The government and the World Bank have signed an agreement today to scale up renewable energy options in selected regions of Nepal in partnership with private sector.

The agreement was signed by Shreekrishna Nepal, joint secretary at Ministry of Finance and Bigyan Pradhan, acting country manager of the World Bank.

As per the agreement, a total of $17.21 million will be spent during four-year period under the private sector-led Mini-Grid Energy Access Project, of which the World Bank will finance total of $7.61 million through its Strategic Climate Fund (SCF), comprising grant of $5.61 million and soft loan of $2 million. Similarly, the government will contribute subsidy of $6 million and the remaining $3.6 million will be contributed by the private sector.

The project is expected to provide renewable energy to 126,000 rural people and support more than 80 businesses through micro/mini-hydro and solar sub-projects in Nepal’s rural areas. The project will be implemented by the Alternative Energy Promotion Centre (AEPC), the government’s nodal agency for renewable energy promotion in Nepal.

“We are thankful for the support of the World Bank in launching this milestone project to encourage commercial financing of renewable and off-grid energy systems in Nepal,” Nepal said as per a media release, adding that this project will demonstrate that the private sector-led model is feasible in mini-grid development and the government is committed to engage private sector in development.

Under this project, private entities and cooperatives will be mobilised to provide electricity services to rural areas as ‘energy service companies.’ These specialised companies will crowd-in financing capacity to develop, build, own and operate renewable mini-grid projects.

“Maximising finance for development is an important element in Nepal’s growth trajectory,” Pradhan of World Bank has been quoted as saying.

“By encouraging the participation of the private sector, this project motivates a business approach to improve energy access while supporting the government’s efforts to provide clean and efficient energy options to rural communities,” he added.

The project aims to support more than 25 mini-grid sub-projects and add new generation capacity of 3.8 megawatt, while rehabilitating and restoring the capacity of existing mini-grids.