44219-014: South Asia Subregional Economic Cooperation Power System Expansion Project

Project Data Sheet (PDS): Details

Description

The project will contribute to Nepal s energy development objectives by (i) scaling up the on-grid and off-grid renewable energy supply, (ii) facilitating cross-border power exchange, (iii) increasing access to renewable energy in rural areas, and (iv) building capacity for on-grid and off-grid power sector development. The on-grid components will be able to evacuate 2,000 MW of new generation outputs along the Kali Gandaki corridor and Marsyangdi corridor to the main load centers at Kathmandu Valley, and facilitate at least 1,200 MW of power exports to India once the second 400 kilovolt (kV) cross-border transmission line from Bardaghat (Nepal) to Gorakhpur (India) is connected. Half of the exports will come from the Upper Marsyangdi 2 Hydropower Project, which is to be developed by GMR Group, India. The off-grid component will provide access to electricity and facilitate productive energy use activities in rural locations without connections to the national grid, increasing the income and welfare of rural communities by using renewable energy mainly for agriculture, rural enterprises, health, and education. The project is consistent with the Asian Development Bank (ADB) country partnership strategy for Nepal, which aims to (i) improve inclusive electricity access, (ii) develop renewable energy, (iii) promote regional cooperation, and (iv) strengthen sector governance. The project is also prioritized as part of the South Asia Subregional Economic Cooperation Program s Power Generation and Transmission Master Plan and Regional Cooperation Business Plan, 2014 2016. The sector and programmatic context of the project is presented in a supplementary document.

Project Rationale and Linkage to Country/Regional Strategy

Nepal is facing chronic power shortages. Only 65% of the country s households have access to electricity 56% through the national grid and 9% through off-grid solutions. Per capita electricity consumption is 102 kilowatt-hours per year, one of the lowest in the world. The installed capacity is 762 megawatts (MW), well below the peak demand of 1,095 MW. As a result, consumers connected to the national grid experience scheduled power cuts of 12 hours per day or more during the dry season. With the expected commissioning of six hydropower projects with a combined capacity of 732 MW in the next 3 to 6 years and more than 1,500 MW of additional capacity being developed, a wet season supply surplus is anticipated by 2018. However, the limited power transmission and distribution network is becoming a bottleneck for meeting domestic power demand, as well as power trade with neighboring countries. To achieve the 25% electrification target through off-grid solutions, the government has enacted policies and plans such as the Rural Energy Policy 2006, Subsidy Policy for Renewable (Rural) Energy 2009 2013, Renewable (Rural) Energy Subsidy Delivery Mechanism 2013, and Delivery Mechanism of Additional Financial Support to Micro/Mini Hydro Project 2011. Enabling measures such as targeted grants (subsidies) and exemption of renewable energy projects from certain licensing requirements have been set up. These activities are being coordinated and implemented under the National Rural and Renewable Energy Program, a government-led single window program for off-grid renewable energy supported by development partners.

Impact

Increased electricity access in Nepal and improved power exchange across the border

Project Outcome

Description of Outcome

Increased capacity of national grid and enhanced renewable energy development

Progress Towards Outcome

Loan (3139) and grants (0397-0398) effectiveness declared on 15 January 2015.

Implementation Progress

Description of Project Outputs

1. Power transmission capacity increased 2. Power distribution network improved 3. Mini-grid-based renewable energy systems in off-grid areas increased 4. Capacity development support to NEA and AEPC provided.

Status of Operation/Construction or Implementation Progress

NEA approved the establishment of Project Management Directorate (PMD) and appointed a Chief of PMD.

Safeguard Categories

Environment: B
Involuntary Resettlement: A
Indigenous Peoples: B

Summary of Environmental and Social Aspects

Environmental Aspect

Initial environmental examinations and an environmental assessment and review framework for future unidentified off-grid subprojects have been prepared for both on- and off-grid components following ADB's Safeguard Policy Statement (2009) and the government's environmental regulatory framework. Potential impacts are mostly temporary and reversible, but some irreversible impacts on the natural habitat will occur because of the clearance of about 150 hectares of forested land. Available information on the habitat ranges and elevations of sensitive species indicates that critical habitat will not be directly impacted; potential impacts on natural habitat and potentially sensitive ecosystems have been identified and can be readily mitigated. Due diligence has determined that associated hydropower facilities comply with Nepal s regulatory requirements. Cumulative and induced impacts will have net positive benefits from easier access to energy and productive end uses of energy. Climate change risk screening was conducted and resulted to a medium climate change classification. Risks identified will be addressed through best practice engineering design. The initial environmental examinations and environmental management plans (EMPs) for all components include mitigation measures, monitoring, and budgetary provisions that are adequate to address the environmental impacts of the project. The EMPs requirements will be incorporated into bidding documents. The NEA and AEPC have sufficient capacity to supervise construction contracts and EMP implementation, including preparation of semiannual monitoring reports. The EMPs will be updated as necessary during implementation. Public consultation and information disclosure requirements have been met, including requirements for consultation with the management teams for protected areas. The environmental assessment for the project was disclosed on ADB s website on 28 February 2014.

Involuntary Resettlement

The project will require land acquisition and involuntary resettlement, which will primarily be economic displacements with limited impact from physical displacement. The transmission and distribution components will have permanent and temporary impacts. Permanent impacts are anticipated from land acquisition for the construction of new transmission substations, distribution substations, transmission towers, and distribution poles. The temporary impacts will be from the loss of trees and crops along the right-of-way. About 715 households will be affected by land acquisition and loss of crops and trees. An initial assessment shows that the project areas do not have any endangered indigenous peoples groups. The magnitude of the impacts on indigenous peoples is not significant. Impacts are limited to loss of portions of land which will be compensated at replacement cost. Where these groups are considered vulnerable, additional resettlement assistance will be provided, in addition to the compensation, and consultations will be carried out to make them aware of the project and to obtain their endorsement for land acquisition. The off-grid component will not have any resettlement impacts for sample subprojects and no adverse impacts on indigenous peoples. The minimum private land requirements for the sample subprojects will be met through voluntary land donation. A due diligence report has been prepared for the sample subprojects. The off-grid component allows for future subprojects, which have not been identified and are subject to due diligence. Therefore, a resettlement framework and an indigenous peoples planning framework have been prepared as required by the Safeguard Policy Statement and related national policies and legislation. AEPC will monitor the implementation of the resettlement and indigenous people plan, and will submit semiannual reports to ADB. Social safeguards measures will be achieved in line with the provisions stated in the PAM. A summary of the initial social safeguards assessment is presented in the summary poverty reduction and social strategy.

Indigenous Peoples

Based on surveys, two draft combined resettlement and indigenous peoples plans have been prepared for the on-grid components, in line with ADB?s Safeguard Policy Statement and the government?s legal framework. These plans will be publicly disclosed to interested stakeholders on the ADB and NEA websites.

Stakeholder Communication, Participation and Consultation

During Project Design

Stakeholder participation and consultations were conducted during project design. The same will be conducted during project implementation.

During Project Implementation

Stakeholder participation and consultations were conducted during project design. The same will be conducted during project implementation.

Status of Covenants

Category Rating
Loan 3139
Sector Satisfactory
Social Satisfactory
Financial Satisfactory
Economic
Others Satisfactory
Safeguards Satisfactory
Project Financial Statements
Grant 0397
Sector
Social
Financial
Economic
Others
Safeguards
Project Financial Statements
Loan -
Sector
Social
Financial
Economic
Others
Safeguards
Project Financial Statements
Grant 0398
Sector
Social
Financial
Economic
Others
Safeguards
Project Financial Statements

 

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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