Renewable Energy Development in Nepal: Potential, Policies and Challenges
Authors:
Roshan Kumar Chhetri1*, Aatiz Ghimire2
1WindPower Nepal Pvt. Ltd., Nepal
2Herald College Kathmandu, University of Wolverhampton, UK
* Author Email: chhetriroshan545@gmail.com
Abstract
This research article provides a comprehensive analysis of the renewable energy sector in Nepal, focusing on its potential, policies, and challenges. The study explores the current energy landscape in Nepal, highlighting the dominance of hydropower and the untapped potential of solar, wind, biomass, micro-hydro, and geothermal energy sources. It examines various strategic plans and policies that aim to promote renewable energy in the country and achieve sustainable development goals. Additionally, the article identifies the challenges hindering the growth of renewable energy, including outdated technologies, limited access to finance, ambiguous policies, and inadequate infrastructure. Finally, the article proposes strategic recommendations for advancing renewable energy development in Nepal, including leveraging climate and energy funds, strengthening donor relationships, fostering publicprivate partnerships, collaborating with local governments, and promoting e-cooking initiatives
Introduction to renewable energies
As of mid-March 2022, an impressive 94.0 percent of Nepal's population had achieved access to electricity. The Economic Survey, 2021/22 by the Ministry of Finance reveals that the electricity generation breakdown comprised 2,033 Megawatts (MW) from hydroelectricity, 49.73 MW from solar plants, 53.4 MW from thermal plants, and 80 MW from various other sources, encompassing renewables and co-generation1. Nepal's geographical and topographical characteristics position it as an auspicious site for the development of renewable energy. At present, hydropower stands as the primary energy source in Nepal, contributing to over 90% of the nation's electricity production. Furthermore, Nepal demonstrates potential for diversifying its energy portfolio through the utilization of other renewable sources, including solar, wind, biomass, and micro-hydro
Solar Energy
Nepal possesses a remarkable potential for harnessing solar energy, characterized by an average of 300 sunny days and 6.8 hours of sunshine. The specific solar photovoltaic (PV) electricity output capacity in the country falls within the range of 1400 kWh/kWp to 1600 kWh/kWp, resulting in an average daily total ranging from 3.8 to 4.4 kWh/kWp. The mountainous regions, with their higher elevations and cooler air temperatures, exhibit even greater potential for PV energy yield. In light of these favorable conditions, the World Bank identified the hills and lower-elevation mountains with optimal Global Horizontal Irradiance (GHI) and lower temperatures as the most suitable areas for solar PV system development in Nepal in 2017.
According to the Solar and Wind Energy Resource Assessment (SWERA) report by the Alternative Energy Promotion Center (AEPC), the estimated commercial potential for ongrid solar PV systems in Nepal is 2,100 MW, as cited by UNEP/GEF in 2008. Moreover, approximately 25% of Nepal's land area is deemed suitable for Concentrated Solar Power (CSP) systems, which, even with just 2% utilization of the best solar irradiance, can generate 1829 MW of electricity. The initiative to employ solar PV systems for electrifying rural households in Nepal was launched after the establishment of AEPC in 1996. As of mid-2021, AEPC had successfully facilitated the installation of over 961 thousand solar home systems ranging from 10Wp to 100 Wp capacities throughout the country. Additionally, around 3,000 institutional solar power systems were implemented in schools and health posts, along with approximately 2,300 PV pumping systems for small-scale irrigation and 200 systems for drinking water supply. AEPC also implemented 30 off-grid solar and solar-wind hybrid minigrids, cumulatively contributing a capacity of 1,262 kW across Nepal2. In Nuwakot, the Nepal Electricity Authority (NEA) operates a utility-scale solar PV power plant with a capacity of 25 MW. As of May 2023, 47 solar PV projects in Nepal have obtained survey licenses, indicating a projected production capacity of 1248.59 MW. Furthermore, construction licenses have been granted to 21 solar projects, collectively contributing to a total capacity of 133.56 MW3.
