ENERGY for all ..Investing in Nepali energy sector...

A recent report released by International Energy Agency (IEA) has some interesting facts and figures on investments and strategies required from various government agencies,multilateral institutions and private investors to reduce energy poverty. Here are some highlights from the report, that I thought was relevant to Nepal's energy crisis.

• To provide universal modern energy access by 2030, annual average investment need to average $48 million per year,more than five times the level of investment in 2009
  
• According to the report , access to electricity involves more than a first supply connection to house hold.The report claims, access to energy means - a rural household should consume a minimum of 250 KW/hr of energy per year and for urban household it is 500 KW/hr per year .
• Nepal's rural electrification program- National 3 -year Interim plan has been cited as one of the vital programs by government to improve access to electricity
• ACcess to clean cooking facilities section - Currently, after China, India,Nepal and Vietnam are the next biggest market for bio gas plan.
• Th global technical potential for hydro power generation is estimated at 145000 TWH ,more than four times current production,and host of the undeveloped potential are in Africa and in Asia,where 92% and 80% if reserves respectively untapped .
• The main obstacle to obtaining greater private sector financing, apart from uncertain investment and regulatory environments and political risks in many developing countries, is the lack of a strong business case for tackling the worst cases of energy deprivation, because of the inability of users to pay. This issue needs to be squarely faced through some form of public sector support, if there is to be a break through to universal access to modern energy. In addition, local financial institutions and microfinance institutions find it difficult to be sufficiently expert regarding new technologies and may underestimate the potential credit‐worthiness of poor households, based on the large amount they already pay for more traditional sources of energy.
  
• Understanding households’ existing energy expenditures is one important step towards unlocking end‐user finance: poor people often are able to afford the full price of modern energy because it costs less than the traditional forms it replaces, such as kerosene lamps and dry cell batteries, but may be unable to overcome the important hurdle of the initial capital cost.
• International commercial banks have an established record of financing projects in the energy sector in emerging markets, predominantly in power generation. Pricing finance at market rates according to perceived risk, they offer debt financing, mezzanine finance and, in some cases, equity. They can lend to project developers directly or to a special purpose vehicle set up to conduct the project. Commercial bank financing terms can be less onerous if certain risks are covered by guarantees from a multilateral development bank or the host government.
  
• Private sector financing sources for energy access investments include international banks, local banks and microfinance institutions, as well as international and domestic project developers, concessionaires and contractors. Private finance may also come from specialist risk capital providers, such as venture capital funds, private equity funds and pension funds. The main forms of instruments favored by private sources include equity, debt and mezzanine finance an increasingly important instrument, offered through local banks, is the extension of credit to end‐users, often with guarantees arranged in partnership with multilateral development bank...(Source:IEA,2011)