The attraction towards solar energy in Nepal has been increasing rapidly. Although hydropower remains the main energy source, considering seasonal fluctuations and the emerging pattern of energy demand, both the government and the private sector have become equally focused on solar energy production.

According to the Department of Electricity Development, solar projects with a combined capacity of 2,215.43 MW are currently in the stages of study, construction, and licensing processes across the country. Of them, 97 solar projects with a total capacity of 2,104.99 MW have obtained study permits and are conducting detailed project reports and other technical studies.

Similarly, 12 projects with a total capacity of 84.4 MW are under construction. Among the projects under construction, some have reached their final phase.

Likewise, five projects with a combined capacity of 10.84 MW have applied to the Department for study permits, while three projects with a capacity of 15.2 MW have completed their study phase and have applied for construction permits.

Increasing the share of solar in the energy mix

Although Nepal has prioritized hydropower, the need for alternative energy sources has been growing to ensure stable production amid climate change, seasonal fluctuations, and rising energy demand. Energy, Water Resources, and Irrigation Minister Kulman Ghising has initiated the process to remove the minimum 10% limit set for solar energy under the energy mix policy.

Through the promotion of solar energy, the government aims to manage peak daytime demand, provide decentralized power supply in areas with damaged transmission lines, and reduce dependence on imported electricity. According to experts in the energy sector, due to the declining cost of solar technology, shorter construction time, and its environment-friendly nature, solar power is expected to occupy an even larger share in Nepal’s energy mix in the coming years.

Weaknesses in grid capacity and storage

Although the authority is preparing to purchase power from solar projects connected near the 220 kV, 132 kV, and 33 kV transmission lines, the expansion of production has brought major challenges in transmission and storage capacity. In recent times, even as electricity generation has increased, a lack of timely construction of transmission lines and substations by the government has resulted in power going to waste.

Solar generation is limited to daytime, production during peak evening demand is low, and battery storage is costly - all of which pose additional challenges. Experts say that without improvements in infrastructure, increasing production alone will not be enough to ensure strong energy security.

Policy uncertainty puts projects at risk

Private developers have complained that delays are occurring due to uncertainty in determining the solar power purchase agreement (PPA) rates. In October/ November 2024, Nepal Electricity Authority had issued letters of intent for 960 MW of solar projects, but the PPAs could not be finalized then. After Manoj Silwal assumed the role of Managing Director at the NEA, the stalled PPAs for solar projects began to move forward. PPAs for 24 solar projects with a combined capacity of 355 MW have been completed, while agreements for the remaining projects are yet to be finalized.

Adopting a competitive PPA policy is considered a positive step, as it brings cost efficiency, transparency, and market-based pricing. However, issues remain in infrastructure, financial investment, equipment costs, and market confidence within the policy and procedural framework. Therefore, although some projects have successfully secured PPAs, many others are still waiting.

Urjasanchar