In the end, only the people of Nepal can solve the challenges facing them.

Most often, the breakthrough for such a change occurs when new technologies or systems become accessible and galvanise individual and collective action. This is where distributed energy technologies offer an unprecedented opportunity for change in Nepal.

Solar, wind or biogas electricity supply systems are the most recognisable parts of distributed energy technologies. But they are only one, and small, part. The fabric of distributed energy technologies and systems is broader than that. They include energy efficiency or how we use appliances that consume less power. Digital technologies allow us to connect, remotely manage and aggregate different distributed systems. Options for individual decision-making in real time, such as when to charge or when to and where to discharge electric vehicles; and battery storage or how and when we choose to go off-grid or on-grid.

Distributed energy technologies and systems are about a clean, sustainable, composite vision of energy supply and demand that places decision-making authority directly in the hands of people. It is often called the democratisation of energy, but that term is too long and complicated; it is simply about giving power to the people. Moreover, such technologies and systems are highly applicable to Nepal. It is as if their new trends were custom designed to help unshackle the chains that have kept Nepal poor and underdeveloped for decades.

Nepal suffers from a wide range of challenges that leave many communities systematically marginalised: Small communities across difficult terrain; low levels of electricity use; heavy reliance on traditional biomass as the primary energy source; very little industrialisation or mechanisation; poor planning and poorer execution; and difficulty in reaching people. Distributed energy technologies and systems are ideally suited to help overcome these challenges. Integrating distributed energy technologies within Nepal’s broader energy mix could transform the country economically and socially. It could address Nepal’s low electricity demand, excess generation, lack of investment and unreliable supply. And in so doing, it will help decentralise the energy sector, empower communities, build resilience, power economic growth, and improve inclusion and gender equality.

These technologies and systems are highly relevant, beneficial and practical for Nepal. But even with enabling policies, who will help accelerate the adoption and integration of such systems within Nepal’s energy mix? The Nepal Electricity Authority (NEA), the country’s monopoly electric utility that controls generation, transmission and distribution, has little interest in distributed energy systems, let alone encouraging an approach to erode its dominant position in the sector.

The answer to how to modernise Nepal’s energy sector through distributed energy technologies and systems is “community electricity cooperatives”—a mechanism set up almost three decades ago.

Regrettably, the best hope for modernising Nepal’s energy sector is now under threat.

Community empowerment at risk

In one of his first policy announcements since taking office, Rajendra Lingden, Deputy Prime Minister and Minister for Energy, Water Resources and Irrigation (MoEWRI), said he was reviewing the Community Electricity Distribution Bye Laws 2060. Though initially intended for rural electrification, these regulations have helped establish over 350 community-based electricity user cooperatives, touching the lives of over 550,000 households.

The minister called for a review of the regulation, saying, “Because of reports about widespread mismanagement, corruption, unreliable service and poor maintenance within these community electricity cooperatives, users within the cooperatives were being charged much higher electricity tariffs than they should have been.”

The minister’s assessment is correct. Community electricity cooperatives present an uneven picture, punctuated with all the problems he noted. But mismanagement, corruption, poor service and fleecing of customers are traits that run throughout Nepal’s broader economy, not just electric cooperatives.

It is important for the Minister not to throw the baby with the bathwater, let alone a baby who holds the key to the future of Nepal.

Modernising electricity cooperatives

The first order of business is to improve the governance and management of community electricity cooperatives. These cooperatives currently lack any meaningful oversight. There is no standardisation in service or recourse for customers when they are not provided with good service. As the entity overseeing the establishment of electricity cooperatives, the Community Rural Electrification Department within NEA was to have played that oversight role. But it didn’t.

A new oversight board for community electricity cooperatives, independent of the NEA, with the ability to set standards of service, financial viability and with adequate authority to enforce these measures is critically needed. The board could also serve to hear and address customer grievances. A new law will be required to establish this board. Fortunately, there are plenty of successful models from around the world, including nearby Bangladesh, to draw from.

Along with these reforms in governance, management and quality of service, community electricity cooperatives must be modernised as independent micro-utilities with the ability to buy, sell, produce, contract and trade power. The approximately 350 cooperatives spread across some 55 districts of Nepal could serve as the backbone of a truly competitive domestic power market.

As micro-utilities, many community electricity cooperatives will move to integrate distributed energy systems within their networks, thus reducing costs, improving reliability and supply resilience for their customers. Many of them will encourage their customers to adopt energy-efficient appliances to reduce costs and improve reliability, much like the Chandannath Electricity Cooperative in Jumla did two decades ago when they replaced incandescent with CFL bulbs.

As micro-utilities, community electricity cooperatives should be free to contract for and purchase the electricity they need to meet their requirements. Unlike the NEA, these micro-utilities will face higher responsibility and costs for load-shedding (for the NEA, load shedding is free). As hundreds of cooperatives or micro-utilities vie for reliable electricity supply, they could very well absorb the excess generation that Nepal reportedly experiences.

The modernisation of community electricity cooperatives will have several economic and social co-benefits. It will empower communities, bring real decision-making back to the local level, enhance their capacity and technical skills, generate economic opportunities, promote equity and inclusivity (cooperatives have more women than the NEA in their management) and power growth.

The modernisation of community electricity cooperatives will need to be accompanied by a broader set of sector reforms: Unbundling of the NEA into separate generation, transmission, and distribution entities; open access that allows buyers and sellers to access transmission rights; power trading market; and an electricity regulator with real authority to oversee the functioning of the power market and protect the interest of all stakeholders.

The idea of modernising community electricity cooperatives mirrors the spirit of Nepal’s constitution. It decentralises the sector, devolves decision-making authority, and empowers local communities. Collectively, these changes will help enhance the quality of the national grid and avoid investments where it is not needed. Most importantly, it will allow all Nepalis to truly benefit from access to reliable, affordable, and clean energy.