December 9: Asian Development Bank has granted a $20 million to Nepal to spur private sector investment in utility-scale solar power. The funding should ensure installation of at least 25 megawatts (MW) of solar power by 2018 but, more importantly, will provide a business model that can be replicated and scaled up elsewhere in the energy-strapped South Asian nation, said the bank issuing a press statement.

The grant will be used to finance the difference between private sector cost of producing utility-scale solar power and the minimum price that the Nepal Electricity Authority is willing to pay for the power. This is the first time that Nepal has ever used so-called “viability gap” funding. 
“Providing some financial security to the private sector should draw more private investment into this critical sector in Nepal and, in doing so, reduce pressure on government finances,” said Aiming Zhou, Senior Energy Specialist at ADB’s South Asia Regional Department. “And once the private sector better understands the Nepal solar sector, I would expect them to seek investment opportunities elsewhere in Nepal or indeed the region.”

According to the Manila based bank, companies will now be able to bid to develop solar systems through an international competitive bidding process, with power purchase agreements awarded on the basis of the best offtake prices. The funding under the grant will be payable on the first day of operation of the solar system, up to end June, 2022. Bidding is expected to start in the first quarter of 2017 and last around 6 to 12 months.

The $20 million grant is being financed by the Scaling Up Renewable Energy in Low Income Countries Program (SREP) of the Climate Investment Funds (CIF) administered by the Asian Development Bank (ADB). It will form part of the $440.50 million South Asia Subregional Economic Cooperation Power System Expansion Project, which kicked off in January 2015, reads the statement.