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However, many obstacles exist to the expansion of renewable energy use, including inadequate institutional structure, the need for a comprehensive framework for energy service delivery to the poor, high upfront costs of alternative energy compared to traditional fuels, low purchasing power of rural people and lack of viable and sustainable RET financing mechanism, insufficient attention to productive uses that could pay for energy services, inadequate harmonised and collaborative efforts among the donors in national renewable energy programmes. These challenges and barriers can be regrouped in to five categories and explained as below:
  1. Policy and regulatory barriers: Though Rural Energy Policy has already been promulgated; its full-fledged implementation is still pending to various legal frameworks that need to be in place. Some important legislation/regulation such as Rural (Renewable) Energy Act, Rural/Renewable Energy Central Co-ordination Commission Regulation, Central Rural Energy Fund Regulation, Feed in Tariff Act and Alternative Energy Promotion Centre (AEPC) Act, Nepal's 20 Years Perspective Plan (2011-2030) are at different stages of development. Considering the present political situation of the country, it might take significant time period to get them through the parliament. In the meantime, the proposed legal frameworks need to align with the new federal structure to be defined under the New Constituion of Nepal, which is still uncertain at the moment. Absence of detail implementation guidelines and by-laws, and operational modalities aligned with Rural Energy Policy and Smart Subsidy Policy; Weak enforcement of National RE and the Rural Energy Policy in particular at district and village level because of insufficient knowledge about these policies at the local levels, absence of a government endorsed framework for PPP models in the RE sector (including revenue sharing models) add further challenges in promotion of RE Sector in Nepal

  2. Institutional (capacity) barriers: Limited or none experience with comprehensive integrated energy planning system at districts and village level; inadequate capacity within district and local governments to regulate, develop, implement and monitor RE projects, weak and inadequate networking between energy companies/distributors of RE systems and (micro-) finance institutes, limited sharing of best practices in RE amongst different stakeholders and projects/programmes, inadequate harmonization/cooperation between different RE projects/programmes in Nepal are the main institutional barriers.

  3. Financial barriers: High costs of RE systems, high dependency on donor funds, limited knowledge of available financing/incentive schemes to finance RE technologies; limited knowledge within (micro-) finance institutes about market opportunities in the RE sector and how to develop loan-products for the RE sector; risk aversion of finance institutes; insufficient capital within micro-finance institutes to finance RE applications; limited knowledge about role of carbon financing to support a sustainable financial environment; and limited availability of credit to user groups are the key barriers related to financing of RE scheme in Nepal.

  4. Technical barriers: Nepal has developed the technical and managerial capacity and skill in the MH sector especially up to 100 kW. Centre of excellence for micro-hydro up to 100 KW has already established in Nepal at AEPC. However, the capacity needs to be enhanced for more than 100 kW. Lack of detailed information on the potential sites and feasibility of RE systems; limited experience with the technical, economic and environmental aspects of RE; inadequate knowledge on the installation, management, operation and maintenance of large RE systems; insufficient capacities both in the knowledge and human resource for manufacturers, installers and maintenance technicians for hydropower plants above 100 kW are the main technical barriers. Similar barriers lie in promotion of large solar systems beyond 100 watts, and particularly use of photovoltaic energy to generate heat.

  5. Information and awareness barriers: Awareness of renewable energy system at the local level is not adequate of awareness information on the costs and benefits of various RE systems; is still lacking at the community level, capacities to understand RE systems and information to compare different RE options and to select the most feasible option at the local situation is inadequate.

  6. Systemic, decentralization and Governance: Systemic characteristics of unified state structure in Nepal are manifested in decision making process which is normally centre-driven. Like in other sectors, renewable energy development programmes are appraised in the centre level and their operation modalities are generally discussed among central level stakeholders. This top-down approach may have, sometimes, led to conflict at the time of implementation and hindered participation of local bodies and local level stakeholders. On the front of decentralisation, it has been seen that centre level institutions, who have decisive powers, always tend to retain their administrative and financial power to control and only delegate implementation responsibilities at the district or lower level. For the sustainability of renewable energy system at the local level, the devolution of power at the local level is a must. Though the current working arrangement at the local level under decentralization framework has supported to establish more number of renewable energy schemes at the community level from outside, still local bodies are not capable of mobilizing the resources and establishing such system on their own.

  7. Social, cultural and gender barriers: Many rural areas have their own cultural and social values different from the other regions. The programme implementation modalities have to address these issues to ensure active participation of local people and incorporate their values. The concerns of women and exclude groups must be addressed while implementing energy program to make it more inclusive and sustainable.

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Renewable Energy for Rural Livelihood (RERL) Programme
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Khumaltar, Lalitpur, Nepal
Tel: 977-1-5547609 / 5544146
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