Private energy producers have warned that Nepal’s energy sector is heading toward serious uncertainty, policy instability, and crisis by 2025. Hydropower project development, in particular, has reached a critical stage.

According to Prakash Dulal, Deputy Secretary General of the Independent Power Producers’ Association of Nepal (IPPAN), private sector energy entrepreneurs are agitated due to government decisions, court orders, and regulatory apathy, leaving the future of thousands of megawatts worth of projects uncertain.

Dulal said that the “take and pay” policy in electricity purchase and sales, introduced through the budget by then Finance Minister Bishnu Poudel, triggered agitation across the entire energy industry. Although the government claimed to have withdrawn the policy, its failure to implement the withdrawal has left power purchase agreements (PPAs) for around 5,000 megawatts of projects in limbo - projects in which the private sector has already made heavy investments.

Similarly, Dulal stated that 217 hydropower projects with a combined capacity of around 19,000 MW are facing financial distress and are at risk of collapse due to a Supreme Court order. He added that the Nepal Electricity Authority has ignored requests from the private sector for RCOD extensions, even though project delays were caused by floods, landslides, and obstacles related to the Ministry of Forests.

The challenges in the energy sector do not end there. Dulal pointed out that despite agitation by entrepreneurs, the government has failed to address the problem caused by the Nepal Securities Board blocking hydropower IPOs. In addition, the controversial practice of maintaining separate engine numbers for promoters and the public has further deepened confusion in the sector.

According to him, electricity generated during the rainy season cannot be sold due to contingency restrictions, resulting in massive financial losses for producers.

Following the Gen-Z movement, growing obstacles to hydropower projects - including issues related to free shares - have emerged as another major challenge. Although the current government decided to allow projects licensed within conservation areas and national parks before October 7, 2024, to move forward, Dulal said the decision has yet to be implemented.

Likewise, the Electricity Bill, which was said to weaken the private sector, became inactive following the dissolution of Parliament, and permission for private sector participation in electricity trading has still not been granted. Confusion has also arisen from the failure to apply PPA quota provisions to hydropower projects below 10 MW after the budget announcement.

Due to policy confusion, weak implementation, and government apathy, Dulal warned that the energy sector is moving toward greater darkness than light in 2025. As private sector morale continues to decline, he said, overall energy development in the country is at serious risk.

Nepalpurbadhar