More than half of Nepal’s licensed hydropower projects remain stalled at various stages of development, with many failing to secure the necessary financial investments to begin or continue construction, according to the Department of Electricity Development.

The 139.5 MW Lower Manang Marsyangdi Hydropower Project, which obtained its production licence in 2018 and signed its Power Purchase Agreement (PPA) in 2023, has yet to secure funding to initiate construction. Butwal Power Company, the project’s promoter, indicated that it is in the process of achieving financial closure and expects to complete it within the current year, maintaining that the project remains within its permitted timeline.

Regulatory guidelines reflect some flexibility but also place constraints on project timelines. While promoters assert that they can take up to five years from the time of obtaining production licences to secure investment, the 2018 Directives on Licensing of Hydropower Projects specify that both financial closure and PPA should ideally be completed within two years. Extensions of one year, and in some cases additional extensions of up to two years, can be granted under justified circumstances, with certain projects exceeding 100 MW eligible for special provisions allowing up to two further years. However, projects under extension must pay annual capacity royalties.

Similar difficulties in financial closure have been reported for the 440 MW Tila-1 and 420 MW Tila-2 projects, both licensed in 2018 and having completed PPAs in 2024, yet still lacking investment. According to government data, 20 projects with a combined capacity of over 1,650 MW have stalled at the financial closure stage despite holding licenses and signed PPAs.

Other projects, such as the 9.14 MW Super Ghalemdi and 5 MW Seplikhola, have also faced investment delays despite holding licences and PPAs at staggered intervals. The 63 MW Chhujung Khola project likewise has seen no construction progress due to an inability to raise funds.

The Ministry of Energy has mandated the creation of a publicly accessible Licence Performance Dashboard to monitor project milestones, compliance, and regulatory actions on a monthly basis. Updates rely on progress reports submitted by project promoters, though the department acknowledged challenges in data consistency.

Of 274 hydropower and solar projects with production licences, 178 have less than 25 percent physical progress, 65 projects fall between 25 and 80 percent completion, and only 32 have surpassed 80 percent progress. Delays have been attributed to multiple factors, including limited management capacity, legal disputes, transmission infrastructure setbacks, access road construction delays, land acquisition challenges, environmental clearances, and restrictions in protected areas.

Among projects with slow progress are state-affiliated ventures such as the Upper Modi ‘A’ and Upper Modi Hydropower Cascade projects, with completion rates under 10 percent, as well as the Tamakoshi V project, which stands at just over 5 percent progress. The 120 MW Rasuwa Bhotekoshi Hydropower Project, developed by a consortium led by former energy minister Deepak Khadka, has progressed only 27 percent.

The Nepal Electricity Authority has recently reiterated requirements for projects with signed PPAs to submit progress reports quarterly, warning of potential action against those failing to comply.

Prakash Chandra Duwal, vice-president of the Independent Power Producers’ Association Nepal, emphasized that promoters generally have up to five years to finalize financial closure after obtaining licences, with extensions available upon payment of capacity royalties. He argued that within the prescribed timelines, projects should not be prematurely classified as underperforming. Duwal noted that comprehensive project development can extend to seven to eight years, or up to ten years for larger undertakings, citing factors such as delays in tree felling, local opposition, and transmission line construction as key contributors to prolonged timelines.