Rural Energy Development Programme

Towards a Solution

Launched in 1996 by UNDP and the Government of Nepal, the Rural Energy Development Programme has introduced decentralized renewable energy sources to the most remote populations in Nepal. By building microhydropower and solar heating (cooking stoves) systems, the programme is effectively providing reliable, low-cost electricity to rural communities and contributing to decreasing indoor air pollution. Its decentralized approach not only strengthens local governance but also supports the development of rural economies and livelihoods.

Initially a small pilot in five districts, the programme is now present in over 75 districts and expanding, providing modern energy services to some 1 million people in remote rural areas of Nepal. Today, micro- and mini-hydropower plants generate more than 15 per cent of Nepal’s electricity. These achievements have in turn created jobs, increased household income, lowered annual household spending on energy, and created new businesses for each new hydropower station, not to mention higher school enrolment and better health, water quality and sanitation.

The programme has an integrated approach to economic, environmental and social development in rural settings. Its partnerships and financing mechanisms are equally innovative through public-private partnerships and a community-based approach, further ensuring sustainability and cost-effectiveness and delivering multiplier benefits for rural populations. The programme process benefits from the strong, long-term commitment of the Government, which not only provides catalytic public investments but also enacts policies that further boost the scaling up. Furthermore, the programme implements capacity development efforts at all levels: national, to create an enabling environment through policy and strategies; local, to improve energy service delivery; and community, to empower beneficiaries and promote local governance.

The Rural Energy Development Programme also offers a global network of expertise and experiences on which countries can draw to tackle their rural energy development challenges. It has already informed several countries in Asia (Afghanistan, Bhutan, Cambodia, Mongolia, Pakistan and Tajikistan) in various programmes relating to energy and local service delivery. Other countries, such as Kenya, Uganda and the United Republic of Tanzania, have also benefited from three-month, on-site training by Nepalese micro- hydropower experts to facilitate the replication of the approach.

To facilitate the programme’s replication, the following conditions need to be met: (a) strong and long-term government commitment to scaling up decentralized energy services; (b) up-front public investments and the active participation of local communities to ensure sustainability; (c) a community-based approach in support of local governance to ensure the long-term sustainability and feasibility of scaling up rural energy services; and (d) effective partnerships and synergies across a wide range of actors to ensure multiplier development benefits.

Stakeholders include district and village development communities, private-sector firms, government organizations, multilateral organizations, the World Bank, local non-governmental organizations, academia, international donors (Danish International Development Agency) and other organizations working in the renewable energy sector.

Public financing by the Government of Nepal has proven catalytic in mobilizing resources as programmes grow, and the Government, via the Nepal Electricity Authority, has made a commitment to provide up to 80 per cent of the capital investment needed for rural electrification construction costs, while communities are responsible for contributing at least 20 per cent of the total cost of the grid extension via labour, household donations and bank loans, among others. The Government gesture has attracted long-term commitments from donors and partners, including DANIDA, the World Bank, UNDP and various non-governmental organizations, as well as local governments that contribute financing under subsidy provisions and capacity-building efforts.

UNDP provided financial and technical assistance focused on providing energy services (particularly micro-hydropower systems and improved cooking stoves) through decentralized, off-grid approaches, which proved to be particularly efficient in reaching the poor in remote and rural areas. Owing to the success of the pilot, the World Bank joined as a partner, providing financial assistance for expanding programme activities.