Hydropower generation in Nepal began over a century ago with the 500-kilowatt Pharping Hydropower Project, the country’s first. Initially, the government held a monopoly on hydropower, and only a limited number of projects were developed. By 1989, Nepal had generated just 167 megawatts of electricity. After the first People’s Movement in 1989, the country transitioned to a multi-party democracy. The 1990 Constitution embraced a policy of liberalization, opening the door to private sector involvement in industry and business, which significantly increased the demand for electricity. Former Energy Secretary Devendra Karki notes that hydropower development has since seen visible progress.
The government alone could not meet the rising electricity demand. The Electricity Act of 1989 paved the way for private investment in hydropower. In 1995, the first private sector project, Himal Hydro, signed a Power Purchase Agreement (PPA) for the 60-megawatt Khimti Hydropower Project, which was connected to the national transmission grid in 2000.
According to the Independent Power Producers Association of Nepal (IPPAN), private developers have added 2,740 megawatts to the national grid over the past 24 years. The private sector now accounts for about 80 percent of Nepal’s hydropower generation, says IPPAN General Secretary Balram Khatiwada. In contrast, government projects contribute about 700 megawatts. In recent years, Nepal has made notable strides in hydropower generation, electricity export, green energy promotion, and private sector engagement—moving the country closer to energy self-reliance and economic growth.
Nepal has vast potential for hydropower generation. Government data suggest that approximately 72,000 megawatts can be generated economically and technically. However, current production stands at around 3,400 megawatts, with PPAs signed for an additional 11,000 megawatts.
To address chronic load-shedding, the government declared an energy crisis in 2015 and ramped up hydropower development. At one point, Nepal was importing electricity worth Rs 22bn annually from India to meet demand. Since then, domestic electricity production has surged. Today, surplus electricity during the monsoon season is exported to India, and in Nov 2024, Nepal began exporting 40 megawatts to Bangladesh.
In April 2023, Nepal and India signed a long-term agreement to export 10,000 megawatts of electricity, setting the stage for Nepal to become an energy-exporting nation within the next decade. The private sector has invested approximately Rs 600bn in hydropower, with an additional 4,200 megawatts currently under construction. IPPAN estimates that total investment could reach Rs 1,500bn when ongoing projects are included.
Total investment in completed and ongoing projects stands at around Rs 1,300bn, which includes bank loans, equity capital, and contributions from around 400,000 individual investors. While hydropower development initially occurred in a handful of districts, it has now spread to 70 of Nepal’s 77 districts. Energy projects are underway in nearly all districts except Bara, Bardiya, Bhaktapur, Dang, Dhankuta, Salyan, and Saptari.
According to preliminary IPPAN data, hydropower development has contributed not only to electricity generation but also to socio-economic development in remote areas. These projects have built 3,300 kilometers of roads, 350 kilometers of tunnels, 140 health centers, 153 schools, 95 drinking water systems, and 45 irrigation systems.
To address local needs, the sector has also supported the hiring of 200 teachers and the provision of 30 ambulances. A one-megawatt project under construction can employ about 300 people, while operational projects employ around 10 people each.
To build on this progress, the government has introduced the Energy Development Roadmap and Action Plan 2024, aiming to expand production, consumption, and export of electricity. The goal is to generate 28,500 megawatts of electricity within the next decade. Former Secretary Karki emphasizes the importance of public-private collaboration to implement the roadmap effectively. “The roadmap has been prepared, but to ensure it is not derailed, we must revise laws and create an investment-friendly environment on time,” he says.
