Ministry of Population and Environment: Renewable Energy Subsidy Policy, 2073 BS
Ministry of Population and Environment: Renewable Energy Subsidy Policy, 2073 BS
Ministry of Population and Environment: Renewable Energy Subsidy Policy, 2073 BS
Government of Nepal
May 2016
1. Background
Nepal is endowed with good renewable energy potential. The major sources of renewable energy are
mini and micro hydropower, solar energy, various forms of biomass energy, biogas and wind energy
etc. Despite huge renewable energy potential, still around 85% of the total final energy consumption in
Nepal is met by traditional biomass energy and around 28% of households (HHs) in Nepal do not have
access to electricity. It is not possible to significantly improve the living standard of the low income
population living in the rural areas if their renewable energy demand is not met.
Extension of national grid to reach those areas is not possible in many years to come due to difficult
terrain, high cost and existing energy crisis in the country. Therefore, clean and sustainable energy such
as Renewable Energy Technologies (RETs) needs to be developed as immediate and long-term
solutions. The economic hardship of people living in the rural areas and the high initial cost of the
RETs justifies the need of subsidy and concessional credit facilities to increase access to cleaner
energy.
2. Past Efforts
The Government of Nepal (GoN) has been supporting promotion and development of RETs since more
than past two decades with support from Development Partners (DPs), private sector and non-
governmental organizations. These initiatives have resulted in significant fruitful achievements in the
development of renewable energy in the country. The GoN and DPs have been providing financial and
technical support to increase energy access in the rural areas both for household's consumption and
productive end uses.
3. Present Situation
Till date, around 25% population has access to electricity through renewable energy sources. Around
30 MW of electricity has been generated from mini and micro hydro schemes, 15 MWp from solar PV
system and around 20 kW from wind energy. More than 1.5 million households have been benefited
from different renewable energy sources for cooking, lighting and productive end uses.
The GoN and various DPs have been providing financial and technical support to increase access to
clean energy. The Renewable Energy Subsidy Policy 2012 has supported in bringing down costs of
RETs, ensuring quality and increasing beneficiary trust on technologies. But majority of the population
living in the rural areas under poverty level remain without access to clean energy have been deprived
of basic energy solutions due to high initial upfront cost of the RETs.
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be standing in the way of attracting these complementary investments on the basis of mutual benefit.
Additional challenges are low utilization rates for the energy produced and delays faced by vendors in
being reimbursed for subsidy.
Major problems and challenges are as follows:
a) Lack of mobilization of credit and high dependence on subsidy is hampering the expected
promotion of RETs. Financial closure for community electrification projects is taking an
excessively long time while communities strive to identify multiple sources of subsidies and
grants on top of that provided by AEPC instead of accessing loan.
b) Policy barriers for private sector investors and service providers to access subsidies is reducing
private sector investment, keeping out management skills and technology dissemination that
private companies can bring in.
c) The flexibility in the pre-qualification system for consultants, manufacturers, vendors, and
contractors has inhibited competition (resulting in high cost structure) and impeded
technical/technological quality improvement in the domestic renewable energy sector.
d) There is a need to extensively promote productive end use of energy to bring about
improvements in rural livelihood by increasing the plant factor of mini and micro-hydro projects.
e) Verification, monitoring and quality assurance, and testing against standards incur large financial
costs and delays that needs to be streamlined.
f) Energy tariffs for rural areas are not enough to recover the initial investment costs for the
facilities. The tariffs only seem to recover small loan repayment and operation and regular
maintenance costs.
6. Long-term Goal
To achieve universal access to clean, reliable and affordable renewable energy solutions by 2030.
7. Objectives
To reduce dependence on traditional and imported energy by increasing access to renewable energy for
improving the livelihoods of people and create employment opportunities especially in the rural areas.
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8. Strategies
8.1. To reduce the initial upfront cost thereby increasing the access to the renewable energy services.
8.2. To maximize service delivery and efficiency in the use of renewable energy resources and
technologies in rural areas and to use renewable energy solutions thereby reducing regional
disparity, creating rural employment and enhancing livelihood of rural people particularly
households from single women, low income, natural disaster victims and socio-economically
disadvantaged groups.
