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Nepal hydropower sector development and challenges

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2026-09-14 18:25 UTC → 2026-09-15 09:24 UTC · added ~~removed~~

The hydropower sector in Nepal is navigating regulatory, social, and structural challenges. While installed capacity has reached 4,120 megawatts, the market faces a mismatch between generation and domestic consumption. Managing surplus energy during the wet season remains difficult, with options limited to exporting to India or curtailing generation. Delays in the Power Purchase Agreement (PPA) process have left approximately 16,000 megawatts from 281 projects in uncertainty, threatening the national goal of 28,500 megawatts by 2035. This has led to pressure to reform the sector by outsourcing power trading to licensed entities to mitigate financial risks for the Nepal Electricity Authority (NEA). Despite structural hurdles, the sector saw a surge in profitability during the fourth quarter of the last fiscal year, with 106 listed companies reporting a combined net profit of Rs 11.11 billion. This growth was driven by lower bank interest rates, increased rainy season generation, and higher consumption due to liquefied petroleum gas shortages. However, the government faces scrutiny over environmental compliance; despite a January 2025 Supreme Court ruling, investigations suggest at least 10 private projects totaling over 360 MW have received permits in protected areas such as Annapurna, Gaurishankar, and Kanchanjunga. On August 26, 2026, a glacial collapse on the China-Nepal border triggered devastating floods that severely damaged hydropower infrastructure, impacting at least 12 projects and damaging solar plants and transmission lines. The disaster caused significant energy shortages and a high human toll, with over 1,400 reported dead in Nepal and Tibet. In response, India has approved the expedited export of up to 654 megawatts to Nepal to help stabilize the grid through December 31. India’s Ministry of Power stated it will supply electricity for 18 hours per day, utilizing the Muzaffarpur-Dhalkebar and Tanakpur-Mahendranagar lines.

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