Kathmandu: The government has decided to open Power Purchase Agreements (PPAs) for hydropower projects with capacities below 10 MW in a bid to accelerate the development of small and medium-sized hydropower projects. The Ministry of Energy, Water Resources and Irrigation believes that this move will encourage small investors and attract new investments into the hydropower sector.
According to Energy Minister Biraj Bhakta Shrestha, small hydropower projects have been the foundation of Nepal’s hydropower development, and promoting them remains a priority. He noted that many private sector companies that initially started with small projects are now capable of developing projects with capacities of several hundred megawatts.
The private sector is currently also actively involved in developing large and semi-reservoir hydropower projects. Notable examples include the 341 MW Budhigandaki Hydropower Project and the 285 MW Upper Tamor Hydropower Project, both of which are under construction.
Data from the Department of Electricity Development show that 23 projects with capacities below 1 MW have already obtained generation licenses. These projects have a combined installed capacity of 17.65 MW. Similarly, 59 projects with a combined capacity of around 50 MW have applied for survey permits.
The government classifies projects with capacities ranging from 10 kW to 100 kW as micro-hydro projects, while those between 100 kW and 1 MW are categorized as mini-hydro projects. The Alternative Energy Promotion Centre (AEPC) has also been playing a key role in promoting such projects.
Minister Shrestha said that special provisions have been introduced to increase private sector participation in reservoir-based hydropower projects. Under the new provisions, projects with fully secured investment can issue up to 40 percent of their Initial Public Offering (IPO) shares in the very first year, while project licenses can remain valid for up to 50 years.
The government has also adopted a policy of signing new PPAs under the “Take or Pay” model to ensure investment security in the hydropower sector. Accordingly, PPAs for projects below 10 MW have been opened with immediate effect, the ministry said.
Reiterating the government’s commitment to facilitating genuine investors, Minister Shrestha said reforms in the licensing system are necessary to discourage the practice of holding project licenses without implementation. He added that while the energy sector would remain friendly to private investment, governance standards would be strictly enforced.
To expand access to clean energy in rural and remote areas, the ministry has prioritized renewable energy sources such as solar energy, micro-hydropower, biogas, and biomass. Preparations are also underway to legally strengthen the Alternative Energy Promotion Centre and expand its role in rural electrification.
The government is continuing its policy of liberalizing energy trade and is creating an environment that allows the private sector to engage in electricity trading in both domestic and cross-border markets. Legal provisions have also been introduced allowing private investors to build transmission lines and trade electricity based on transmission service charges.
In terms of transmission infrastructure expansion, the government aims to complete 12 transmission lines within the next fiscal year, including nine 132 kV lines, two 220 kV lines, and one line under the Nepal-India Electricity Transmission and Trade Project.
According to the ministry, the total length of transmission lines of 66 kV and above is expected to reach approximately 7,048 circuit kilometers by the end of the next fiscal year. An additional 800 circuit kilometers of transmission lines are planned for completion during the year. The ministry has allocated approximately NPR 46.25 billion for the expansion and upgrading of the transmission and distribution system.
NepalPurbadhar
