Title: Poiltical Econoy of Mainstreaming Renewable Energy in Nepal

Author: Nirjan Rai, Saumitra Neupane and Saurab Lama

Year of Publication: 2021

The Alternative Energy Promotion Center (AEPC) in Nepal faces an uncertain future due to several key factors impacting the organization. AEPC has been moved from the Ministry of Population and Environment to the Ministry of Energy, Water Resources, and Irrigation, which has disrupted its institutional standing. Additionally, the implementation of federalism in Nepal’s political system has further complicated AEPC’s role and operations. The conclusion of the major National Rural and Renewable Energy Program (NRREP) and the withdrawal of key donor support, particularly from Denmark and Norway, have also significantly contributed to the precarious position AEPC finds itself in.

Established in 1996, AEPC has built up considerable technical expertise and developed robust local networks through various donor-funded programs over the years. However, the transition from one major program (ESAP) to the government-led NRREP in 2011 was not a smooth process, marked by ongoing coordination challenges between AEPC and its donor partners. 

Diverging views exist on AEPC’s future role and function. Some advocate for transforming it into a “Center of Excellence” focused on building technical capacity and facilitating knowledge sharing networks. Others argue AEPC should maintain more direct authority over resources and program implementation. Compounding these uncertainties is AEPC’s relatively weak legal standing, as it was established through a cabinet order rather than dedicated legislation.

The current opportunity to draft comprehensive renewable energy legislation in Nepal is seen as both a constraint and a potential opening. There are concerns the new legislation may simply seek to institutionalize the status quo, rather than enabling the kinds of reforms many feel are necessary. Nonetheless, the broader political and institutional changes underway, such as the shift to federalism and AEPC’s move to a new parent ministry, present windows to rethink and restructure Nepal’s renewable energy sector in a more adaptive, incremental manner.

To help inform this reform process, the report proposes three key political economy studies to be conducted in the first year. These would examine the intersections of renewable energy and Nepal’s transition to federalism, strategies for transitioning the sector from a subsidies-driven model to a more market-based approach, and renewable energy’s evolving role within Nepal’s broader energy landscape.