ADB grant of USD 20m to push large solar investments in Nepal

The Asian Development Bank (ADB) today announced a USD-20-million (EUR 18.7m) grant aimed at triggering increased private sector interest and investment in utility-scale solar projects in Nepal.

The funds are expected to support the deployment of no less than 25 MW of solar power generation capacity by 2018 and “provide a business model that can be replicated and scaled up elsewhere in the energy-strapped South Asian nation,” the ADB explained.

Nepal relies heavily on hydropower plants (HPPs), but solar power is seen as a perfect complement, especially in the low-water season. Unlike micro- and mini-grid solar power, however, large solar projects of 4 MW and above have received little attention from private sector investors.

The grant will go to finance the difference between the cost of producing solar power and the price the Nepal Electricity Authority is ready to pay for each kWh. The ADB noted that this is the first time that Nepal has ever used viability gap (VG) funding.

“Providing some financial security to the private sector should draw more private investment into this critical sector in Nepal and, in doing so, reduce pressure on government finances,” said Aiming Zhou, Senior Energy Specialist at ADB’s South Asia Regional Department.

Companies in Nepal will be able to soon compete for solar projects in an international tender process, with the power purchase agreements (PPAs) going to those who offered the best power sale prices. Bidding is expected to start in the first quarter of 2017. The funding under the ADB grant will be payable on the first day of operation of a solar system up to end-June 2022.

The grant is being financed by the Scaling Up Renewable Energy in Low Income Countries Program (SREP) of the Climate Investment Funds (CIF) administered by the ADB.

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