Nepal‘s 8.5 MW Butwal Solar PV Project in Rupandehi with Mount Everest in the background. The project came into operation in 2020. Photo from Wikimedia Commons. License CC BY 4.0.
This article was submitted as part of the Global Voices Climate Justice fellowship, which pairs journalists from Sinophone and Global Majority countries to investigate the effects of Chinese development projects abroad. Find more stories here.
For the first time, renewables have overtaken coal’s share of the global electricity mix, led by the growth in solar and wind power. According to a report released by energy think tank EMBER in October 2025, solar alone contributed 83 percent of the rise, while fossil fuels saw a slight decline, with generation falling in China and India.
Nepal has a solar power potential of 432 gigawatts (432,000 megawatts), over ten times higher than that of hydropower , which is 42,000 MW. With over 300 days of sunshine a year, the country could produce 3.6 to 6.2 units of electricity per square meter based on its solar radiation levels.
Such potential, combined with decreasing installation costs (thanks to heavy Chinese investments into solar panels , among other renewables), means a viable and affordable solution to Nepal’s often unreliable energy supply led by hydropower. However, restrictive domestic energy policies and tense geopolitics in the region mean Nepal is failing to harness its tremendous solar energy potential.
500 kW solar system at the Commission for the Investigation of Abuse of Authority, in Tangal, Nepal. Image from Wikimedia Commons. License CC BY-SA 4.0.
As one of the biggest hydropower powerhouses in the world, Nepal has long relied on run-of-river projects to power its electricity grid. However, as the climate crisis increases risk in the Himalayas, hydropower is becoming increasingly unstable, largely due to threats such as glacial lake outburst floods (GLOFs).
Read more: Glacial lake outburst floods (GLOFs) and the melting of the ‘Third Pole’
Is solar the solution?
All of these growing risks and limitations to hydropower should have jump-started investments into solar power generation in Nepal, especially given its exceptional potential. However, that is not the case.
For one thing, when it comes to Nepal’s energy mix, the government caps solar power at just 10 percent. There is no official explanation, but it is likely due to perceptions that solar technology can’t supply a consistent energy stream, given that there is no generation at night and that Nepal has morning and evening peak loads.
This could be solved by introducing storage technology such as pump solar hydro or even battery storage, but then there is an issue of tariffs, which are much lower for solar at NPR 5 (USD 0.035) per energy unit. This is followed by competitive bidding, where companies are encouraged to lower it even further.
Meanwhile, there is no bidding process for hydropower. The licenses operate on a first-come, first-served basis. There is a fixed rate regardless of the location, which is also higher at NPR 6.5 (USD 0.046) per energy unit. Hydropower is supply-driven, while solar is demand-driven. Under such a discouraging scenario, solar power accounts for only 5 percent of Nepal’s total energy mix, even as the ceiling is 10 percent.
Energy expert Kushal Gurung told Global Voices: “Given the environmental risks to hydropower, investors are now demanding tariffs on hydropower to be increased. So the question to the government is, are you paying more money for hydropower or willing to buy more of the cheaper solar power?”
Farmers in Nepal irrigate their fields using solar water pumps. Photo from Gham Power . Used with permission.
At the same time, entrepreneurs have been asking officials to raise the cap on solar power to 30 percent and expand zoning policies so that solar plants can be built in areas with high potential, such as Dolpo and Mustang in the Tibetan plateau, which are near empty as they are uncultivable but also have some of the highest solar radiation levels.
Perhaps solar power’s biggest advantage is its cost-effectiveness compared to hydropower. Estimates put the operating cost of a hydropower plant at about three to four times that of a solar plant for the same generation capacity. More importantly, investors are no longer assured of a return on investment on hydropower due to the climate crisis, especially as insurance premiums have increased considerably.
“Last year, when the government opened a bidding for 800 MW of solar power, there was bidding for a combined total of over 3,000 MW from the private sector, which is to say that both lenders and developers are convinced with solar technology, but the government, especially the bureaucracy, has to be on the same bandwidth too,” says Gurung, adding that he had spoken with the current Energy Minister Kulman Ghising about increasing the cap on solar, and he agreed, but when he tried to advocate for the bidding process to be removed, he was not too receptive.
