South Asia - Investment decision making in hydropower : decision tree case study of the upper Arun hydropower project and Koshi basin hydropower development in Nepal

Abstract

The South Asia region requires major new energy resources to support its development goals. Hydropower development, especially in mountainous areas, is a largely untapped resource for low carbon energy. This is a serious concern in countries like Nepal where hydropower provides over 90 percent of the current electricity production and which have ambitious plans to develop hydropower resources in the future. Hydropower production is affected by climate variability, and local governments are not able to provide clear guidance on screening and mitigation measures to hydropower developers. The articulation of a programmatic approach to assessing and managing climate risks in the context of other risks for hydropower investments is the goal of this document. The approach described is drawn from the decision tree developed by the water global practice with the support of the water partnership program and the decision making under uncertainty initiative led by the office of lead economist, climate change. This report describes the programmatic approach and illustrates its application with a case study of hydropower development in Nepal. Chapter one presents programmatic approach to assessing climate risks to hydropower investments in South Asia. Chapter two describes the methodology for the programmatic approach. Chapter three introduces the context for the case study, the energy sector of Nepal. Chapter four presents the application of the approach to the upper Arun hydropower project (UAHP). Chapter five presents the basin-scale analysis. The conclusions from the application are discussed in chapter six.