The Micro-Hydro Village programme was built upon the national strategy launched through the Rural Energy Development Programme and helped to increase the electricity access through renewable energy sources in rural areas in the remote villages of Nepal.  The micro-hydro system provided continuous electricity to end users in close proximity.  Through active community mobilization and involvement and by working with community organizations and government agencies, the project demonstrated a successful model for extending electricity access through renewable sources in rural areas.


  1. Objective
  2. Target Group
  3. Output
  4. Key Features of the Case
  5. Sustainable Financing
  6. Supportive Policies and Institutional Environment
  7. Building Local Capacity and Skills
  8. Community Participation and Including Local Stakeholders
  9. Achieving Co-Benefits
  10. Affordability and Technical Issues
  11. Local Champions
  12. Monitoring and Evaluation
  13. Replicability and Scaling-up
  14. Contact
  15. References and Further Reading



The Micro-Hydro Village Electrification (MHVE) is part of a larger national Power Development Project in Nepal to improve access to (rural) electricity services (a non-grid connected element) and to promote private participation in the overall power sector, improve efficiency, and to mobilize financing.


Target Group

Remote villages in Nepal which are unlikely to receive electricity in the foreseeable future.



  • The MHVE scaled up community-level projects with a total capacity of 2.5 to 3.0 MW serving 30,000 new customers and 10 new districts in Nepal [1].



  • MHVE supported hydroelectric facilities ranging from 10kW to 100kW, with an average plant size of 25kW to 30kW [1].


  • The net benefit of the MHVE program per household was calculated to be  $8 per month and average cost was  $1.40 per month [1].


  • The income of communities with micro hydro units increased by 11%, and the women and children from these communities suffered less from respiratory problems and disease [1].


  • Micro-hydro units displace nearly 10 million kilograms of carbon dioxide each year [1].


Key Features of the Case


The MHVE was one of the components of Nepal Power Development Project (NPDP) launched in 2003 by International Development Association (IDA) of the World Bank.


The NPDP had three primary components: creation of a Power Development Fund (PDF), the MHVE, and transmission and distribution improvements to the national Nepal Electricity Authority (NEA) grid. The PDF financed private sector development of small and medium sized hydro schemes, mostly grid connected. The MHVE component overlooked off-grid micro-hydro schemes below 100kW in installed capacity. NEA component focused on rehabilitating and extending the national transmission and distribution network [1].


The World Bank funding through IDA for the project was US$ 75.6 million during 2004-2009 with a grant of US$ 5.5 million for MVHE component only. Contribution from          UNDP, local banks and borrowers and local communities resulted in the total project budget of US$ 133.4 million [1].


The MHVE was based on earlier UNDP scheme called Rural Energy Development Program (REDP).


The MHVE required that communities wishing to build microhydro facilities donate land for the construction of canals, penstocks, power houses, and distribution lines voluntarily. Furthermore, villagers were required to contribute land and labour for civil works related to microhydro units [1].


Nepal law doesn't require micro- hydro schemes to undergo environmental impact assessments; however, specific impact assessments were still conducted under this programme, in accordance with UNDP's REDP guidelines ensuring that the residual flow in the de-watered section of rivers was never less than 10 % of the dry season flow [1].


Sustainable Financing

IDA granted US $ 5.5 million in 2003 and US$ 3.8 million in 2008 for MHVE, covering most of the costs, and the remaining was covered through cash and labor counterpart provided by participating communities and the Government of Nepal [2]. Under the REDP framework, the programme provides support up to 50% of the total non-local cost required for installation of microhydro [3]. The communities were also assisted to mobilize financial resources in the form of grants, loans and investment from local authorities, such as District Development Committee (DDC) and Village Development Committee (VDC), government line agencies and development banks. The DDC and VDC usually contribute about 10% of the total non-local cost in each demonstration scheme [3]. The local beneficiaries also provide voluntary labor and locally available materials required for the installation.


Supportive Policies and Institutional Environment

MHVE was built upon earlier UNDP's successful initiative REDP which was a joint initiative of government of Nepal, UNDP and World Bank.  It implemented programmers through local authorities, such as DDCs and VDCs in each district and villages.  REDP was supported for creating a comprehensive institutional arrangement from top to bottom level. At the central level, Rural Energy Development Boards (REDB) and Management Committee (MC) were created for coordinating activities with government line agencies. At the local government level, District Energy Committee ensured collaboration with all related agencies in districts for integrating planning and management of rural energy development initiatives. At the grassroots level, the establishment of community organizations (COs) provided the rural community with a platform to launch development activities concerning them. Moreover, creation of functional groups (FGs) with representatives from different ethnic group ensures equitable participation from all levels.


Building Local Capacity and Skills

The programme helped in local capacity building and skills through training in the form of formal education, practical exercises, and exchange workshops at different levels. At the community level, the programme provided training to end users on how to install and operate micro hydro system; at the district and national level, trainings were provided to institutions and their staff on how to setup and manage organizations to develop the capacity necessary for the successful implementation and completion of the system. Additionally, income generation training for business development and subsequent training of actors on various issues were conducted to achieve programme sustainability [4].



MHVE also provided extensive training in operations and maintenance for local operators and managers from each local community doing a microhydro project so that they would understand technical aspects of system operation, bill collection, disconnecting for non-payment, record keeping, and accounting [1]. Maintenance support facilities and service centres within districts were established and strengthened to provide repayable financial support for manufacture of turbines and generators within Nepal [1].


