Call for integrated energy financingRepresentatives of government bodies, development partners, bilateral and multilateral donor agencies have called for an integrated financing model to promote private investments and reduce dependency on subsidy mechanism on energy sector.
Representatives of government bodies, development partners, bilateral and multilateral donor agencies have called for an integrated financing model to promote private investments and reduce dependency on subsidy mechanism on energy sector.
The active involvement and investment from the private sector is vital for enhancing the energy sustainability, including providing access to various forms of renewable energy to all, particularly the poorest of the poor households in developing countries like Nepal, said experts attending the two-day international financing and investor forum which began in Kathmandu on Wednesday. The event is being organised by the Alternative Energy Promotion Centre (AEPC) in association with various development partners.
The AEPC and ADB have been jointly organising the annual workshop on ‘Energy for All Investor Forum’ in Nepal every year since 2013. This year, AEPC and the Energy for All Program of ADB along with UNDP and UNCDF convened clean energy entrepreneurs, investors, financial institutions, policy makers and practitioners for a two-day Financing Workshop and Investor Forum, beginning on Wednesday.
According to the organisers, the event will explore the issues preventing the flow of venture capital, private equity and commercial loans to the key actors in the renewable energy, as well as how
policy and regulation can contribute to breaking down these barriers.
“It is very important to promote entrepreneurship in energy sector to work towards sustainable energy business and facilitate energy access to all,” said Kenichi Yokoyama, country director with Asian Development Bank (ADB), one of the key multinational donor agencies promoting energy for all campaign in Nepal.
The investor forum explores business plans and financing models from private institutions and banking sectors to promote energy access to all, especially through renewable energy sources such as solar, wind, micro-hydro and improved cooking stoves, among others, according to Yokoyama.
“Besides the private sector involvement, it is equally important to have an enabling policy, regulatory framework and favourable environment, to develop energy sector in the country,” he said.
In an attempt to encourage private investment and reduce the dependency on subsidy for renewable energy, the AEPC has already established the Central Renewable Energy Fund (CREF) as the financial management mechanism for the renewable energy sector under its National Rural and Renewable Energy Programme (NRREP). The CREF financial management mechanism is being implemented through private commercial and development banks.
In his remarks, Australian Ambassador to Nepal Glenn White said that private sector and community participation is important to ensure energy for all in rural areas.
Yubaraj Khatiwada, vice-chairman of the National Planning Commission, said the lack of availability of continued quality energy supply at affordable prices is a major challenge facing Nepal. Though two-thirds of the country’s total population is connected to electricity, either through the national grid or from various renewable and alternative energy sources, the consistent supply remains a big issue. “We are talking about universal access to energy, and the government should be committed to provide energy for all, even by implementing subsidy mechanism to some extent,” Khatiwada said.
“Financing on hydropower and other renewable energy is always a big challenge for developing countries like Nepal. For low income and developing countries, equity financing has become a challenge as we don’t have domestic saving to finance the equity component,” he said. “We have been urging developing partners and donor agencies for equity financing but the initiatives are not adequate.”
Khatiwada also shared some initiatives undertaken by the government to encourage the private sector,
including the decision
taken by the Nepal Rastra Bank. During his tenure as a governor, Khatiwada brought out a mandatory regulation for banks to lend 12 percent of the total lending portfolio to the agriculture and energy sectors.
Banks have allocated resources but their utilisation has been very poor due to lack of commitment on part of energy producers, he said, asking, “Is it really a matter of financing or implementing the project and mobilisation of the resources effectively?”