Energy consumption projection of Nepal: An econometric approach

In energy dependent economies, energy consumption is often linked with the growth in Gross Domestic Product (GDP). Energy intensity, defined herewith, as the ratio of the total primary energy consumption (TPE) to the GDP, is a useful concept for understanding the relation between energy demand and economic development. The scope of this article is to assess the future primary energy consumption of Nepal, and the projection is carried out along with the formulation of simple linear logarithmic energy consumption models. This initiates with a hypothesis that energy consumption is dependent with the national macro-economic parameters. To test the hypothesis, nexus between energy consumption and possible determinant variables are examined. Status of energy consumption between the period of 1996 and 2009, and for the same period, growth of economic parameters are assessed. Three scenarios are developed differing from each other on the basis of growth rates of economic indicators: total GDP, GDP-agriculture, GDP-trade, GDP-industry, and other variables including growth in private consumptions, population, transport vehicles numbers, prices of fossil fuels etc. Scenarios are: Business as Usual (BAU), Medium Growth Scenario (MGS) and High Growth Scenario (HGS). Energy consumption in all the sectors and for all fuel types are not statistically correlated with every economic parameters tested in the assessment. Hence, the statistically correlated models are included in the prognosis of energy consumption. For example, the TPE consumption and electricity consumption, both are significantly dependent with the total GDP and population growth. Likewise, fuel wood consumption is significantly dependent with the growth in rural population and private consumptions. In BAU the estimated electricity consumption in 2030 would be 7.97 TWh, which is 3.47 times higher than that of 2009. In MGS, the total electricity consumption in 2030 is estimated to increase by a factor of 5.71 compared to 2009. Likewise, in HGS, electricity consumption would increase by 10-fold until 2030 compared to 2009, demanding installed capacity of power plant at 6600 MW, which is only from hydro power and other centralised system.