The Promise in the Panels

These developments reflect the rowing momentum in Nepal’s olar power sector. Investor nterest is accelerating, capital in, and the country’s nascent private equity and venture capital (PEVC) ecosystem now view solar as a priority. As solar companies begin to enter the public markets, Nepal is seeing an unprecedented surge in solar project proposals. This marks a major change for an energy system long dominated by hydropower. According to the Nepal Private Equity Association (NPEA), PEVC firms have already invested Rs 1.13 billion in solar projects as of 2024.

This solar rush is a very recent trend. Data from the Department of Electricity Development (DoED) show that solar development activity in Nepal was minimal before 2021. Most early efforts were small and largely experimental. Momentum began to build after the fiscal year 2022/23 and then accelerated sharply over the last two fiscal years. In 2024/25 alone, the government issued survey licenses to 66 projects with a combined capacity of 1,195 MW. So far in the current fiscal year, which began in mid-July, projects with additional 305 MW have been permitted. Together, these two years account for nearly three-quarters of Nepal’s total licensed solar capacity.

From Margins to the Mainstream

The scale of this pipeline reflects growing investor confidence in photovoltaic energy, largely due to a convergence of economic, technological, and policy factors increasingly tilting in favor of  solar power. Energy experts point out that the operating cost of a hydropower plant can be as much as four times higher than that of a solar project producing comparable energy.

According to the “Energy” report published by the Office of Investment Board Nepal (OIBN) in April 2024, Nepal receives solar radiation sufficient to generate 3.6 to 6.2 units of electricity per square meter. The country’s average solar insolation stands at around 4.7 units per square meter per day, with sunshine available for nearly 300 days a year. This highlights Nepal’s substantial untapped potential for solar power generation.

Despite these advantages, solar still accounts for less than 10% of Nepal’s total electricity mix. This gap shows both the magnitude of the opportunity ahead and the structural bottlenecks that continue to slow its realization. Experts warn that this imbalance is becoming increasingly risky as climate variability places mounting pressure on Nepal’s hydropower-heavy generation system.

Developers are now pivoting toward large, utility-scale solar projects. Early solar initiatives in the country were  typically measured in single-digit megawatts. Today’s pipeline, by contrast, is dominated by proposals in the 50-MW, 100-MW and even 150-MW range. Among the most prominent new entrants are the 150-MW Arghakhanchi Solar Power Project and the 100-MW Rolpa Solar Power Project. Both these ventures are promoted by NRN Infrastructure and Development Limited. GT Energy Pvt Ltd has also secured survey licenses  for two 100-MW projects in Jhapa and Nepalgunj. This shift is now visible not just in aggregate numbers, but in the size of individual projects coming forward.

DoED Director General Mandevi Shrestha says the surge in investor interest is due to the government’s emphasis on energy mix. She says the government has already taken a policy decision to provide a reasonable price for electricity generated from solar power, with an official target of meeting at least 10-15% of total electricity generation from solar energy.

Big Businesses Bet Big

Policy intent is now being matched by corporate capital. Nepal’s leading business groups have moved decisively into the solar sector. Billions of rupees from the private sector are expected to be invested in large-scale projects over the next two years. Conglomerates such as Shanker Group, Golchha, Golyan, Ramesh Corp, Butwal Power, CE, Dolma and CEDB, among others, are entering the space. This signals growing confidence of the private sector in solar energy as a commercially viable investment.

Interest is also building among international players. India’s state-owned power producer NTPC Limited has expressed willingness to invest in up to 100 MW of solar power in joint collaboration with the Vidyut Utpadan Company Ltd. Among domestic investors, the Golyan Group is preparing to develop 100 MW of solar power projects across  five locations. The conglomerate, with business interests spanning sectors like manufacturing, agriculture, real estate, hospitality and hydropower, is now scaling up its presence in renewable energy. Five Golyan Group companies were selected in last year’s competitive bidding process conducted by the Nepal Electricity Authority (NEA). The group has already signed power purchase agreements (PPAs) for all its solar projects. The estimated cost of solar projects is around Rs 70 million per MW, placing the total investment for the 100-MW portfolio at approximately Rs 7 billion. The projects are being developed through the Golyan Power–Pure Energy joint venture. The largest project (30 MW) is being built in Banke, with other projects planned in Bardiya (25 MW), Kanchanpur (15 MW), and two projects of 15 MW each in Nawalparasi.

