Nepal's renewable energy sector, led by hydropower, continues to attract domestic and foreign investment. Understanding the licensing, environmental, and power-purchase framework is essential before committing capital to a project.
Primary legislation
The Electricity Act, 2049 and the Electricity Regulations, 2050 govern the generation, transmission, and distribution of electricity. The Investment Board Act applies to larger projects that fall within the national priority thresholds.
Licensing requirements
Project developers must obtain:
- A survey licence to conduct preliminary studies and feasibility assessments
- An electricity generation licence once the survey and studies are complete
- Approval of the environmental impact assessment (EIA) or initial environmental examination (IEE), as applicable
Power purchase agreements
The Nepal Electricity Authority (NEA) is the principal off-taker. The terms of the power purchase agreement (PPA), including tariffs and take-or-pay obligations, are negotiated against the prevailing regulatory framework and can significantly affect bankability.
Project finance considerations
Lenders typically require a complete chain of land rights, generation and transmission licences, a signed PPA, and adequate insurance. Foreign investors should also confirm whether the investment requires approval from the Investment Board Nepal or sectoral regulators.
Environmental and social compliance
Hydropower and renewable projects face heightened environmental and social scrutiny. Resettlement, forest clearance, and river-flow obligations must be addressed in the EIA and monitored through the project lifecycle.
Our energy and infrastructure team advises developers, lenders, and investors on the full project lifecycle. Learn more about our energy practice or contact the team.