Wind Energy
Nepal possesses a significant and untapped potential for harnessing clean wind energy. A report published by the Solar & Wind Energy Resource Assessment in Nepal (SWERA) in 2008 identifies a promising area spanning over 6000 square kilometers, characterized by a wind power density exceeding 300 watts/m2. If only 10% of this region is considered suitable for wind energy production, Nepal has the capacity to generate up to 3000 MW of wind energy, translating to a rate of 5 MW per square kilometer. The study highlights the high and middle mountainous areas of Nepal as the most promising locations for wind energy development. However, the commercially viable wind energy potential of the country is currently estimated at a modest 448 MW. Nonetheless, efforts have been made to explore and utilize wind energy resources in Nepal. The Asian Development Bank has provided support for the installation of two wind turbines with 5 kW capacities each, accompanied by a 2 kW solar hybrid system in Nawalparasi, Dhaubadi VDC. Additionally, several pilot projects focusing on small wind-solar hybrid systems have been implemented in various locations across the country. Notably, the largest wind-solar hybrid power system in Nepal, boasting an installed capacity of 20 kW, has been successfully completed and is providing electricity to 90 rural households. As of the fiscal year 2020/2021, the cumulative installation of solar and wind mini-grid systems, according to estimates by the Alternative Energy Promotion Center (AEPC), has reached 1262 kW.
Micro and Pico Hydro
Micro-hydro and pico-hydro power systems, which generate electric power below 100 kW and 1 kW respectively, have emerged as practical and cost-effective solutions to address the electricity needs of rural and remote areas in Nepal, where expanding the national grid has been challenging. Leveraging its vast hydropower potential, Nepal has actively promoted the development of micro-hydropower as a means of rural electrification since the government initiated subsidization for such projects in 1981. As of 2018, the installed capacity of micro hydropower plants, including pico-hydropower plants, reached up to 38 MW, while the country's untapped potential for hydroelectricity from these small-scale plants exceeds 50 MW.
Integrating micro and pico-hydropower systems into the national grid would enhance their sustainability and economic viability. By 2020, four micro-hydropower plants with a total capacity of 253 kW have been successfully integrated into the national grid, with several more projects currently under evaluation. The Alternative Energy Promotion Center (AEPC) collaborates closely with various stakeholders, including local communities, to facilitate and promote the development of micro and pico-hydro projects throughout the country.
Biomass
According to the Ministry of Finance (2021), Nepal's agricultural sector plays a crucial role in the country's economy, employing 60.4% of the total population4. The substantial biomass generated from farming and livestock activities presents an excellent opportunity for utilizing biogas technology, particularly for cooking purposes, given the country's sizable population. Around 1.9 million households, accounting for 42% of all households in Nepal, have the potential to adopt household biogas systems. The Government of Nepal (GoN) has actively promoted various capacities of biogas plants under the domestic category, ranging from 2 cubic meters to 8 cubic meters, while biogas plants exceeding 12 cubic meters are classified as Large Biogas Plants. As of 2021, approximately 435,000 household biogas plants have been successfully installed across Nepal, with a majority of these installations located in the Terai region. Additionally, there are 343 large-scale biogas plants implemented throughout the country, with over half of them also situated in the Terai region. These initiatives demonstrate the government's commitment to expanding the adoption of biogas technology and harnessing its benefits for sustainable energy and rural development
Geothermal Energy
Geothermal energy refers to the thermal energy that is generated from the sub-surface of the Earth, where water and/or steam are responsible for carrying this energy to the surface. In the Nepalese context, geothermal energy can be employed for an array of applications, including agriculture drying, fish farming, greenhouse heating, snow-melting, and bio-digestion. Despite the many potential benefits of geothermal energy in Nepal, its use has thus far been limited to recreational and tourism-related activities such as balneotherapy. Nepal remains in the early stages of exploring the potential of geothermal energy, and the country's only source of information regarding hot springs and geothermal resources comes from two research papers authored by Mahendra Ranjit (2005, 2015). There are 31 major geothermal springs scattered throughout Nepal, but the government's "Alternative Energy Perspective Plan" (2002-2017) identifies geothermal energy as a promising alternative energy source for the country. In 2001, the Government of Nepal initiated geothermal programs through the Alternative Energy Promotion Centre, which conducted field surveys at two accessible geothermal locations: Kodari and Singha Tatopani. However, the study was limited to preliminary chemical analysis of the thermal water. While isotopic studies conducted by Mahendra Ranjit (2010) suggest the possibility of a vast geothermal reservoir in the Sadhu Khola - Jomsom area of central Nepal, these qualitative estimates must be confirmed through geophysical investigations.
