Infrastructure
The Nepal Electricity Authority plans to buy an additional 1,500 megawatts of electricity from the developers of run-of-the-river (ROR) hydropower projects.
An NEA board meeting chaired by the Deputy Prime Minister and Minister of Energy, Water Resources and Irrigation Rajendra Prasad Lingden on Thursday decided to execute PPA deals with ROR project for up to 1,500 MW based on the roll order of grid connection agreement dates.
The state utility will buy electricity from those projects at Rs8.40 and Rs4.80 per unit in the dry and rainy seasons, respectively, under the 'take or pay' deal.
According to NEA data, 136 hydroelectric projects with a combined production capacity of 3,192MW have signed power purchase agreements (PPAs) with the state utility by the end of January. All clauses, including power purchase and sale rates, will stay the same based on the rolling order of the agreement's execution date.
In April 2018, the Ministry of Energy determined the production mix of power projects based on the current state of the energy, water resources, and irrigation sectors, as well as the future road map (white paper), with the goal of achieving electricity self-sufficiency through domestic production within ten years.
The ratio of reservoir and pump storage 30-35 per cent, peaking ROR 25-30 per cent, ROR 30-35 per cent, and other alternative sources 5-10 per cent will be maintained for 15,000 MW, and arrangements will be made for a take-or-pay PPA.
On July 8, 2022, the Cabinet meeting decided to change the production mix by reducing reservoirs by 10 per cent and increasing ROR by the same percentage. The meeting decided to keep 20-25 per cent of reservoirs, 25-30 per cent of peak ROR, 40-45 per cent of ROR, and 5-10 per cent of other alternate sources in the mix.
The ROR limit ratio has climbed from 35 per cent (5,250MW) to 45 per cent (6,750MW), allowing ROR projects to carry out PPAs for 1,500 MW.
According to NEA Managing Director Kulman Ghising, PPAs will be executed until the limit of 6,750 MW is reached for the ROR project, per the Cabinet decision.
“Due to the absence of assurance of the market for the sale of electricity during the rainy season," Ghising claimed, "the NEA has ceased signing PPAs of ROR hydropower projects for three years."
"Projects that have signed PPA contracts require 5-7 years to be constructed. In addition to the increase in domestic power demand, it is anticipated that the markets in India and Bangladesh will have opened by then. Therefore, the decision has been made to execute the PPA," he continued.
The NEA has executed PPAs with various projects for producing 6,366 MW, of which 1,531 MW has already been connected to the national grid. Projects with a combined installed capacity of 3,281MW are currently under construction.
Panel to determine PPA format
The NEA board has established a committee to determine the framework of the energy purchase and sale agreements for hydropower projects with a capacity that exceeds the permissible limit.
The committee is led by a joint secretary from the Ministry of Energy, Water Resources, and Irrigation. A joint secretary from the Law Ministry, the director general of the Power Development Department, the deputy executive member of the NEA Planning, Monitoring, and Information Technology Directorate, and the member secretary of the Electricity Trade Department are other members of the panel.
The committee will submit a report after studying the design criteria of the projects based on the flow of water available in rivers and streams. Several projects with a total capacity of 11,000 MW have applied for PPAs with the NEA.