Community Participation and Including Local Stakeholders

The active participation of local people to manage and operate their micro hydro system was essential under MVEP.  Under the framework of REDP, community mobilization package consists of six basic principles, namely organization development, skill enhancement, capital formation, technology promotion, environment management and empowerment of women and marginalized groups [3]. The establishment of various functional and management groups at national, district and community level ensured greater participation.


Achieving Co-Benefits

The impact of project and the installation of micro-hydro system not only provided electric power to the households, but also improved the quality of life of the entire village by providing opportunities for income generation and education. Apart from lighting, it also provided mechanical energy for milling, husking, grinding, carpentry, spinning and pump irrigation in the village which paid off in the form of higher local incomes [1]. Part of MHVE project funds was also allocated to promote women's empowerment, skill enhancement and income generation in a 'Community Mobilization Fund (CMF)'. The fund offered $400,000 in total to couple hydropower with income generation schemes, particularly to promote non-lighting uses of electricity such as agro-processing, poultry farming, carpentry workshops, bakeries, ice making, water supply etc. [5].  One of the key features of the programme is that supports creating an environment for rural women and marginalized group (Dalits) towards empowerment. The framework of REDP requires mandatory participation of one female from each beneficiary household in all initiatives and inclusion of Dalits in functional groups to build their self-confidence, capacity and to integrate them in the decision making process [3]. Emphasis is made to increase their capability through training and exposure visits. Their involvement in activities such as cleaning houses, train road construction, water taps, maintenance, pit latrine construction and plantation of trees help to develop ownership of the infrastructure as well as bringing them into mainstream development process [3].


Affordability and Technical Issues

Tariffs for micro-hydro units were set by each Microhydro Functional Group, and were based on loan repayments, operation and maintenance costs, depreciation, and provision of a reserve fund for maintenance. Only schemes expected to yield average economic return of 10.9 % for the program as a whole, or individual returns ranging from 10 % to more than 12 %, were supported [1]. By using functional group for tariff collection and by providing them extensive training in operations and maintenance, the project ensured smooth operation of the system.


However, establishing meters and developing tariff structure are some of the most cited issues of micro-hydro systems in Nepal. Since in rural areas, electricity consumption is very low, energy based tariff structure does not yield high revenue and operational costs associated with meters, meter reading, account keeping and collection could be at times higher than the revenue generated [6]. Usually household metering equipment is generally not installed and household pay according to the number of light bulbs, a cut off device that limits consumption to 100W or based on their social status [5].


Local Champions

At the district level, the District Energy Committee and at the local level, the Community Organizations (Cos) and Functional Groups (FGs) played important roles in the design, execution, operation and maintenance of the project.


Monitoring and Evaluation

According to Sovacool et al, [5] To improve accountability, the program was formally institutionalized at the lowest level of governance and local groups like Village Development Committees, COs, and FGs, who met regularly (monthly) to maintain and manage each plant.  At the village level, gender-based COs ensured that women felt free to participate in micro-hydro decisions. National line agencies and the donors also had a significant role to play by developing guidelines and setting standards. The requirement of the scheme to undergo environmental impact assessments also helped to maintain a certain standard. By displaying details of cash flows and purchase amounts open to public scrutiny, the programme ensured transparency and offered better options for monitoring and evaluation.


Replicability and Scaling-up

MVEP itself was based on earlier UNDP's successful REDP scheme. REDP developed a community driven microhydro development in Nepal with basic principles involving community and its female and marginalized groups in decision making, planning, designing, operating and maintaining their micro hydro systems. The same model was replicated to other villages and scaled up in terms of generation capacity, and its application to various uses and sectors.



World Bank Country Office- Nepal

1st Floor, West Wing, Lal Durbar Convention Centre

Yak and Yeti Hotel Complex

Durbar Marg

Kathmandu, Nepal

Tel: +977-1-4226792

E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.


References and Further Reading

[1]   Sovacool, B.K., Dhakal, S., Gippner, O., Bambawale, M. (2011). Rural Energy Development in the roof of the world: Lessons from micro hydro village electrification in Nepal. Energy Governance Case Study #7. Available online at


[2]   World Bank. IDA at work: Micro hydro lights the way for villages. Available online at,,contentMDK:22332062~menuPK:4754051~pagePK:51236175~piPK:437394~theSitePK:73154,00.html


[3]   Rural Energy Development Programme as in


[4]   Clemens, E., Rijal, K., Takada, M. (2010). Capacity development for scaling up decentralized energy access programmes. Lessons from Nepal on its role, costs, and financing. United Nations Development, Alternative Energy Promotion Centre, and Practical Action


[5]   Sovacool, B.K., Bambawale, M. J., Gippner, O., Dhakhal, S. (2011). Electrification in the mountain kingdom: the implications of the Nepal Power Development Project (NPDP). Energy for Sustainable Development, 15(3), 254-265.


[6]   Mini Hydro Applications for Serving Electricity in Rural Nepal – Innovations. Available online at


Micro-Hydro Village Electrification in Nepal






The Government of Nepal through the financial assistance of International Development Association (IDA) of the World Bank.


World Bank Country Office- Nepal

1st Floor, West Wing, Lal Durbar Convention Centre

Yak and Yeti Hotel Complex

Durbar Marg

Kathmandu, Nepal

Tel: +977-1-4226792

E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.


Small/Pico-hydro power

Energy resource:

  • Hydro

Sub type:

  • Micro Hydro (5-100 kW)


  • Energy supply
  • Hospital
  • Household
  • Commercial


  • Communication
  • Electricity
  • Lighting


  • Off-Grid

Targeted area:

  • Rural

Geographical scope:


Project status:

Completed project

Project start:


End date:


Implementing approach:

Public private partnership

Funding Type:

  • Grant

Budget (Euro):