The Nepal Electricity Authority (NEA) is preparing to build battery storage systems with a combined capacity of 100 megawatts in four major cities—Biratnagar, Birgunj, Bhairahawa, and Nepalgunj—aimed at enhancing the country’s energy security.

These battery systems will store electricity generated during off-peak hours and supply it during peak hours to help manage fluctuations in demand. NEA Executive Director Hitendra Dev Shakya said the NEA is seeking concessional loans from various development partners to finance the project.

“If the required funding is secured, construction work will begin immediately,” said Shakya. He added that feasibility studies estimate the investment cost to be between Rs 7 billion and Rs 10 billion. “We plan to start with these four locations and expand to other areas based on system performance,” he said. Similar projects have been built at a cost of Rs 6–7 billion in China and around Rs 10 billion in India, according to Shakya.

Most of Nepal’s hydroelectric plants are run-of-river projects that generate more electricity during the rainy season while the production falls during the dry season. The electricity demand typically peaks during the daytime and evening hours, with extra demand in winter. To address this mismatch, NEA is pursuing battery storage as a solution for stabilizing supply during high-demand periods.

What is Battery Storage?

Battery storage systems store electricity—often generated by solar panels or other renewable sources—during times of low demand or high generation and release it when demand spikes. These systems can also provide backup power during emergencies such as load shedding.

Capable of storing hundreds of megawatts of energy, battery storage has become a key tool in modern energy management, especially for balancing variable renewable energy sources and ensuring grid reliability.

NEA Seeks Rs 10 Billion Short-Term Loan to Address Budget Crisis

The NEA has initiated the process of securing a short-term loan of Rs 10 billion from a government-owned bank, with a one-year repayment term. The move comes amid a serious cash shortfall, which the current NEA leadership attributes to the previous administration led by Kulman Ghising. According to NEA, the previous leadership prepared the budget without ensuring adequate financial backing.

NEA Executive Director Hitendra Dev Shakya confirmed that discussions are underway to obtain the loan, though he did not specify whether it will be taken from Nepal Bank, Krishi Bikas Bank, or Rastriya Banijya Bank. “We will borrow from the bank offering the lowest interest rate,” Shakya told New Business Age . “The loan will be repaid within a year through alternative funding sources. All necessary procedures are expected to conclude within 10 to 15 days.”

NEA published a white paper last Friday outlining its financial condition. For fiscal year 2024/25, the authority projects revenue of Rs 199.2 billion, while approved expenditures are estimated at Rs 228.77 billion—resulting in a deficit of nearly Rs 30 billion. The white paper notes that this fiscal strain stems from the continuation of construction works despite insufficient and uncertain cash flow.

As of mid-March 2025, NEA has unpaid bills worth Rs 11.61 billion under existing contracts. Meanwhile, the NEA’s central treasury holds Rs 10.1 billion, of which Rs 3.68 billion is in a term account, Rs 3.95 billion in a deposit account, and Rs 2.47 billion in a current account, which serves as its minimum operational reserve. “With no available reserve to settle outstanding construction payments, the NEA has begun the process of acquiring a short-term loan,” the white paper states.

Shakya added that construction work has stalled due to a lack of liquid funds. He warned that if the government does not provide financing, the Electricity Regulatory Commission will need to approve an increase in electricity tariffs. If neither is feasible, NEA will resort to expenditure cuts and prioritize only essential projects.

The white paper also highlights NEA’s long-term debt, which stands at Rs 248.12 billion—comprising Rs 77.08 billion from domestic sources and Rs 171.04 billion from foreign development partners, backed by government guarantees. This debt represents 39% of NEA’s total assets, which are valued at Rs 644 billion, including Rs 235 billion in fixed assets and Rs 220 billion tied up in ongoing projects.

NEA reported a cumulative profit of Rs 46.47 billion up to fiscal year 2023/24, and Rs 9.48 billion as of mid-March 2025. However, after accounting for tax-related adjustments—including 12 years of accumulated losses and “accelerated depreciation” under the Income Tax Act—NEA registered a net loss of Rs 5.26 billion for the current fiscal year.

The white paper also raises concerns noted in the audit report, including understated expenses of Rs 7.19 billion, overstated income of Rs 4.72 billion, and unrecorded income of Rs 299.1 million. It recommends further adjustments to ensure accurate profit and loss reporting for fiscal year 2023/24. These figures also exclude potential liabilities that could lead to further losses.

In addition, NEA faces a major funding gap in meeting employee-related obligations. Although liabilities for fiscal year 2023/24 amount to Rs 48.87 billion, only Rs 812 million has been allocated for this purpose.

As of mid-March 2025, NEA’s total arrears stand at Rs 44.54 billion. This includes Rs 23.44 billion for dedicated feeder and trunk lines, of which Rs 14.10 billion is still owed by the Government of Nepal in the form of pending reimbursements for subsidies, such as those provided during the COVID-19 pandemic. In total, arrears related to dedicated infrastructure and other categories amount to Rs 32.5 billion, with an additional Rs 12.49 billion in regular arrears. Notably, these arrears have been recorded as income in NEA’s financial statements.