KATHMANDU, Dec 9: The Asian Development Bank (ADB) on Thursday announced a $20-million grant aimed at triggering increased private sector interest and investment in utility-scale solar projects in Nepal.
The funds are expected to support the deployment of no less than 25 MW of solar power generation capacity by 2018 and provide a business model that can be replicated and scaled up elsewhere in the energy-strapped South Asian nation, ADB said, issuing a statement.
Though Nepal relies heavily on hydropower plants, solar power is seen as a perfect
complement, especially in the low-water season. "Unlike micro- and mini-grid solar power, large solar projects of 4 MW and above have received little attention from private sector investors," ADB said in the statement.
The grant will go to finance the difference between the cost of producing solar power and the price the Nepal Electricity Authority (NEA) is ready to pay for each kWh. The ADB noted that this is the first time that Nepal has ever used viability gap funding.
"Providing some financial security to the private sector should draw more private investment into this critical sector in Nepal and, in doing so, reduce pressure on government finances,” Aiming Zhou, senior energy specialist at ADB’s South Asia Regional Department, is quoted in the statement.
Companies in Nepal will soon be able to compete for solar projects in an international tender process, with the power purchase agreements (PPAs) going to those who offered the best power sale prices. Bidding is expected to start in the first quarter of 2017.
The funding under the ADB grant will be payable on the first day of operation of a solar system up to end-June 2022, according to the statement.
The grant is being financed by the Scaling Up Renewable Energy in Low Income Countries Program (SREP) of the Climate Investment Funds (CIF) administered by the ADB.