The World Bank today approved the Strategic Climate Fund (SCF) grant amounting to $5.61 million and SCF loan in the amount of $2 million to help Nepal diversify its energy sources to renewables.

The SCF grant and credit support the private sector-led Mini-Grid Energy Access Project, which aims to mobilise energy-service companies in selected regions of the country to increase the capacity of renewable energy mini-grids, the World Bank said in a statement issued today.

“One component of the project will provide credit facility to the private sector to support renewable mini-grid sub-projects, and help this sector prosper and expand,” said Subodh Adhikari, World Bank senior energy specialist and task team leader of the project.

According to him, the second component will provide technical assistance to the mini-grid sector, energy-service companies and partner banks to ensure smooth and sustainable implementation.

The project is aligned to the efforts of the government of Nepal to address barriers to private sector participation in the renewable energy mini-grid sector and aims to address these barriers by successfully demonstrating new approaches that will promote public-private partnerships.

Similarly, private entities and cooperatives will be mobilised to provide electricity services to rural areas as ‘energy service companies (ESCOs)’.

These specialised ESCOs will crowd-in the necessary technical expertise and financing capacity to develop, build, own and operate renewable mini-grid projects. They will have access to better credit terms and stronger project development support through project.

“This project will tap into the vast business opportunities and technical potential for the private sector to provide more efficient and sustainable energy services in Nepal,” said Faris Hadad-Zervos, World Bank country manager for Nepal, adding that it is directly linked to the government of Nepal’s effort for greater private sector management and commercial financing through public- private partnerships, and the World Bank’s mission of maximising all financial opportunities for development.

Furthermore, the project aims to improve the overall energy supply situation in Nepal by promoting renewable energy solutions, including the opportunities to capture private sector efficiencies through PPPs.

While enhancing the market, the project ultimately aims to support rural residential and non-residential customers, who will gain access to new or improved energy services in rural areas through renewable energy mini-grids.