Lights out in Nepal: Investing in local ownership for long-term energy solutions
In the aftermath of Nepal’s earthquakes, millions of Nepalese in both urban and rural areas are facing widespread power outages, and more than a dozen hydropower projects have been damaged. As the international community pools efforts to rebuild Nepal, restoring energy access is a priority. This begs the question: what is the most effective approach to addressing short-term energy needs while building sustainable, long-term solutions? Small-scale projects, such as micro hydro, provide an opportunity for investors to empower communities in more ways than one.
Though the recent earthquake has severely impacted the energy sector, access to electricity has never been reliable for Nepal’s 28 million people. Many rural areas have no electricity at all, and those that do face chronic power shortages. Investors in energy infrastructure have shied away because of the relatively small size of the market and difficulty of doing business in Nepal. The country ranks 126/175 countries on Transparency International’s Corruption Perceptions Index (Canada ranks 10th), and 109/189 economies in the World Bank Group’s “ease of doing business” measurements. The barriers to investment and innovation in Nepal’s energy sector are non-technical.
This finding is consistent with the work of the Advanced Energy Centre domestically and internationally. At the AEC, we repeatedly find that non-technical considerations are the biggest barriers to the adoption of innovative technologies in Canada and around the world. When it comes to investing in developing countries such as Nepal, key concerns are political volatility, regulatory environment, ease of doing business, and other potential risks to energy projects.
Despite these barriers, Nepal’s energy sector is full of untapped potential, amplified by a recent historic Power Trade Agreement with India and significant foreign investments in hydropower that could earn the country a total of $17 billion (US) in the next 30 years (only $2 billion shy of the country’s total GDP). Though these estimates are attractive and tempting for large-scale private investors, there is significant potential for impact from small-scale projects that engage and empower communities and local industry. Large-scale investments are critical to a long-term growth strategy for the country but they do not address the immediate issues facing millions of energy-poor Nepalese.
Innovative small-scale projects may be the solution, and they are currently being deployed by a range of actors, from small non-profits such as SunFarmer to global institutions like the World Bank.
MaRS Cleantech company, SunFarmer, demonstrates that small-scale investments can overcome risks, and deliver profound social and economic value to the Nepalese in the process. SunFarmer is delivering reliable solar power to communities in Nepal through affordable financing.
SunFarmer installs, monitors, and maintains solar systems for community institutions through zero-interest loans paid for by charitable donations. Their model encourages adoption of renewable energy through addressing prohibitive costs and the poor quality of many systems installed in developing countries. Since 2013 they have completed 9 projects reaching nearly 29,000 Nepalese.
SunFarmer is also developing a product for investors that see value in their model and are willing to commit $100,000 or more. These projects are attractive investment opportunities as they are lower risk and can overcome many non-technical barriers to energy innovation.
Micro hydro is another example of small-scale projects that offer significant value in both the short and long-term. The remote mountain village of Darbang built a micro hydro power plant in 2009 with the assistance of the Nepalese government and the World Bank. By 2013 the plant resulted in the creation of 22 new industries, and improved the quality of life for the town’s residents. It has even connected them to the rest of the world by providing Internet access.
Partnering with governments and global institutions, such as the World Bank and the new Asian Infrastructure Investment Bank, can offer investors additional security and risk management.
This disaster has been the deadliest in Nepal’s history, and has exposed the critical lack of energy access in the country’s rural areas to the world. The World Bank and SunFarmer projects demonstrate that investments in small-scale projects and businesses can overcome non-technical barriers, and offer both immediate solutions, and long-term growth, to communities across Nepal. As rebuilding begins, investing in projects such as these will be fundamental to delivering reliable electricity and well-being to the Nepalese.