Biomass fuels remain the main sources of energy. Due to cold weather, use of energy sources tends to increase in winter, particularly for space heating. Since most houses are poorly insulated, there is a considerable potential for reducing the energy demand for space heating through simple retrofit measures as well as improved building designs to utilize solar energy. Renewable power (hydropower and biomass) makes up a large share of existing production, although Lesotho is importing almost as much (66MW) as it is producing domestically (72MW). Solar PV is seen as having a very high potential especially in rural electrification for off-grid installations in households, schools, hospitals etc. Due to very mountainous terrain and sparse population, grid extension is not viable in the southern parts of the country. Solar energy is also seen as a means for water heating and the government has embarked on a project to equip public buildings with solar heaters. Solar cookers and solar dryers are also discussed for rural households. Wind measurements confirm that Lesotho has significant potential for wind power and wind farms are planned in the country. Mini-hydro and biogas make up the remainder of possible generation capacity increase means. Both technologies are also operational in some locations. Inadequate institutional capacity can hinder greater use of renewable technologies. Lesotho obtains its electricity from a couple of suppliers (Muela and Eskom) and the remaining few state-owned (rurally located) mini-hydropower plants are planned to be privatized. The energy policy for Lesotho was drafted in 2003. According to the policy, the government’s main challenges are: (1) ensuring the existence of a governance system which supports efficient and effective running of the power sector; (2) creating an environment conducive to private sector participation and investment; (3) promoting the efficient use of electricity; (4) making optimal use of Lesotho’s power sector resources through regional cooperation. This also means establishment of a rural electrification fund.