Centralized or Decentralized Electricity Governance in Nepal

Abstract

There is a debate about whether a centralized or decentralized electricity governance is suitable for Nepal. Nepal’s electricity sector is currently dominated by large hydropower projects. The proponents of the status quo argue that centralised electricity governance promotes economies of scale and consequent cost reductions, enhanced flexibility, more reliability and a stronger capacity to resist external energy shocks. Decentralized electricity governance is an emerging sub-national government-initiated electricity generation based decentralised energy governance system. Its proponents argue that decentralized electricity systems offers advantages like decreased transmission line costs, lower losses, is more responsive to local conditions and takes energy decision making closest to the users of energy, Recognizing that the debate between centralized versus decentralized electricity governance is not binary, the multilevel governance framework, used as a tool of analysis in this essay, recognizes that there are multiple state and non-state actors at different levels of government necessitating that the technical and institutional structures evolve together to ensure economics of scale, national integration and resilience. This supports the harmonization of local and national interests, with a role for the public and private sectors. Based on the above principles, more work needs to be done to formulate an effective electricity governance system for Nepal.