The development of hydropower and solar energy projects in Nepal is experiencing significant delays, with many projects falling short of expected construction milestones due to a combination of financing, regulatory, and logistical challenges.
According to the Department of Electricity Development, of the 274 projects that have received production licences, 178 have achieved less than 25 percent physical progress. Another 65 projects fall within the 25 to 80 percent completion range, while only 32 projects have surpassed 80 percent construction progress. The Ministry of Energy has urged regular monthly updates, although the department noted that progress reports are reliant on data submitted by project promoters.
Several factors contribute to the slow advancement of these projects. Key issues include limited management capacity among promoters, delays related to the development of transmission lines and substations, legal disputes, and the absence of cascade agreements for interconnected projects. Infrastructure challenges such as access road construction delays, land acquisition hurdles, forest clearance processes, securing right-of-way, and complications arising from restrictions in protected areas and national parks further impede progress. Additionally, reservoir-based projects face submergence-related problems.
Project sizes with lagging progress span a broad range. There are 42 projects up to 10 MW, 42 between 11 and 50 MW, 10 projects between 51 and 100 MW, and 14 hydropower projects with capacities exceeding 100 MW showing unsatisfactory construction progress.
Among notable projects facing delays are the Upper Modi ‘A’ Hydropower Project and the Upper Modi Hydropower Cascade Project, both under a subsidiary of the Nepal Electricity Authority (NEA). Their construction progress stands at 9 percent and 0.5 percent, respectively. Similarly, the Tamakoshi V Hydropower Project, also promoted by an NEA subsidiary, has reached only 5.2 percent completion. The 120 MW Rasuwa Bhotekoshi Hydropower Project, developed by a company led by former energy minister Deepak Khadka in partnership with a Chinese firm, has advanced just 27 percent.
The Department of Electricity Development spokesperson Badri Kuinkel clarified that the physical progress figures are based on reports submitted by promoters up to mid-January, while financial closure details have been updated through mid-June. In response to the delays, the Nepal Electricity Authority issued a notice on June 20, mandating that projects with signed power purchase agreements submit progress reports within seven days. The authority requires hydropower and solar projects to provide updates at intervals no longer than four months, warning that failure to comply may lead to action.
Prakash Chandra Duwal, vice-president of the Independent Power Producers’ Association Nepal, highlighted that projects are typically allowed up to five years to achieve financial closure after receiving production licences, with extensions possible upon payment of capacity royalties. He emphasized that projects receive an initial two-year window to finalize PPAs or financial closure, plus a one-year extension, and may secure an additional two years with royalty payments. According to Duwal, this means that projects within the allotted timeframes should not be immediately classified as underperforming. He further noted that the process of financial closure and preparation often takes two to three years, regional obstacles such as tree felling, local opposition, and transmission infrastructure delays also hinder timely construction progress, especially in larger projects, which may require up to a decade to complete.