Consult (2009), Nepal NEA DSM/EE Project, Task 3: Interim Results on DSM Options based on Energy Audits, the World Bank and Nepal Electricity Authority.

2. Energy Consult (2010), Nepal NEA DSM/EE Project Task 5&6: DSM Action Plan with Policy Recommendations, the World Bank and Nepal Electricity Authority.

3. Energy Consult (2011), Evaluation of Pilot CFL Distribution Program and Capacity Building of DSM Cell, the World Bank and Nepal Electricity Authority.

4. ESCAP (2011). Guidelines for strengthening energy efficiency planning and management in Asia and the Pacific, Economic and Social Commission for Asia and the Pacific, United Nation.

5. GoN/NEA Implemented KKREP; Available at: http://www.kkreuo.org.np/admin/upload/15_GoN%20Adopted%20KKREP%20-%20A%20Case%20of%20Concept%20Barrier.pdf (Accessed on September 5, 2013)

6. KKREP Component Document; Available at: http://www.kkreuo.org.np/index.php?module=library (Accessed on September 5, 2013)

7. KKREP Project Completion Report; Available at: http://www.kkreuo.org.np/index.php?module=library (Accessed on September 5, 2013)

8. Ministry of Finance (MoF), (2013). Economic Survey. Kathmandu, Nepal.

9. Ministry of Finance (MoF), (2010). Economic Survey. Kathmandu, Nepal.

10. NEA (2012), Nepal Electricity Authority, A Year in Review Fiscal Year 2011/012. Durbarmarg, Nepal.

11. NEA (2013), Nepal Electricity Authority, A Year in Review Fiscal Year 2012/013. Durbarmarg, Nepal.

12. PACE Nepal, (2012). Baseline study of selected sector industries to assess the potentials for more efficient use of energy , Nepal Energy Efficiency Programme (NEEP)/GIZ

13. Proposal of KKREUO for Redefinition of Index loan: Available at: http://www.kkreuo.org.np/index.php?module=library (Accessed on September 5, 2013)