Hydropower License Hoarding in Nepal
Implications for the Green Energy Transition
Keywords:
Energy transition, hydropower development, institutional economics, license hoarding, welfare analysisAbstract
Purpose: This study examines license hoarding in Nepal’s hydropower sector, where over 42,000 MW of potential remains underutilized due to systematic project delays, and quantifies its economic and environmental consequences.
Design/methodology/approach: Using a novel project level dataset of 847 hydropower licenses issued between 2000 and 2025, the study integrates real options theory with institutional economics. It employs Probit, Cox proportional hazards, panel fixed effects,
and instrumental variables models, complemented by Random Forest with SHAP values, counterfactual generation analysis, and welfare loss estimation.
Findings: Weak institutional enforcement is the primary driver of hoarding increasing delay probability by 34.2% when combined with speculative ownership. Macroeconomic uncertainty amplifies the option value of waiting. License hoarding causes annual foregone electricity of 4,287 GWh, economic losses equal to 2.3% of GDP, and excess emissions of 2.8 million tons of CO2e. Policy simulations show that escalating penalties and binding milestones could lower inactivity by 41.3%.
Implications: Strengthening enforcement and introducing performance based licensing can accelerate green transitions in developing economies.
Originality/value: Relatively little work has been done to systematically quantify institutional inefficiencies in renewable energy licensing. This study contributes to the literature by providing evidence-based pathways for policy reform.
JEL Classifications: L51, Q42, Q28, Q48