Solar’s Growing Strategic Role Solar power is becoming essential in Nepal because of a growing imbalance in its power grid. “Nepal today relies heavily on run-of-river hydropower, and most of the projects under construction follow the same model,” said Dr Sandip Shah, Chairperson and Managing Director of Pashupati Renewables Pvt Ltd. “What the system clearly lacks are peaking plants.”

That gap is becoming more consequential as climate change reshapes hydropower’s reliability. The low-flow season is growing longer and drier, squeezing generation when demand is often at its highest. At the other extreme, the monsoon is becoming more erratic and intense, bringing heavier rainfall that has increased the frequency of landslides and floods. Together, these changes are undermining the dependability of run-of-river hydropower which has long remained the backbone of Nepal’s electricity supply.

In this context, solar power is no longer just a diversification option but an operational necessity. It complements hydropower during the dry season and daylight peak hours and helps stabilize a system increasingly exposed to climatic volatility. As Shah notes, taken together, these trends make a compelling case that Nepal urgently needs alternative and complementary sources of energy—and solar now sits at the center of that transition.

Developers also acknowledge that not all of the rising interest is driven by long-term operational returns. “Interest in solar power projects has been growing for two main reasons,” said Apar Neupane, CEO of Simple Energy. “First, they can be installed and commissioned quickly. Second, they require  relatively less capital. Many of the projects coming forward are motivated by the ability to commission quickly, pursue an IPO, list the company and realize gains through that route. In that sense, solar projects do not always have strong standalone profitability on their own.”

Tarai as a Solar Hub

As planners prioritize proximity to load centers, the solar boom is also reshaping Nepal’s energy map. Tarai plains have emerged as the country’s undisputed solar hub due to factors like the region’s flat terrain, relatively easier  land acquisition and improving grid infrastructure.

NEA has realized that most hydropower projects are located in remote areas  where building transmission lines is time-consuming, costly and prone to significant losses. Because of this, the industrial corridors—Duhabi, Simara, Bhairahawa and Kohalpur—have been experiencing substantial voltage drops.

“If generation can be increased by installing solar plants closer to these load centers, the quality of voltage supply improves,” Shah said. “This is why the NEA has been actively pushing solar projects in the Tarai, as reflected in last fiscal year’s competitive bidding of 960 MW.”

Solar developers say that two factors are critical for project development: access  to properly regularized land and a power purchase agreement (PPA). Once a PPA is secured, financing is generally not difficult. “Because of the short gestation period and lower risk profile, interest in solar power projects has been growing,” Shah added.

Another important driver has been the sharp decline in the cost of key inputs, particularly solar panels, in the international market. Five years ago, panels used to cost around 26 cents per watt. Today, prices have fallen to roughly 9 cents per watt. Nepali developers source panels largely from China, home to Tier-1 manufacturers and large-scale production facilities. The core equipment—solar panels and inverters—is imported almost entirely from China.

As construction activity accelerates, competition among foreign suppliers  has intensified to provide solar panels, inverters, storage systems, and other equipment for solar power projects worth nearly Rs 100 billion in Nepal. Most manufacturers are now producing global Tier-1 solar panels, a segment overwhelmingly dominated by Chinese companies.

Solar panels remain the single largest cost component in a solar project, accounting for 45–55% of total project costs, according to energy producers.

Ambition Outpaces Execution Despite the lost list of licenses, actual construction is moving at a slow pace. According to the DoED’s latest data, construction licenses have been issued  for solar projects with a combined capacity of 84.4 MW so far, whereas NEA's annual report shows 141.94 MW of solar power has been connected to the grid by 2024/25.

Of this, 116.94 MW was developed by independent power producers (IPPs), while the Nepal Electricity Authority (NEA) accounted for the remaining 25 MW. During 2024/25, power purchase agreements (PPAs) were signed for 932.031 MW from 31 hydropower projects and 170 MW from eight solar projects.

