Historically the rural population of Nepal has been meeting their energy needs from traditional sources like fuel wood and other biomass resources Only about 44% of the total population has access to grid electricity Because of country s rough and mountainous topography high cost of grid extension and low and scattered population density constructing some big power plants (e g large hydropower) can not meet the electricity needs of all people especially those living in rural areas Distributed generation of electricity using environment friendly solar photovoltaic (PV) systems might be one of the reliable alternatives for urban as well as rural electrification This article begins with a general overview of energy resources in Nepal Present status and perspectives of solar PV sector have also been discussed Benefit cost and breakeven analyses of solar PV systems in Nepalese urban areas have been carried out The breakeven year has been calculated between 2027 and 2036 for PV systems with system life time between 40 and 25 years respectively It has been concluded that the solar PV systems are not the economic solutions for grid connected urban areas in Nepal On the other hand this article concludes that the rural electrification projects should not be decided on the basis of mere monetary benefits rather many social aspects should be considered and in this case there are not convincing alternatives to solar PV systems for electrification in many rural villages in Nepal (C) 2009 Elsevier Ltd All rights reserved