Kathmandu: For the first time, renewables have overtaken coal’s share of the global electricity mix, led by the growth in solar and wind power.
According to Global Voices an energy think tank, solar alone contributed 83 percent of the rise, while fossil fuels saw a slight decline, with generation falling in China and India.
Nepal has a solar power potential of 432 gigawatts, over ten times higher than that of hydropower, which is 42,000 MW. With over 300 days of sunshine a year, the country could produce 3.6 to 6.2 units of electricity per square meter based on its solar radiation levels. Despite this significant potential, investments into solar power generation in Nepal have been limited.
The government caps solar power at just 10 percent of Nepal’s energy mix, possibly due to perceptions that solar technology can’t provide a consistent energy stream. Although storage solutions like pump solar hydro or battery storage could address this issue, the current tariff structure discourages solar investment. Solar tariffs are much lower than hydropower, and competitive bidding further reduces them, while hydropower licenses operate on a first-come, first-served basis with a fixed rate.
Energy expert Kushal Gurung noted that environmental risks to hydropower have led investors to demand higher tariffs for it. Entrepreneurs are also pushing for an increase in the solar power cap to 30 percent and expanded zoning policies to build solar plants in high-potential areas like Dolpo and Mustang.
Solar power is more cost-effective than hydropower, with operating costs estimated to be three to four times lower for the same generation capacity. However, climate risks and increased insurance premiums have made returns on investment in hydropower less certain. Last year, a bidding process for 800 MW of solar power saw bids for over 3,000 MW from the private sector, indicating strong interest in solar technology.
Geopolitical tensions further complicate the development of solar projects in Nepal. The Dolma Himalayan Climate Fund’s proposal to generate 150 MW of solar power in Mustang was halted due to potential uranium mining and pressure from China, concerned about the plant’s proximity to the Tibetan border. Similarly, a project by Risen Energy was stalled due to Indian concerns about its proximity to the border, highlighting deteriorating relations between India and China.
Despite these challenges, some Chinese-backed projects have succeeded. In 2024, China handed over two solar-powered projects in Lalitpur, aimed at improving living conditions amidst power cuts and water shortages. These initiatives are part of China’s efforts to strengthen ties in the region and counter India’s influence.
Small-scale opportunities like net metering still exist for solar energy entrepreneurs in Nepal. Many industries have sufficient rooftop space for solar generation, offering a substantial energy potential. Additionally, China could leverage Nepal’s solar potential by setting up PV manufacturing plants, benefiting from Nepal’s lower tariffs on exports to the United States and potentially competitive pricing under the European Union’s Carbon Border Adjustment Mechanism.
Despite the hurdles, Nepal continues to seek Chinese investment in clean energy, including solar and wind. However, geopolitical sensitivities have limited large-scale solar power plant development, with cooperation mostly confined to small-scale aid projects.