Subsidy Suppress the RE Development - Smart Solar Nepal

Subsidy Suppress the RE Development

In Nepal’s Present Scenario

From the twenty-first century onward, solar radiation is the best alternative and most cost-effective energy resource on the planet. Nepal has (4-6) hours of sunlight per day on average, with an average solar radiation intensity of 4.7kWh per square meter, and a commercial capacity of solar power for grid link estimated at 2,100 MW. The Solar and Wind Energy Resource Assessment project tried to map Nepal’s wind resource potential and found a very bright potential for wind energy, with a projection of about 3,000 MW of wind energy.

According to the Nepal Electricity Authority (NEA), approximately 86.44 percent of households in the country now have access to electricity transmitted via the national grid. So, why does renewable energy source for just 3% of Nepal’s electricity mix? It is a controversial topic in the country’s hydro-dominated electricity market, but little action has been taken. In Nepal, Solar panels on individual rooftops are still the main source of renewable energy (RE). Wind power projects are far too few to be anything other than showpieces, while hydropower production is stuck in uncertainty and commitments that have yet to be fulfilled. Despite the fact that electricity has been available in Nepal for over a century, hydropower still produces less than 1,000 megawatts per year, despite the fact that four zeros are typically added to the number.

Subsidy suppress the development

Nepal has established a semi-autonomous agency called the Alternative Energy Promotion Centre in 1996. It has focused on household-level rural energy supply through solar and micro-hydro and promotion of biogas for cooking. But it has failed to upscale RE development at industrial level. Many people blame the country’s subsidy policy, claiming that it does not encourage creativity in the sector and has struggled to attract both domestic and international investors.

In last two and half decades, Nepal’s total RE production has been 50 MW – less than a single medium-level hydro project in neighboring countries. Due to its focus on reaching out to people living in remote mountain areas, the RE policy has a heavy subsidy component. In 2000, the Subsidy Policy and Subsidy Delivery Mechanism were first written. These two documents were updated on a regular basis, with the most recent versions released in May 2016 and November 2016, respectively. The Subsidy Policy acknowledges that previous subsidies failed to efficiently mobilize private investment and commercial credit into Nepal’s renewable energy market. Subsidy dependence has increased rather than decreased. The policy document implied that communities were attempting to obtain subsidies from various outlets. One of the reasons for this was that the electricity tariffs were insufficient to cover the system’s initial investment costs. This isn’t the only explanation, though.

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