Nepal has generated only 613MW of hydroelectricity out of its commercially viable capacity of 43,000 MW. According to the census 2001, about 40 percent of the total population have access to electricity. But this figure is very skewed. At present only about 200,000 rural households are electrified leaving about 3.5 million households without access to electricity.

Nepal's hydroelectricity development efforts focused on large scale hydroelectricity projects targeting urban and accessible areas for service delivery. People living in remote areas are beyond the reach of its service. An extension of the national grid to scattered remote rural hamlets is considered economically unfeasible. Moreover, large scale hydro projects are capital intensive and require large upfront cost.

Environment and social problems are associated with such projects. Opting micro hydro electricity plants and other renewable sources instead of large or medium hydroelectric plants is advantageous environmentally and financially. Negative environmental impacts of large plants can be avoided. It also substitutes traditional sources of energy like fuelwood, animal and vegetable residues. It indirectly helps in conserving environment.

Rural energy technologies including micro-hydro, solar and wind energy and biogas are viable alternatives to ensure accessibility of energy to remote rural and poor communities in a reasonably cost effective manner. Promotion of alternative energy sources and off grid hydroelectricity is only feasible options to electrify rural households.