To unlock Nepal's renewable energy potential, Nepal must transition from a hydropower-dominant to a diversified renewable energy mix
Nepal's energy landscape is at a critical juncture, requiring urgent strategic choices. Despite abundant renewable resources, especially solar and hydropower, the country remains heavily reliant on traditional biomass and imported fossil fuels. With per capita electricity consumption barely 0.4 MWh per year, it is one of the lowest in Asia. This figure highlights both the limitations of Nepal's existing energy infrastructure and the enduring policy inertia that has kept Nepal to old energy paradigms. The global shift towards clean energy is accelerating, and it's time Nepal embraced its renewable energy potential in a way that moves beyond hydropower.
For decades, hydropower has been the backbone of Nepal's electricity generation, accounting for over 95% of installed capacity. This dominance is often hailed as evidence of clean energy leadership, yet the reality is far more complex. Most of Nepal's hydropower plants are run-of-river (RoR) systems that depend heavily on seasonal river flows. During the dry months, when water levels fall, Nepal's hydropower generation declines sharply, leaving the country vulnerable to electricity shortages.
In 2024, Nepal imported about 13% of its annual electricity, mostly during winter, to meet domestic demand while similar surpluses are exported during the wet season. This seasonal dependence weakens energy security and leaves the country vulnerable to external market fluctuations. Moreover, the environmental toll of hydropower is becoming increasingly evident: disrupted river ecosystems, loss of biodiversity, and the displacement of local communities. As climate change accelerates, these challenges are compounded by more frequent and unpredictable extreme weather events. Intense rainfall triggers floods and landslides that damage hydropower infrastructure, while prolonged droughts reduce river flows and limit electricity generation. In such a volatile climate, relying almost entirely on hydropower is a sheer stupidity.
Nepal's energy future lies not in hydropower alone, but in a combination of hydro, solar and storage. The country receives an average solar radiation of 4.5 to 5.5 kWh/m²/day – sufficient to power the nation many times over. Studies estimate that harnessing ground-mounted, rooftop, and just 20% of agrivoltaic potential could produce around 400 GW of electricity, a scale that could position Nepal as a regional clean energy powerhouse. Yet, solar energy currently contributes only about 0.1 GW to the national grid. The gap between potential and reality is staggering. This is where pumped hydro energy storage (PHES) can truly be a game-changer. Nepal's mountainous terrain provides ideal conditions for off-river PHES projects that can effectively complement variable solar generation.
According to the PHES Atlas, Nepal has over 2,800 potential sites with a combined storage capacity exceeding 50 TWh. Developing even a fraction of these sites would enable excess solar and hydropower to be stored and released during peak demand, support reliable cross-border electricity trade, and providing an effective solution for balancing Nepal's energy systems. Together, solar and PHES could transform Nepal's power grid from a weather-dependent system into a robust, flexible, 100% renewable energy network.
A recent energy system modeling study carried out at the Renewable and Sustainable Energy Laboratory, Kathmandu University and published in Renewable and Sustainable Energy Transition provides both hope and evidence that Nepal can achieve a reliable, cost-effective, and 100% renewable energy system by 2050. Solar photovoltaic (PV) and hydropower are modelled as the primary energy sources, while PHES and cross-border electricity imports are used for system balancing.
Using a least-cost optimisation model with hourly resolution, we simulated multiple demand scenarios ranging from 2 to 9 MWh per capita per year and found that solar PV emerges as the dominant source of generation across all scenarios. PHES provides essential daily and seasonal balancing, ensuring grid stability. The levelised cost of electricity (LCOE) starts at US$ 56 per MWh, making it competitive with other energy systems. The main cost drivers include solar PV prices, discount rates, and hydropower development assumptions.
These findings are more than theoretical. They demonstrate that Nepal's clean energy future can be built using mature, commercially proven technologies. What remains lacking is not technical feasibility, but political commitment, institutional coordination, and strategic investment alignment.
To unlock Nepal's renewable energy potential, Nepal must transition from a hydropower-dominant to a diversified renewable energy mix. This requires a fundamental policy shift grounded in four key pillars: Diversification and integration to enhance energy reliability and resilience. Nepal should set clear capacity targets for solar, PHES, and other renewables alongside hydropower, and develop integrated planning models that capture seasonal and hourly dynamics. Policy and regulatory reform must focus on attracting private investment in solar and storage projects and introduce effective risk-sharing instruments.
Infrastructure and innovation must focus on investing in grid expansion and modernisation, digital monitoring, and domestic R&D for renewable technologies and local manufacturing. Regional and community partnerships should focus on strengthening electricity trade frameworks with neighbouring countries while empowering local industries, commercial institutions, and communities to enhance domestic consumption and participate in decentralized renewable projects.
In essence, Nepal's transition to a renewable diverse energy system depends on coordinated action across these four pillars ensuring energy security, economic development, and environmental sustainability for the future.
Lohani is a professor at the School of Engineering, KU