Nepal has a solar power potential of 432 GW, over ten times higher than hydropower. Photo by Gham power. Used with permission.
Geopolitics in the mix
In 2018, Dolma Himalayan Climate Fund (DHCF) pitched a proposal to generate 150 MW of solar power and store 20 MW of it in battery systems in Mustang to meet Nepal’s seasonal and daily peaks.
They got approval from the Investment Board and had already invested millions into the project when the Mines Department under the Nepal Government instructed all developers in the region to halt their projects, citing the possibility of uranium mining in the region. But insiders say the real reason was due to pressure from the Chinese government who were unhappy with the plant being set up too close to the Tibetan border, due to security concerns.
Parts of Tibet were annexed by China in October 1951 and converted into the Tibet Autonomous Region under China’s rule. This land and the sovereignty of the Tibetan people are still contested, and the Independence movement continues to this day. Because of this, Beijing keeps a close watch over any possible Tibetan activism or dissident activities that challenge its control over the region and is sensitive to any perceived encroachments on its territory, particularly from Nepal, which is a key transit point for Tibetan refugees and a center for activism that challenges China’s sovereignty and control over the region.
Another example of a clean energy project caught up in a geopolitical tangle was Nepal’s biggest solar electricity plant, which was to be developed by the Chinese company Risen Energy for USD 190 million. The Investment Board Nepal (IBN) was itself involved in negotiations with Risen’s subsidiary, Risen Energy Singapore JV, for the grid-connected photovoltaic generation system. The proposal was to install two 125 MW solar generation plants in Banke and Kapilvastu districts near the Indian border. The installations would each store 20 MW of daytime generation to be transmitted during the morning and evening peak hours. But the agreement was not signed because Indian authorities were concerned that the two solar array sites were close to the southern border.
Relations between India and China have been deteriorating in recent years, and Delhi has attempted to use its influence in South Asia to block Chinese development and cooperation in the region.
But not every Chinese-backed project has been blocked. In 2024, China handed over two solar-powered livelihood projects to a local community in Lalitpur, within Nepal’s Kathmandu Valley — a community solar bathhouse and a rooftop photovoltaic power system. Funded by the Yunnan People’s Association for Friendship with Foreign Countries and implemented by its commercial representative office in Nepal, the projects aim to improve daily living conditions amid frequent power cuts and water shortages. The initiative forms part of the Chinese embassy’s “Happy Community” program (幸福社区, Xìngfú Shèqū) under the China–South Asia Poverty Reduction and Development Cooperation Center, and exemplifies China’s continued efforts to make inroads in the region and combat India’s influence.
“Hydropower is a geopolitical mess, but it has well and truly started in solar power too. It now all comes down to how we handle it, and we need deft diplomacy to make sure our projects are not indefinitely delayed as has happened in the past,” says Gurung.
Low-hanging fruit
While geopolitics and restrictive domestic policies limit Nepal’s solar power potential, there are still small-scale opportunities for solar energy entrepreneurs to cash in, such as net metering.
Most established industries in Nepal have enough rooftop space to generate 500 KW to 1 MW of solar energy, and combined, they would generate a substantial amount of energy. Moreover, these industries are often bankable and trusted by financial institutions. The same applies to commercial complexes such as supermarkets and chain stores spread all over Nepal.
On the other hand, China could also take advantage of Nepal’s high solar power potential. Given that the United States has only imposed a 10 percent tariff on Nepal, China could set up PV manufacturing plants in Nepal. However, this requires government-to-government talks, which are hindered by tensions between India and China.
The same applies for the Carbon Border Adjustment Mechanism which is a carbon tariff on carbon intensive products, such as steel, cement and some electricity, imported to the European Union. Chinese products have suffered under this mechanism but Chinese products made in Nepal can be competitive in the European market given lower carbon tax for the country.
Clean energy has long been an area where Nepal hopes to attract Chinese investment — not only in hydropower, but also in solar and wind energy. However, due to geopolitical sensitivities, China has not yet established any large-scale solar power plants in Nepal. Instead, cooperation has so far been limited to a few small-scale aid projects.
https://globalvoices.org/2025/11/04/here-comes-the-sun-exploring-solar-potential-in-nepal/
