Energy Security in the Context of Nepal

Abstract

Energy is an important component for fulfilling basic needs of people and for all economic activities like production of goods and provision of services for any country. Securing energy supply to meet national demand for both the short term and long term is one of the most important priorities for any country all over the world. The concept of energy security is seen to be evolving over the years with recent studies encompassing not only ensuring supply but also focusing on social, economic, environmental, geopolitical, and military concerns related to energy supply and demand. The International Energy Agency (IEA) (IEA, 2008) defines energy security as “the uninterrupted availability of energy sources at an affordable price”. However, the meaning of energy security is highly context dependent, such as a country's special circumstances, level of economic development, perceptions of risks, researcher's background, time frame of study, etc. Nepal has been facing many challenges in the development of the energy sector. Traditional energy sources like fuel wood, agricultural residue, etc. are the main energy source of Nepal creating the issue of sustainability, indoor air pollution, deforestation, and even human health hazards. There is limited access to modern energy like electricity, especially in rural areas. Despite a huge potential for hydropower, solar power and wind energy, these resources have not been utilized due to geographical, technical, political and economic reasons causing an acute power shortage of electricity and load shedding. The electricity deficit has not only reduced the economic productivity of the country, but also made the country dependent on import of electricity from India. The import of electricity has been increasing rapidly to fulfill the growing demand.Petroleum products are dominant in the transportation sector followed by the industrial, residential and commercial sectors using liquefied petroleum gas (LPG) for cooking, water boiling, and space heating purposes. In the transport sector, there are no alternatives for petroleum products, except electricity which use in Nepal is insignificant. Nepal is a net importer of petroleum products, and from only one supplier country, India, which makes the country highly vulnerable to oil supply disruptions, oil price fluctuations and their effects. The expenditure made on imported energy exceeds the revenue generated from the export of all commodities. Also, the continued use of the petroleum products in the country highlights the issue of energy security and the equally important issue of sustainability. Nepal was ranked 74th out of 94 countries in 2012 and 111th out of 129 countries in 2016 in terms of Energy Trilemma Index constructed by the World Energy Council that consists of energy security, energy equity and environmental sustainability (WEC, 2018). Increasing energy efficiency, diversification of suppliers geographically, diversification of energy sources, diversification of technologies, stocks of critical fuels, etc. are some of the measures found in the literature that can improve energy security by reducing vulnerabilities. In developing countries like Nepal, energy security can mostly be interpreted as energy access to all people and energy access for expanding industry and service sectors at an affordable cost. There is a need to incorporate energy security in the national energy policy of Nepal with more emphasis on diversification of primary energy sources (other than traditional resources), increase in electricity generation from hydropower resources, reduction of import dependency especially fossil fuel resources, strategic fuel reserves, diversification of energy resources uses in different energy consumption sectors like transport, industries, increase in energy supply from renewable energy sources, etc. This chapter begins with an introduction to energy security concept and quantitative and qualitative analysis of energy security. A review of the energy security situation in the context of Nepal is presented along with different scenarios applying energy security improving measures. Finally, case studies of assessment of the energy security of Nepal under different scenarios are presented.