8.3. To support development and growth of the renewable energy market by mobilizing commercial
credit, attracting private sector/entrepreneurs and reducing their investments risks.
8.4. To encourage public-private sector participation in the renewable energy technologies.
9. Working Policies
9.1. Best available renewable energy technology based on cost per unit of energy output will be
promoted.
9.2. Additional studies and research on renewable energy technologies will be conducted to reduce
costs and to encourage the technology transfer.
9.3. Use of renewable energy services will be encouraged for reducing the drudgery of rural women
thereby increasing their productive time and improving health and educational status of the
households.
9.4. Support will be provided for achieving the government’s long-term target of reducing energy
supply and consumption disparity in rural and urban areas through rural electrification and
availability of energy services.
9.5. Support will be provided for sustainable development of RET market in Nepal.
9.6. The institutionally strengthening and working area expansion of Central Renewable Energy
Fund (CREF) will be accomplished to ensure credit mobilization into the renewable energy
sector.
9.7. Private sector participation in ownership, operation and management of RETs will be
encouraged.
9.8. Technical quality in the renewable energy sector will be enhanced.
Clarification: For the purpose of this policy, Category "A", Category "B" and Category "C" regions
refers to Very Remote, Remote and Accessible areas as mentioned in Annex-1 of this
policy.
11.1.1.1. Mini/micro hydropower for productive energy use
In order to replace the use of fossil fuel by electricity from mini/micro hydropower in productive
applications particularly in sectors like tourism, mining, marble cutting, stone crushing, cement
manufacturing, irrigation, pumping and large-scale agro-processing, generation – equipment subsidy
amount as per Section 11.1.1 will be provided. A detailed business plan with local employment
opportunities has to be prepared by the developer to be eligible for subsidy.
11.1.2. Pico Hydro up to 10 kW capacity
The subsidy for pico hydro up to 10 kW capacity will be as follows:
Subsidy Amount in Rs.
Subsidy Category Capacity Category “A” Category “B” Category “C”
Regions Regions Regions
Distribution (per HH) Up to 10 kW 11,500 10,500 10,000
Generation (per kW) Less than 5 kW 70,000 60,000 50,000
5 kW to 10 kW 95,000 85,000 75,000
But, for systems having capacity less than 5 kW, the maximum subsidy per kW will not exceed Rs.
185,000; Rs. 165,000 and Rs. 150,000 for Category "A", Category "B" and Category "C" regions
respectively. Similarly, for systems from 5 kW to 10 kW, the maximum subsidy per kW will not
exceed Rs. 210,000; Rs.190,000 and Rs.175,000 for Category "A", Category "B" and Category "C"
regions respectively. However, in case of individual developers, conditions as specified in the Subsidy
Delivery Mechanism should be fulfilled to be eligible for subsidy.
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11.1.4. Incomplete old micro hydropower projects
Micro hydropower projects in remote areas that have not been completed due to lack of financial
resources or technical reasons by the time of approval of this policy will be provided one time subsidy,
including regular subsidy and additional subsidy, of up to 80% of the cost for ensuring its completion.
However, projects that have already received additional subsidy previously will not receive additional
subsidy through this policy.
11.1.5. Improved Water Mill
11.1.5.1. The subsidy for improving water mill for mechanical applications like hulling and
grinding will be as follows:
Subsidy Amount in Rs.
Type of Improved Water
Category “A” Category “B” Category “C”
Mill
Regions Regions Regions
Grinding 18,000 16,000 14,000
Hulling and grinding 38,000 36,000 34,000
11.1.5.2. The subsidy for private or community owned improved water mills generating up to 5
kW of electricity providing electricity access to nearby households will be as follows:
Subsidy Amount in Rs.
