Govt and World bank launch mini-grid project

Kathmandu, Apr. 22

 The government and the World Bank (WB) on Monday signed an agreement to scale up renewable energy development in Nepal.

The four-year US$ 17.21 million project will work with the private sector in the selected regions in the country to increase renewable energy in the Private Sector-led Mini-Grid Energy Access Project.

The WB will finance US$ 7.61 million through its Strategic Climate Fund (SCF) and the government will contribute subsidy of US$ 6 million while remaining US$ 3.60 million will be contributed by the private sector.

The agreement was signed by Shreekrishna Nepal, Joint Secretary, Ministry of Finance and Bigyan Pradhan, Acting Country Manager of the WB.

The project will provide renewable energy to 126,000 rural people and support more than 80 businesses through micro/mini-hydro and solar subprojects in the rural areas. The project will be implemented by the Alternative Energy Promotion Centre (AEPC), the government's nodal agency for renewable energy promotion in Nepal.

This project aims to support more than 25 mini-grid subprojects and add new generation capacity of 3.8 MW, while rehabilitating and restoring the capacity of existing mini-grids.

“We are thankful to the World Bank for the support in launching this milestone project to encourage commercial financing of renewable and off-grid energy systems in Nepal. This project will demonstrate that the private sector led model is feasible in mini-grid development and GoN is committed to engage private sector in development," said Nepal.

Under the Project, private entities and cooperatives will be mobilised to provide electricity services to the rural areas as “energy service companies” (ESCOs). These specialised ESCOs will crowd-in financing capacity to develop, build, own and operate renewable mini-grid projects, said the WB.

Commercial banks are a key partner who will assume credit risk of the subproject loans to ESCOs once they are eligible and selected to participate in the Project by AEPC. The credit facility component of the project is in turn supported by a technical assistance component for stronger project development support to the mini-grid sector, ESCOs and partner banks to ensure sustainable implementation beyond the life of the project. 

 “Maximising finance for development is an important element in Nepal’s growth trajectory. By encouraging the participation of the private sector, this Project motivates a business approach to improve energy access while supporting the government’s efforts to provide clean and efficient energy options to rural communities” said Pradhan.

Published in The Rising Nepal daily on 23 April 2019.