Financing in sustainable and renewable energy will help reduce the cost of production and dependency on fossil fuels, making domestic products more competitive, according to a study.
“It provides cover for the rising cost of fuel,” said the ‘Sustainable Energy Finance Market Study for Financial Sector in Nepal’. The study was carried out by the SouthAsia Enterprise Development Facility, which is managed by International Finance Corporation (IFC) in partnership with the UK Department for International Development and the Norwegian Agency for Development Cooperation.
The study, which has analysed the current energy use pattern by the industries and identified areas where financial institutions can invest for greater efficiency, reported that the country can save around $9.02 million — from the selected industries — with the adaptation of energy efficient methods.
Currently, domestic industries consume more energy, which could be reduced bringing their operation cost down, said the report that has studied some 265 industries — 72 large, 154 medium and 39 small — including cement, brick, steel, food and beverage, paper and pulp, poultry and feed, tourism, dairy and tea.
The country had imported petroleum products worth Rs 67.38 billion in the first nine months (mid-May) of the current fiscal year against imports of Rs 52.35 billion in the same period of last fiscal year. The increasing dependency on fossil fuel due to lack of energy required for industries has increased the cost of production of the domestic industries making Nepali products less competitive in both domestic and international markets. According to the Environment Sector Programme Support, domestic industries can save up to 30 per cent of energy costs by implementing energy efficient measures alone.
There is also a significant investment potential estimated at some $17.92 million for energy efficient and renewable energy projects in the country’s 10 selected industrial sectors, the report concluded, adding that the payback period is also comparatively less, a little over two years for equipment and technology change, process modification, installation of modern technologies and fuel switching, whereas for retrofit options it will be upto two years only.
With the study, IFC targeted financial institutions to help develop sustainable energy lending business.
Together with energy service providers and end-users, the project aims to make sustainable energy projects bankable by carrying out energy audits too. With IFC’s support in building capacity for proposal evaluation, loan product development and due diligence, Clean Energy Development Bank specifically is launching a unique sustainable energy financing product, the first such offering by any financial institution in Nepal.
“Clean Energy Development Bank invites all stakeholders to join the Sustainable Energy Finance initiative to tackle the energy crisis responsibly and effectively,” said chairman of the bank Manoj Goyal.
“Promoting energy efficiency is particularly significant in the country which is completely dependent on petroleum imports,” he said, adding that additionally, unreliable grid power supply forces plants to use expensive diesel generators.
“Energy is a major priority for industrial growth,” said IFC programme manager Thelma Tajirian, adding that the sustainable energy finance market study will help financial institutions make strategic decisions in the new market and spur the private sector to take the lead in clean and sustainable economic development.
Similarly, head of energy finance of IFC Pavol Vajda said that the developing world could move up towards higher income generating countries by using efficient energy forms and not just traditional energy sources.
“As energy is a key economic driver, its efficient use will boost GDP,” he said.