Subsidy Category Category “A” Category “B” Category “C”
Regions Regions Regions
Distribution (per HH) 11,500 10,500 10,000
Generation (per kW) 50,000 30,000 20,000
But, the maximum subsidy amount per kW for generation and distribution will not exceed Rs. 107,500;
Rs. 82,500 and Rs. 70,000 for Category "A", Category "B" and Category "C" regions respectively.
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11.2.2. Solar Mini Grids
The subsidy for community/cooperative/private/public private partnership owned solar electrification
projects up to 1000 kWp in areas not connected through national grid or other sources, depending on
the choice of the project developer to opt for subsidy on the basis of actual power generation or actual
energy consumption, will be as follows:
Subsidy Amount in Rs.
Subsidy Category Category “A” Category “B” Category
Regions Regions “C” Regions
A) Subsidy on the basis of project
Distribution (per HH) 32,000 30,000 28,000
Generation – Equipment (per kWp) 175,000 165,000 150,000
But, the maximum subsidy amount per kW for generation and distribution will be maximum of 60% of
the system costs but not exceeding Rs. 495,000; Rs. 465,000 and Rs. 430,000 for Category "A",
Category "B" and Category "C" regions respectively. Distribution subsidy will be provided to a
maximum 10 households per kW.
B) Subsidy on the basis of energy consumption
Energy Consumption (kWh) 60% 60% 60%
Subsidy for energy consumption will be paid to the concerned project operator over a period of five
years only based on actual energy consumption. However, irrespective of whatever is stated above,
financial support more than the subsidy amount mentioned above can be provided for pilot projects as
per the understanding between GoN and DPs.
11.2.3. Maximum subsidy amount of up to 65% of the total systems cost but not exceeding Rs.
500,000 will be provided for solar photovoltaic system to be installed in public institutions
in rural areas particularly for operating computers and other electrical equipment in
schools, for operating vaccine refrigerator and other electrical equipment and lighting
purposes in health posts, government and community hospitals.
11.2.4. Maximum subsidy amount of up to 60% of the total costs but not exceeding Rs. 1,500,000
per system will be provided for PV pumping system for drinking water managed by
community or private company. An additional subsidy of Rs. 4,000 per household will be
provided to the “targeted beneficiary groups”.
11.2.5. Maximum subsidy amount of up to 60% of the total costs but not exceeding Rs. 2,000,000
per system will be provided for PV pumping system for irrigation of agricultural land
managed by community or private company.
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11.5. Biogas
The subsidy is applicable to GGC (Gobar Gas Company) 2047 Model, the GGC 2047 modified model
and other latest efficient models of various capacities to serve the homes, public institutions,
commercial enterprises and communities.
11.5.1. Domestic Biogas Plant
11.5.1.1. Subsidy per plant per household for domestic biogas plant, using animal dung as the
main fuel, will be as follows:
Subsidy Amount (Rs)
Region
2 cum 4 cum 6 cum and above
Mountain Districts as specified by GoN 25,000 30,000 35,000
Hill Districts as specified by GoN 20,000 25,000 30,000
Terai Districts as specified by GoN 16,000 20,000 24,000
However, the subsidy amount specified above for 6 cum and above domestic biogas plant will be
reduced by 5% every year up for 3 years from FY 2074/75.
11.5.1.2. Additional 10% of the subsidy amount specified above per plant per household will be
provided to the “targeted beneficiary groups”.
11.5.1.3. In case of biogas plants using kitchen waste and other household bio-degradable waste,
subsidy amount of up to 50% of the total cost but not exceeding Rs. 10,000 will be
provided to specific designs of domestic biogas plants with capacity 4 cum or less in
order to improve urban environment and reduce consumption of imported fuel.
11.5.2. Waste-to-Energy based Biogas
Biogas plants with a capacity from 12.5-35 cum are considered as small, 35-100 cum are considered as
medium and above 100 cum are considered as large biogas plants.
11.5.2.1. Biogas plants which utilize human waste, solid waste, agriculture residues etc.
available in the public institutions such as schools, colleges, hospitals, police and army
barracks, senior citizen homes and religious places will be eligible for institutional
subsidy.