Renewable Energy in Various Strategic Plans and Policies
Nepal is resolutely dedicated to achieving net-zero emissions by 2045, as detailed in its comprehensive Long-term Strategy for Net-zero Emissions. The strategy presents two scenarios: the With Existing Measures (WEM) scenario, which evaluates the impact of intervention measures implemented up to 2020, and the With Additional Measures (WAM) scenario, which encompasses additional feasible mitigation actions. The strategy's sectoral approach emphasizes maximizing power generation from renewable energy sources. Key strategic actions include the development of hydropower plants, integration of variable renewable energy into power systems, expansion of distributed energy resources, and the establishment of policies on regional power sector integration, renewable energy integration, and grid flexibility. For both the WEM and WAM scenarios, the Long-term Strategy establishes targets for energy generation capacity and investment. By 2050, the WEM scenario aims for 34 GW of hydropower, 2.1 GW of grid-connected solar PV plants, and 1.1 GW of off-grid and isolated renewable energy power systems. The more ambitious WAM scenario sets targets of 50 GW of hydropower, 2.1 GW of grid-connected solar PV plants, and 1.1 GW of off-grid and isolated renewable energy power systems. The estimated investment required to achieve these targets is $9.85 billion for the WEM scenario and $15.05 billion for the WAM scenario by 2050. Additionally, according to IFC statistics, Nepal has the potential to attract $46 billion in green and climate-friendly foreign investments from 2017 to 2030.
The Sustainable Development Goal (SDG) Baseline Report for 2030 outlines Nepal's objectives for increasing electricity access, reducing reliance on firewood for cooking, raising per capita electricity consumption, and decreasing commercial energy use per unit of GDP5.
Nepal's Second Nationally Determined Contribution (NDC) aims to expand clean energy generation from 1,400 MW to 15,000 MW by 2030, with 5-10% coming from mini and micro-hydro power, solar, wind, and bio-energy. This is intended to ensure that 15% of the total energy demand is met from clean energy sources.
The 15th National Plan sets targets for augmenting the share of renewable energy in the country's overall energy consumption and fostering an investment-friendly environment for renewable energy projects. By 2023/24, Nepal aims to increase the share of renewable energy in total energy consumption from 7% to 12%. The plan also includes targets for renewable energy generation, starting from a baseline of 67.8 MW in 2018/19 and reaching 216.6 MW by 2023/24, 4,000 MW by 2029/30, and 5,000 MW by 2043/447.
In conclusion, these documents underscore Nepal's steadfast commitment to increasing the proportion of renewable energy in its energy mix. While hydropower remains a focal point, Nepal is also actively pursuing the development of other renewable energy sources such as solar, wind, and biomass.
Challenges and way forward
Challenges
The development of renewable energy in Nepal is a multifaceted endeavor that entails addressing various complex challenges. One of the foremost obstacles is the imperative to phase out outdated technologies that still dominate the energy sector. Traditional biomass sources like firewood and agricultural waste persist as the primary energy sources in Nepal. To forge ahead, it is essential to foster a new technology ecosystem by investing in solar and wind technologies and constructing the requisite infrastructure to support their deployment. However, this endeavor necessitates substantial investment and a skilled workforce, which are not readily available within Nepal.
Effective coordination with local and provincial governments assumes paramount importance in renewable energy development, as these entities play a critical role in identifying local energy needs and prioritizing renewable energy projects. Nevertheless, the centralized nature of Nepal's energy sector poses challenges to effective coordination with these regional authorities. Another significant challenge lies in accessing finance, as renewable energy projects entail substantial upfront investments, while financing options remain limited. Innovative financing models, such as public-private partnerships, are indispensable to overcome this hurdle. Gender, equity, and social inclusion (GESI) considerations are vital in the development of renewable energy. The sector must strive for inclusivity and equity, addressing the specific needs of women, youth, and other marginalized groups. Nepal also has a considerable number of households that will permanently remain off-grid. In this regard, the development of innovative solutions, such as community-based microgrids and decentralized renewable energy systems, is crucial to ensure that these households have access to renewable energy. Given Nepal's challenging terrain and underdeveloped infrastructure, developing renewable energy infrastructure necessitates substantial capital investment. Consequently, improving road and transport infrastructure becomes imperative to ensure that renewable energy services can reach remote communities. Moreover, the presence of ambiguous policies and regulations creates uncertainty and hampers investment in renewable energy development. Establishing clear and consistent policy directions becomes pivotal to attract investment and support the growth of the sector.
