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Nepal added nearly 529 megawatts (MW) of electricity generation capacity to its national power system in a single fiscal year, with 23 new power projects developed by independent power producers (IPPs) coming into operation.

According to the Nepal Electricity Authority (NEA), a total of 23 new projects developed by private-sector independent power producers became operational during FY 2025/26, adding 528.99 MW of installed capacity to the national grid.

The expansion marks continued acceleration in private-sector participation in Nepal’s power generation sector, with hydropower remaining the dominant source of new generation capacity.

With the commissioning of the new projects, the number of operational power projects developed by independent power producers has reached 227, with their combined installed capacity rising to 3,459 MW.

The growing contribution of IPPs is increasingly reshaping Nepal’s electricity generation landscape, as private developers continue to bring new generation capacity into operation while a much larger pipeline remains under construction.

213 projects with 6,472 MW under construction

The NEA said 213 power projects with a combined installed capacity of 6,472.21 MW are currently under construction.

In addition, 105 projects with a combined capacity of more than 2,200 MW are at various stages of development.

The figures indicate that Nepal’s generation capacity is poised for another significant expansion in the coming years if projects currently under construction and development are completed on schedule.

The increase in generation is also strengthening Nepal’s potential to supply surplus electricity to the domestic market and expand cross-border electricity exports.

54 new PPAs signed in a year

Alongside commissioning new projects, the NEA continued signing power purchase agreements (PPAs) with private-sector developers.

During FY 2025/26, the authority signed 54 new PPAs for a combined capacity of 703.6 MW.

Of the agreements, five hydropower projects accounted for 28.6 MW, while 49 solar power projects accounted for 675 MW.

The strong number of solar PPAs indicates that private-sector investment in Nepal’s renewable energy sector is increasingly diversifying beyond conventional hydropower.

With the latest agreements, the total number of PPAs signed between the NEA and independent power producers has reached 545, covering a combined contracted capacity of 12,135 MW.

The contracted pipeline represents a substantial potential increase in Nepal’s electricity generation capacity, although project completion will depend on financing, construction progress, transmission infrastructure, regulatory approvals and market conditions.

Private sector participation expanding beyond generation

The NEA has also begun exploring greater private-sector participation in electricity transmission infrastructure as private developers increasingly dominate new generation investment.

The authority said it is pursuing a policy of involving private-sector companies in transmission-line construction under the Build, Own, Operate and Transfer (BOOT) model.

Under the Tariff-Based Competitive Bidding (TBCB) framework approved by the government, letters of intent have been received from interested service providers for the construction of four transmission-line projects.

The proposals are currently under evaluation, according to the NEA.

The move could mark an important shift in Nepal’s power-sector infrastructure model, as the rapid growth of generation capacity is creating an equally urgent need to expand transmission networks.

Transmission bottlenecks emerge as key challenge

The latest figures show that Nepal’s electricity generation pipeline is expanding rapidly. However, the ability to evacuate power from generation sites to major demand centers and export points remains a critical challenge.

With thousands of megawatts of projects under construction and more than 12,000 MW already covered by PPAs, transmission infrastructure will be crucial to ensuring that newly generated electricity can be effectively integrated into the national grid.

The NEA’s move to attract private investment in transmission through the BOOT and TBCB models is therefore aimed at accelerating infrastructure development while reducing pressure on the authority to finance and construct all transmission infrastructure on its own.

Nepal’s power sector is consequently entering a new phase in which the private sector is not only becoming the principal driver of generation expansion but could also play a larger role in transmission infrastructure.

The commissioning of 528.99 MW from 23 new projects in FY 2025/26, combined with 6,472.21 MW under construction and more than 12,000 MW covered by PPAs, points to a potentially substantial expansion of Nepal’s electricity supply in the years ahead.

The major challenge now will be to ensure that generation, transmission, domestic consumption and export markets expand in parallel so that the country can fully utilize its growing hydropower and renewable-energy capacity.