The government has set a target of adding 1,040 megawatts (MW) of electricity to the national power system in the upcoming Fiscal Year (FY) 2026/27, increasing Nepal’s total installed electricity generation capacity to 5,535 MW.
Through the annual budget, the government has proposed connecting more than 1,000 MW of additional electricity to the national grid. Of the planned increase, 670 MW will come from hydropower projects, while 370 MW will be generated from solar energy.
As part of the plan, the government aims to complete the 40 MW Rahughat Hydropower Project within the scheduled timeframe. To support electricity generation, transmission, and distribution infrastructure, a budget of Rs 85.54 billion has been allocated.
Major Hydropower Projects to Be Accelerated
The government has pledged to speed up construction and development works on several major hydropower projects, including the Tanahun Reservoir Hydropower Project and the run-of-river Upper Modi A, Upper Modi, Upper Trishuli-3B, and Budhiganga projects.
Several large-scale projects are also in the pipeline, including:
- Upper Arun Hydropower Project (1,061 MW)
- Uttar Ganga Hydropower Project (828 MW)
- Chainpur Seti Hydropower Project (210 MW)
- Tamakoshi-5 Hydropower Project (99 MW)
- Ghunsa Khola Hydropower Project (77 MW)
According to the budget document, financial arrangements and bidding processes for these projects will begin soon.
Studies and New Investments Planned
The government will also move forward with feasibility studies and preparations for major projects such as:
- Nalgadh Hydropower Project (417 MW)
- Arun-4 Hydropower Project (490 MW)
- Naumure Hydropower Project (281 MW)
In addition, construction bidding will be initiated for the 439 MW Betan Karnali Hydropower Project, which will include investment participation from contributors to the Employees Provident Fund.
The government has also pledged support for hydropower projects with a combined capacity of 3,000 MW, including the 900 MW Arun III and 669 MW Lower Arun projects.
Expansion of Transmission Infrastructure
To strengthen electricity transmission, the government has allocated Rs 70 billion for the completion of ongoing transmission lines and substations.
The 1,200 MW Budhi Gandaki Reservoir Project, which has experienced prolonged delays, will also be expedited, with the government planning to begin the contracting process during the next fiscal year.
The Hetauda–Dhalkebar–Inaruwa 400 kV transmission line is expected to be completed within the current fiscal year. Construction of additional 400 kV transmission corridors, including Khimti–Barhabise–Kathmandu and Hetauda–Ratemate–Lapsiphedi–New Damauli–New Butwal, will also be accelerated.
Cross-Border Energy Connectivity
The government plans to advance several cross-border transmission projects to strengthen regional electricity trade. These include:
- Butwal–Gorakhpur
- Inaruwa–Purnia
- Dhalkebar–Muzaffarpur–Sitamarhi
- Lamki–Dododhara–Bareilly
- Lamahi–Lucknow
- Nijgadh–Motihari
- Chilime Hub–Kerung
The Karnali Corridor national transmission line will also be accelerated, while electricity access will be expanded in off-grid areas of Karnali Province.
Green Hydrogen and Battery Storage Initiatives
Under the government’s new energy initiatives, a 2.5 MW green hydrogen pilot plant will be established in Hetauda for commercial production. Additionally, a 100 MW Battery Energy Storage System (BESS) will be introduced in the Kathmandu Valley to help address electricity shortages during peak demand hours.
New Financing Measures for the Energy Sector
To mobilize investment for large-scale energy projects, the government plans to issue green energy bonds and diaspora bonds. The private sector will also be encouraged to invest in large-scale and reservoir-based hydropower projects.
Under the new policy, reservoir-based hydropower projects that secure full investment financing will be allowed to issue up to 40 percent of their Initial Public Offering (IPO) in the first year itself.
The government also expects to generate additional resources for energy development through the recently introduced five percent Value Added Tax (VAT) on electricity consumption.
