United Nations
Information Centre | Nepal
The future of clean energy in Nepal: 6 opportunities
4/6/2018 11:35:57 AM

Kathmandu, 6 April 2018- Nepal is seeing big changes. There is unprecedented structural transformation for federalism, which brings its new policy challenges. There are also opportunities from increased connectivity, both physical (by roads) and virtual (by information and communication technologies).

Nepal has reached a major crossroads in its national development. The goal for the nation is to ensure prosperity for all. This will mean generating prosperity, sharing prosperity and sustaining prosperity.

Renewable energy has a key role in achieving this national vision. But not everyone has been able to access the benefits of renewable energy. Low-income communities in the last mile are often left behind. New technologies and innovative financial models can help ensure energy access for all.

In the exciting context of Nepal, we see 6 opportunities to use innovative finance for clean energy access.

1. Clean Cooking Solutions
Use of solid biomass in cooking is still common in Nepal. Over three-quarter of all households currently use traditional cooking solutions. There is huge potential for promoting clean cooking solutions with financing options in Nepal. Efforts in the past focused on low cost improved mud stoves, which were built onsite. However, households have shown a preference for more efficient options like metallic stoves and electric cook stoves. Future efforts should do more to cater to the preferences of households.

   

2. Appropriate Financing Options and Facilitation
Over 90% of the solar systems installed with UNCDF CleanStart support required no subsidy but was enabled via credit. There is opportunity to explore where else and what technologies credit facilitation can support.

Liquidity crunch in banks have hindered lending in the past. Thus, a sustainable source of financing, especially for concessional loans will be important. We need both international (e.g. GCF) and national sources of credit. This would be a major function of the Alternative Energy Promotion Centre (AEPC).

For enhancing energy lending, a combination of capacity building on the demand side and concessional loan and bankable pipeline of projects on the supply side will be important. This will be a key function of Central Renewable Energy Fund (CREF) within AEPC going forward. It will focus on matchmaking between BFIs and end-users through capacity building.

3. Digital Payment Services
Digital payment services in energy lending are still new in Nepal. The remaining 15% or so households without clean lighting solutions are in remote parts of the country. In these areas, access to technology and financing services are difficult. Digital payment services are a possibility because it can reduce the cost of collecting loan instalments. Energy systems can be promoted with the pay-as-you-go (PAYG) model. This will not only ensure the regular operation of systems but can also reduce the cost of collecting fees for energy services.

4. Renewable Energy in Agriculture
Agriculture contributes 60 percent to the GDP of Nepal. It is a key sector for millions and, yet, few have explored the links with energy technology. Use of technology and energy solutions in the agriculture value chains can increase productivity and efficiency. Digitizing access to finance and technology along agricultural value chains go hand in hand. Fintech products that could support agriculture include: Asset-backed finance, Pay-Go energy solutions, Digital warehouse receipts and inventory products creating financial records and data collateral; digital savings to help with unpredictable cash flow; digital insurance for crops; online trading platforms and e-commerce to address access to markets issues. Stakeholders in Nepal should explore these potential solutions.

5. Renewable Energy Development in Federal Nepal
Federalism provides opportunities to bundle local business development, women enterprise development and energy. Local government, which has the mandate to promote distributed electricity generation, can support these bundles. The National Planning Commission of Nepal has recently commissioned a nationwide feasibility study on this. This can help local government jump start work in this sector. Nepal plans to have a bank branch in each municipality in the country. This will ease energy lending.

6. Productive Uses of Renewable Energy
It is important to ensure that renewable energy contributes to economic productivity. Demonstrating this can help ensure that enterprises and energy lenders perceive a clear value add from the introduction of renewable energy. Examples of productive use of renewable energy in Nepal can include solar lighting for poultry farms, mobile repair centers, computer training centers, TV repair centers, water pumping for irrigation, grocery shops, bus ticket counters. The diversity in productive uses needs to be explored and develop to truly demonstrate the value of renewable energy.

Paradigm shift is sector support
Development partners face challenges in a stretched funding space of international development. We need a paradigm shift from a project-based approach to a market-based approach to advance renewable energy development. This will allow for outside sources of financing to contribute to the vast opportunities that exist. A market-based approach along with innovative partnership models can help Nepal unlock its clean energy potential as it strives to achieve its development goals.

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