With nearly 80 percent of the country’s energy consumption being met through traditional energy sources such as firewood, animal and agricultural wastes, Nepal faces a daunting task of providing clean energy solutions to its population, especially in rural areas. It is unfortunate that one-fourth of the population still lacks access to electricity in Nepal—a situation made more pitiful by the country’s enormous hydropower potential. Hydropower has been long been considered the mainstay of the Nepali energy sector. Unfortunately, for one reason or another, development of hydropower has been snail-paced, resulting in long hours of power cuts. 

The drainage of financial resources in importing electricity and fossil fuels to fill in energy deficiencies and the promotion of unsustainable energy consumption practices such as use of battery backups have been pushing the country’s development back. The bitter reality remains that our households, businesses and industries rely heavily on fossil fuels as an alternative energy source while available multiple renewable energy options remain either severely underutilised or often overlooked.

1500 percent growth

Realising the vast potential of renewable energy (RE) resources in the country and the need to promote equitable clean energy access, especially in remote areas, the government established the Alternative Energy Promotion Centre (AEPC) on November 3, 1996, as a model government agency to develop and promote renewable energy technologies. Its focus over this period has been to cater for the needs of rural and remote areas—where access to grid electricity is unlikely in the immediate future—with technical and financial support of development partners. Since 2012, the National Rural and Renewable Energy Programme (NRREP) is being implemented under a five-year national framework following a single programme modality. The AEPC has contributed significantly in reducing dependency on traditional energy sources, with the share of renewable energy in the overall energy mix of the country increasing from a lowly 0.15 percent in 1995-96 to 2.60 percent in 2013-14, a growth of over 1500 percent. 

Considering that the majority of RE systems are being severely underused, and thus hampering the overall sustainability of the systems, the promotion of productive energy use in electrified areas has been one of the key working areas of the AEPC. A total of 1,191 micro, small and medium enterprises  have been established for promoting productive energy use while another 3,151 income generating activities have been promoted to enhance rural economies. Formulation of enabling policies, including the rural energy policy and the subsidy policy, has boosted the promotion of technologies, reducing the cost for the users. Altogether eight CDM projects have been registered in UNFCCC. A total of 1.2 million CERs have already been issued with approximately USD 6.7 million generated as revenue.

A total of 2,223 households have installed a cumulative capacity of 1.125 MWp from solar PV in urban areas under the Urban Solar Programme  initiated by the AEPC. The last two decades of RE promotion have primarily focused on technology promotion, which has brought about significant progress. However, after so many systems promoted in the country, the issues of sustainability, applicability and impact are at the core of discussions. Studies show that smaller systems pose their own challenges to adequately address these issues. Smaller systems, although very vital in places like Nepal, are mostly seen as a transitory form of energy provision and are difficult to be adapted to the mainstream energy mix of the country. There is an increasing number of cases, where community electrification systems, especially from microhydro, are shut down on arrival of grid connection in the area. 

Similarly, operation of the promoted systems is always a challenge in the case of community-owned systems due to the lack of know-how and other constraints. The notion of “everybody’s property is nobody’s property” can also be observed, resulting in local conflicts and raising serious issues of sustainability and proper functionality of the systems. Building on the experiences and achievements of the AEPC in the last 20 years, upscaling technology and ensuring sustainability and grid connection of promoted off-grid systems seem to be the only way renewable energy can maintain its vibrancy and play a significant part in the lives of the people, and consequently contribute to national development. The AEPC is supporting pilot projects to connect two micro projects, Syaurebhumi in Nuwakot (23 kW) and Leguwa in Dhankuta (40 kW) to the national grid, which could potentially be a game changer for the RE sector.

The RE sector has predominantly been a subsidy driven market. While subsidy has successfully developed markets in several technological areas, significant challenges prevent mobilisation of commercial investment into the technology sub-sectors. Subsidy investment from the government has not effectively mobilised private investment or commercial credit into Nepal’s RE sector to the extent envisaged. On the contrary, there is evidence that high subsidy rates may actually hamper the process of attracting these complementary investments while beneficiaries strive to identify multiple sources of subsidies and grants. 

Sustainability of Nepal’s RE sector cannot be achieved without a paradigm shift. Although subsidy is still expected to remain at the core of RE promotion in the foreseeable future, the government has devised policies and programmes to slowly graduate from a subsidy driven approach to a more market driven approach. One of the key components for this is involvement of the private sector and financial institutions. The current RE subsidy policy formulated in 2016 has made a policy shift favouring private and financial sectors’ participation. 

Integrated energy policy

It has now been realised that solely as a social venture the RE projects may not be sustainable or attractive. Encouraging the injection of credit in RE financing is also key to making a business case out of the projects. To facilitate this process, the Central Renewable Energy Fund (CREF) is already operational as an institution responsible for efficient delivery of subsidies and credit support. To make a business case out of the projects, there is a real need to promote productive energy use to improve the plant utilisation factor of mini- and micro-hydro projects, which stands at around 20 percent. In order to ensure that the lives of people are directly and positively impacted, the new subsidy policy has incentivised assured energy supply over a period of time. This would ensure technical as well as financial sustainability while the beneficiaries are assured of energy service  provisions. 

The present energy crisis calls for closer coordination among various stakeholders, including inter-government agencies, development partners and the private sector, for streamlining and upscaling energy promotion activities. Discussions are underway to formulate an integrated energy policy to incorporate both on-grid and off-grid energy systems. 

The AEPC needs to be strengthened as the sector lead. Especially in the light of the political ambitions of providing Clean Lighting and Cooking Solutions to All by 2017, graduating from LDC by 2022 and fulfilling commitments of Sustainable Energy for All by 2030, the country faces an uphill struggle to ensure energy to all of its citizens. Renewable energy could play a transforming role in this process. 

Dhital is Executive Director of the Alternative Energy Promotion Centre (AEPC); Maskey is an policy expert at AEPC