Kathmandu: 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 Global Voices, a report released by an energy think tank 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 possesses a solar power potential of 432 gigawatts, significantly higher than its hydropower capacity of 42,000 MW. Despite having over 300 days of sunshine annually, enabling the production of 3.6 to 6.2 units of electricity per square meter, investments in solar power generation remain limited.
The government caps solar power at 10 percent of Nepal’s energy mix, with no official explanation provided. This restriction is likely due to concerns about solar’s ability to consistently supply energy, particularly during Nepal’s morning and evening peak loads. Storage technologies, such as pump solar hydro or battery storage, could address this issue. However, solar tariffs are much lower at NPR 5 per energy unit, prompting competitive bidding that encourages further reductions.
In contrast, hydropower licenses operate on a first-come, first-served basis with a fixed rate of NPR 6.5 per energy unit. This discouraging scenario results in solar power accounting for only 5 percent of Nepal’s total energy mix. Energy expert Kushal Gurung questions whether the government should consider increasing tariffs on hydropower or invest more in solar power.
Entrepreneurs advocate for raising the solar power cap to 30 percent and expanding zoning policies to facilitate solar plant construction in high-potential areas like Dolpo and Mustang. These regions, despite being uncultivable, receive high solar radiation levels and remain largely empty.
The cost-effectiveness of solar power, compared to hydropower, is a significant advantage, with estimates indicating that hydropower operating costs are three to four times higher for the same generation capacity. Investors now face challenges in ensuring returns on hydropower investments due to climate crises and rising insurance premiums.
Last year, the government opened bidding for 800 MW of solar power, receiving bids for over 3,000 MW from the private sector. This indicates confidence in solar technology among lenders and developers. However, the government, particularly the bureaucracy, needs to align with this perspective. Gurung notes that while the Energy Minister Kulman Ghising agreed to increase the solar cap, he was less receptive to removing the bidding process.
Geopolitical dynamics also complicate Nepal’s solar energy initiatives. In 2018, the Dolma Himalayan Climate Fund proposed generating 150 MW of solar power in Mustang, including 20 MW stored in battery systems. Despite initial approval, the Mines Department halted the project, citing potential uranium mining. Insiders suggest pressure from the Chinese government, concerned about security near the Tibetan border, influenced this decision.
Similarly, a proposed USD 190 million solar plant by Chinese company Risen Energy faced delays due to Indian authorities’ concerns over its proximity to the southern border. Deteriorating India-China relations have led Delhi to block Chinese development in South Asia.
While some Chinese-backed projects, like solar-powered livelihood projects in Lalitpur, have succeeded, large-scale initiatives remain limited. Geopolitical tensions hinder collaboration, requiring deft diplomacy to avoid indefinite project delays.
Despite these challenges, small-scale opportunities for solar energy entrepreneurs in Nepal exist, such as net metering. Industries with ample rooftop space can generate substantial solar energy, attracting financial institution support. Additionally, China could leverage Nepal’s solar potential by setting up PV manufacturing plants, taking advantage of lower tariffs.
Clean energy remains a key area for attracting Chinese investment, but geopolitical sensitivities have restricted large-scale solar power plant establishment. Cooperation between Nepal and China has so far been limited to small-scale aid projects.