Institutional Strengthening of Rural Energy Sector targets the development of rural energy policy development coherent to the national development framework that focus on the poverty reduction and social justice, harmonisation of assistances from external development partners to achieve higher fund utilisation efficiency with respect to the policy goals, and capacity building of the national partners and stakeholders in the rural energy sector for sustainability of the development efforts. It has identified three broadly divided themes – policy supports, supports for coordination of external development partners, and institutional capacity building.

The scope of this Component are in line with achieving the Component objectives mainly in the form of support to GoN for review and preparation of strategy, and policy and document and institutionalise the process of future reviews and policy formulations through preparation of a long-term sector strategy. The Component will also support GoN in institutionalising donor coordination along with capacity building activities of key institutions. Specifically, scopes are described below:

1. Support to development of rural energy policy and institutional framework that are capable of addressing social equity, resource allocations based on financial and environmental sustainability, prioritisation of projects that are tied-up with poverty reduction, decentralisation and capacity development at the local level. The Component will also ensure quality assurance of the technologies disseminated; promote private sector participation (including NGOs and CBOs) and defining clear roles of institutional roles with central and local government roles limited to facilitation, coordination, promotion, monitoring and capacity building and stay away from project development itself.
2. To provide supports to AEPC in harmonising the external development assistance that are already active and the ones that are willing to get involved in the rural energy sector with specific focus on electrification through advocating/lobbying for rural energy policy and coordination for a common sector wide approach.
3. To provide supports to AEPC and other institutions for institutional capacity building and human resource development through development of framework for coordination, participation, accountability, transparency including decision-making process, and legal framework to support good governance (external relations, networking, knowledge sharing, partnership, external communication). Continued support to AEPC mainly and particularly the partner organisations including financing institutions for capacity building.