Way Forward
The following strategies can be explored to facilitate the advancement of renewable energy in Nepal:
Facilitating Climate and Energy Funds: The government should establish and implement a comprehensive approach to effectively utilize climate funds such as the Green Climate Fund (GCF), International Renewable Energy Agency (IRENA), and Global Environment Facility (GEF) to support the development of renewable energy projects in Nepal. Mobilizing resources from these funds will require well-crafted project proposals, stakeholder engagement, and sound financial management to ensure timely disbursement of funds.
Strengthening Donor Relationships: The government should enhance its partnerships with donors such as the German Agency for International Cooperation (GIZ) and the UK Foreign, Commonwealth & Development Office (FCDO), while also diversifying funding sources by engaging with other key donors active in the energy sector, including the United States Agency for International Development (USAID), Swiss Contact, Japan International Cooperation Agency (JICA), and Korea International Cooperation Agency (KOICA). These engagements can be conducted through bilateral and multilateral approaches.
Public-Private Partnership with the Private Sector: Explore and develop project banks on a public-private partnership (PPP) model in collaboration with private sector companies to attract private sector investment and scale up renewable energy projects in Nepal. Ensuring the inclusivity of these projects in line with the principles of Gender Equality and Social Inclusion (GESI) is essential to promote equity and sustainability.
Collaboration with Local and Provincial Governments: The federal government should collaborate with local and provincial governments, as stipulated in the new constitution to facilitate efficient resource allocation and strengthen the development of renewable energy projects in Nepal.
Engaging Local Governments in MSW-to-Energy Projects: Engage local governments in Municipal Solid Waste (MSW) to Energy projects, which can promote clean energy and waste reduction. Local governments can contribute by conducting public awareness programs on waste segregation and facilitating private sector involvement in addressing local issues. Strategic engagement with multiple stakeholders, including local governments, government agencies, and private sector partners, is crucial.
Promoting E-cooking: The government should actively promote e-cooking as the primary cooking method, which can mitigate indoor air pollution and improve health outcomes. Effective awareness campaigns, targeted marketing, and sustained advocacy efforts are required to encourage the adoption of e-cooking technologies.
Transitioning from Coal to Biomass Fuel: Prioritize the replacement of coal with biomass fuel, a cleaner alternative that reduces greenhouse gas emissions and improves air quality in Nepal. This will necessitate the development of comprehensive biomass fuel supply chains, strategic partnerships with local communities, and robust regulatory frameworks to incentivize the use of biomass fuels.
Encouraging Green Hydrogen: Nepal should promote the use of Green Hydrogen, produced from renewable energy sources, as a clean and sustainable energy solution. This entails establishing robust research and development programs, forging partnerships with private sector companies, and implementing targeted policy interventions to stimulate the adoption of Green Hydrogen technologies.
Private Sector Engagement in Micro-Hydro through RESCO Model: Engage private sector companies in the development of micro-hydro projects using the Renewable Energy Service Company (RESCO) model. This approach will facilitate access to clean energy in rural areas and attract private sector investment for the expansion of renewable energy projects. It requires the formulation of robust business models, strategic partnerships with local communities, and effective stakeholder engagement to ensure the long-term viability of micro-hydro projects.
References
https://www.npc.gov.np/images/category/SDGs_Baseline_Report_final_29_June-1(1).pdf
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https://www.npc.gov.np/images/category/15th_plan_English_Version.pdf
This is the web copy of an article that was originally published in the print version of 'The agrineer 2023' - Annual Magazine. https://doi.org/10.6084/m9.figshare.23619030