11.5.2.2. Enterprises such as poultry farms, cattle farms, slaughter houses, small/cottage,
medium and large scale industries etc. that are owned by private entities having good
potential for biogas production are considered to be commercial entities. The
enterprises with high volume of organic waste production have a high potential of
biogas production. The energy thus produced can either be distributed or self-
consumed. Such small, medium and large biogas plants are eligible for subsidy under
commercial category.
11.5.2.3. Subsidy in case of waste-to-energy plants has been calculated on the basis of biogas
generation capacity of the plant
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Subsidy Amount in Rs.
Thermal Application per CuM of Biogas Produced Per Additional Subsidy for
Biogas Plants day at Normal Temperature & Pressure Electricity Generation
per kW (Baseload for
Terai Hills
24 hrs)
Commercial Small Medium Large Small Medium Large
65,000
Biogas Plants 20,000 25,000 30,000 24,000 30,000 36,000
Institutional
Biogas Plants for
57,000 68,000 185,000
Public
Institutions
Community
45,000 54,000 150,000
Biogas Plants
Municipal Scale 40% of total
Waste to Biogas 40% of the total cost but 40% of the total cost but electrification cost but
Energy Systems not exceeding Rs. 200,000. not exceeding Rs. 240,000. not exceeding Rs.
400,000.
17. Annulment
Renewable Energy Subsidy Policy, 2069 and Urban Solar System Subsidy and Credit Mobilization
Guidelines, 2072 have been annulled. All activities done within that policy and guidelines will be
considered to be done under this policy.
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Annex 1
S.N. Districts Category “A” Regions Category “B” Regions Category
“C” Regions
1. Solukhumbhu Khumjung, Namche, Kerung, Tapting, Mawe, Chaulakharka, All other
Chaurikharka, Jubing, Goli, Taksindhu, Beni, Loding, areas of the
Chheskam, Bung, Gudel, Waku, Tamakhani, Salleri, Kaku, Wasa, Jubu, districts
Sotang Panchan, Kagel, Mukali, Deusa, Garma, mentioned
Nechabedaghari, Nechabatashe, Salyan, here and
Tingla, Bhakanje, Lokhim, Gorakhani, remaining
Nele districts of
2. Manang Dhyaru, Pisang, Bhraka, Thoche, Dharapani, Chame, Bagarchap the country
Khangsar, Manang,
Tangkimanang, Nar, Phu
3. Mustang Dhami, Charang, Lomanthang, Kagbeni, Chhusang, Muktinath, Lete,
Chhondup, Chhoser, Surkhang Marpha, Kunjo, Jhong, Kowang,
Tukuche, Jomsom
4. Rukum All areas
5. Dolpa All areas
6. Mugu All areas
7. Humla All areas
8. Jumla All areas
9. Kalikot All areas
10. Taplejung Olangchunggola, Papung, Iekhabu, Thapethok
Yamfudin, Lelep
11. Sankhuwasabha Pawakhola, Hatia, Chepuwa, Diding
Num, Kimathanka, Sisuwa,
Wala, Makalu, Mangtewa, Yafu,
Tamphu, Pathibhara
12. Dolakha Bigu, Aalampu, Gaurishankar, Khare, Marbu, Orang, Chilankha
Lamabagar
13. Rasuwa Thuman, Timure, Lamtang, Bridim, Haku, Gatlang, Goljung
Chilime
14. Gorkha Lho, Samagau, Prok, Bihi, Sirdiwas, Ueya, Kerauja, Khasigaun,
Chunchet, Chekampar Manbu, Laprak, Gumda, Lapu
15. Rolpa All areas
16. Achham All areas
17. Sindhupalchowk Gumba, Phoolpingkati, Tatopani
18. Dhading Lapa, Tipling
19. Jajarkot All areas
20. Dailekh All areas
21. Bajura All areas
22. Bajhang All areas
23. Darchula All areas
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