Renewable Energy in Nepal – Published in Law Business Research

Nepal, endowed with abundant natural resources, is uniquely positioned to become a leader in renewable energy in South Asia. With over 6,000 rivers and immense solar potential, the country has long aspired to transition from traditional energy dependence to a sustainable, clean energy future. In recent years, the Government of Nepal has intensified its focus on renewable energy through policy reforms, foreign investment incentives, and legal frameworks designed to support long-term energy security and climate resilience.

Legal and Regulatory Framework

The principal legal instrument governing renewable energy in Nepal is the Electricity Act, 2049 (1992), which is undergoing reform through a proposed Electricity Bill aimed at modernizing the sector. The Renewable Energy Subsidy Policy, 2073 (2016) and the National Energy Efficiency Strategy, 2018 outline the government's commitment to facilitating decentralized, community-based renewable energy systems.

The regulatory oversight is provided by the Nepal Electricity Authority (NEA) and the Alternative Energy Promotion Centre (AEPC). These bodies play pivotal roles in licensing, power purchase agreements (PPAs), and tariff structures, while the Ministry of Energy, Water Resources and Irrigation (MoEWRI) drives strategic energy planning.

Investment and Project Development

Renewable energy projects—primarily hydropower, solar, and wind—are implemented under the Build-Own-Operate-Transfer (BOOT) model. The Foreign Investment and Technology Transfer Act, 2019 governs foreign investment, offering protection and repatriation rights to investors. Project Development Agreements (PDAs), such as those executed for large-scale hydropower projects like Upper Trishuli-1, are negotiated with the Investment Board Nepal (IBN), laying out comprehensive obligations, timelines, and incentives.

With recent amendments in the Public-Private Partnership (PPP) and Investment Act, 2075 (2019), private sector participation in energy infrastructure has become more structured. Moreover, the simplification of environmental and land acquisition procedures is making Nepal’s renewable energy sector increasingly attractive for both domestic and foreign investors.

Legal Considerations for Investors

Despite the opportunities, navigating Nepal’s renewable energy sector requires careful legal due diligence. Issues such as:

• Compliance with licensing and grid interconnection requirements,
• Negotiation and enforcement of Power Purchase Agreements (PPAs),
• Land acquisition and environmental clearance,
• Currency convertibility and repatriation under Nepal Rastra Bank guidelines,
• Dispute resolution mechanisms, particularly the enforcement of arbitration awards,

are critical for successful project execution.

At Sinha Verma Law Concern (SVLC), we have advised on several landmark renewable energy projects in Nepal. Our legal team has assisted in the drafting, negotiation, and regulatory compliance of PDAs, PPP frameworks, and EPC contracts, ensuring legal soundness and project bankability.

Outlook

As Nepal aims to export surplus electricity to neighboring countries like India and Bangladesh, cross-border transmission agreements and regional power trade frameworks are becoming important legal considerations. The South Asia Subregional Economic Cooperation (SASEC) initiative and the BBIN (Bangladesh, Bhutan, India, Nepal) energy cooperation strategies present further opportunities for legal professionals and investors alike.

The renewable energy sector in Nepal is not only a pillar for economic growth and sustainability but also a fertile ground for innovative legal structuring and international collaboration. SVLC remains committed to supporting this transition with insightful legal guidance, due diligence, and advocacy.

For further legal insight or to consult on renewable energy projects in Nepal, contact SVLC’s dedicated energy law team.