KATHMANDU, May 26: Experts have called on the government to urgently prioritize energy security through diversification of energy sources and accelerated investment in electricity storage technologies, warning that Nepal’s growing dependence on a narrow energy base could pose long-term economic and supply risks.
Speaking at a program in Kathmandu, energy economists highlighted that rising volatility in global fuel markets and increasing project costs—driven by fluctuations in petroleum prices—have reinforced the need for a more resilient and balanced energy strategy.
Ram Manohar Shrestha, energy economist and emeritus professor at the Asian Institute of Technology, said Nepal should capitalize on the rapidly declining costs of energy storage systems, particularly grid-scale technologies. “As energy storage technology is becoming more competitive, Nepal must take advantage of installing grid-scale storage systems to strengthen reliability and flexibility in the power sector,” he said.
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Experts noted that global energy markets have faced repeated shocks in recent years, including a sharp rise in coal prices following the Russia–Ukraine conflict between 2022 and 2023, along with continued volatility in petroleum markets linked to geopolitical tensions. However, they observed that Nepal remains relatively insulated, with fossil fuels accounting for only around 14–15 percent of total energy demand.
Citing research-based estimates, speakers noted that a 10 percent rise in petroleum prices can reduce gross domestic product by about 0.15 percent and increase inflation by roughly 0.4 percent. Demand, however, remains relatively inelastic, with consumption falling by only around 2 percent under similar price increases.
Despite recent global price declines prior to renewed geopolitical tensions, experts pointed out that Nepal has historically failed to build adequate strategic fuel reserves. While many countries maintain petroleum stocks sufficient for 60 to 240 days of consumption, Nepal’s reserves last for less than 15 days, exposing the economy to supply vulnerabilities.
The discussion also highlighted structural challenges in Nepal’s current energy system, which is heavily reliant on hydropower. Experts warned that climate change impacts are increasingly affecting hydropower generation reliability, raising concerns about long-term stability.
At the same time, Shrestha noted that Nepal’s electricity demand is projected to grow significantly, reaching up to 10,000 MW by 2030. With government projections estimating domestic production capacity of around 15,000 MW, the country could face a surplus of approximately 5,000 MW—underscoring the need for improved demand planning and export or storage solutions.
He stressed that Nepal must now move toward a comprehensive energy strategy focused on diversification and sustainability. This includes expanding solar energy, exploring hydrogen technologies, and strengthening supply-side resilience through a balanced energy mix.
Experts concluded that a forward-looking policy framework combining storage technologies, diversified energy sources, and strategic planning will be essential for ensuring Nepal’s long-term energy security.
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