Climate Finance Works in Nepal

Many people in rural areas of Nepal lack access to clean, cheap, and reliable energy. Nationwide, just over 40 percent of Nepalese have access to electricity. To help alleviate poverty and promote rural development, Nepal created the Alternative Energy Promotion Centre (AEPC) in 1996 to deliver alternative energy systems to Nepal’s rural population.

By 1999, it was clear that the center, which worked with solar energy, micro-hydropower, biogas, improved water mills, biofuel, and improved cook stoves, was very popular and needed more financial support to meet demand. Denmark (DANIDA) stepped up and gave 154 million DKK, and the Energy Sector Assistance

Programme (ESAP) was born. With its support, 1.5 million people benefited, despite a raging armed insurgency under way and ongoing political instability.

The solar home systems are built, sold, and installed by the private sector, and typically are used to provide light. ESAP provides subsidies for installations that are proportional to a household’s distance from the grid. The household still pays the majority of the cost. Micro-hydropower plants are village-based and more involved to install. This hydroenergy provides enough power to light homes, plus run a radio and small equipment.

In 2007, Norway provided 147.4 million NOK to AEPC; DANIDA, an additional 150 million DKK; and Nepal, an amount equal to 554 million NPR, toward a total budget of 4.9 billion NPR. Recently, Germany provided 8.5 million Euros. The program became ESAP II, and its goal was to reach 1 million rural households with affordable, alternative energy systems by 2012.

By December 2010, or 32 months into the program, ESAP II had installed 157,000 solar home photovoltaic systems, 191,020 mud-brick improved cook stoves, 3,050 metallic stoves, and 9,000 small solar home photovoltaic systems. It commissioned 2.5 MW from micro-hydropower plants, which provided electricity to 63,000 households. ESAP II also assisted on the policy level and helped the government of Nepal build a subsidy policy for alternative energy systems.

According to NORAD estimates, the micro-hydropower plants reduced CO2e emissions by about 5,000 tonnes per year.

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