Renewable Energy Subsidy Policy of Nepal, 2016

Nepal is endowed with good renewable energy potential. The major sources of renewable energy are mini and micro hydropower, solar energy, various forms of biomass energy, biogas and wind energy etc. Despite huge renewable energy potential, still around 85% of the total final energy consumption in Nepal is met by traditional biomass energy and around 28% of households (HHs) in Nepal do not have access to electricity. It is not possible to significantly improve the living standard of the low income population living in the rural areas if their renewable energy demand is not met. Extension of national grid to reach those areas is not possible in many years to come due to difficult terrain, high cost and existing energy crisis in the country. Therefore, clean and sustainable energy such as Renewable Energy Technologies (RETs) needs to be developed as immediate and long-term solutions. The economic hardship of people living in the rural areas and the high initial cost of the RETs justifies the need of subsidy and concessional credit facilities to increase access to cleaner energy. In order to widely develop the RET sector, encourage very poor households to use RETs, timely revision of the subsidy amount and credit and to encourage private sector and financial institutions to invest in the sector while focusing on providing service delivery of utmost quality in rural areas, the existing policy was not adequate and hence, the need to revise and formulate a new policy has been realized. The new policy mainly focuses on gradually replacing subsidy by credit in the long-term. Similarly, it focuses on further scaling up of RETs and achieving the objectives of the UN's “Sustainable Development Goals” and “Sustainable Energy for All”.