In a bid to diversify its generation mix, the NEA awarded bids in 2024/25 to develop 960 MW of solar power through a tariff-based competitive bidding process. The power sector utility selected 63 projects with a combined capacity of 960 MW. It signed PPAs for eight projects totaling 170 MW during the fiscal year. PPAs for the remaining  projects are expected to be signed in the coming fiscal year.

According to its latest annual report, the NEA has so far signed PPAs with 38 solar projects totaling 375 MW, while PPAs for another 55 projects with a combined capacity of 790 MW are currently under process.

Rethinking Nepal’s Solar Cap Solar developers are calling on the government to raise the cap on solar’s share in the national energy mix to as high as 30% from the existing 10%. They argue that the existing ceiling reflects an outdated policy mindset, particularly as photovoltaic costs continue to fall and system flexibility becomes more valuable.

Shah says the cap has little technical justification. “There is no clear technical justification for this limit. Power systems naturally find their own balance—how much solar, how much hydropower, and within hydropower, how much should be run-of-river versus peaking capacity. Arbitrary caps distort that equilibrium,” he argued. He pointed to India and Singapore where solar already accounts for 26% and 40% of installed capacity, respectively.  “India is also rapidly deploying storage hydropower and battery energy storage systems. We request the government to remove the 10% cap and go for the next tariff-based bidding,” Shah added.

Shah says Energy Minister Kulman Ghising is positive on removing the existing cap of 10% “The NEA’s position is that a government-level decision is required. We have also met Energy Minister Kulman Ghising, who has expressed a positive view on removing  the limit,” he added.

If measured purely in megawatts, Shah says that the cap has effectively already been reached. “If we look at the system purely in megawatt terms, the 10% threshold has already been reached in terms of PPAs signed. But if we assess  it in terms of megawatt-hours and actual energy contribution, solar has not yet reached that level,” he said. But Neupane cautions that solar alone cannot solve Nepal’s most pressing power-system challenge. “Solar generation is limited to daytime. Our real requirement, however, lies in meeting peaking demand—particularly during the evening and morning peaks,” he says. “What Nepal truly needs at this stage is seasonal storage to achieve energy independence.”

Potential Meets Policy—and Politics However, not all constraints are technical or financial. Some of the biggest obstacles to execution lie beyond energy policy altogether. There are also challenges in attracting foreign direct investment (FDI) into Nepal’s solar power sector. Despite strong investor interest, regional sensitivities have complicated progress on some foreign-led projects. Two high-profile proposals—one by the Dolma Himalayan Climate Fund and another by a joint venture led by the Chinese company Risen Energy—have faced delays amid reported concerns from neighboring countries.

Dolma has proposed developing a 150-MW solar project in Mustang, paired with a 20-MW battery energy  storage system. While the OIBN has approved the plan, the Department of Mines and Geology later instructed all developers in Mustang to suspend work. OIBN sources say the suspension was driven by security concerns over a Western investor operating so close to the Chinese border.

Risen Energy’ $190 million project in Banke and Kapilvastu has also faced a similar fate. The 125-MW plant, proposed through Risen Energy Singapore JV, was designed to use 20-MW of battery storage to power  demand in the mornings and evenings. However, negotiations with the OIBN failed to close, reportedly due to reservations about Chinese involvement in projects located near the Indian border.

The strategic case for solar energy in Nepal is compelling. It offers a direct solution to the country’s seasonal energy  imbalance. While hydropower peaks during the monsoon—often forcing plants to spill water, output plummets during winter, forcing a heavy reliance on electricity imports from India. Predictable daytime  solar generation serves as a natural partner to hydropower, conserving reservoir water during the dry months and reducing winter import dependence.

It is a defining moment for Nepal which never had a larger solar pipeline or stronger investor interest. However, without faster construction approvals and policy frameworks that reflect current market realities, much of this 2,119-MW pipeline risks stalling.

By advancing  even a fraction of these projects, Nepal can rapidly expand  its solar footprint, stabilize its grid. Doing so will not only lower system costs but also cement the country’s position as a more  diversified renewable-energy producer in South Asia.

(This report was originally published in January 2026 issue of New Business Age magazine.)