Govt likely to offer better PPA rates for storage projects

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    KATHMANDU, FEB 07 –

    Kulekhani ReservoirThe government is mulling to fix  two different power purchase agreement (PPA) rates for hydro power projects based on run of the river (RoR) and storage-type. The Ministry of Energy (MoE) said that a new provision is being devised to offer relatively higher PPA rate to the storage-type projects as they are relatively expensive than the RoR projects.

    “We cannot offer same PPA rate to all sorts of projects at a time when construction of storage projects are expensive,” said Energy Secretary Hari Ram Koirala.

    Ministry officials said that the attempt was made after the private sector developers demanded higher PPA rate, calling on the government to provide more outcome for the investors making higher investment in the storage projects.

    According to a rough estimation of the Nepal Electricity Authority (NEA), it costs around Rs 150 million per MW to construct an RoR project and the construction of a storage-type project requires some 15 percent more investment per MW.

    Koirala said that the ministry had formed a task force to study on the proposed PPA rate for the two different kinds of projects. A task force formed formed two weeks ago under Keshav Dhoj Adhikary, superintendent engineer of Department of Electricity Development (DoED) will recommend on the PPA rate for the storage-type projects. The task force comprises representatives from the NEA, the Finance Ministry and the Ministry of Law, among others.”The task force will study on the complexities of financial and technical aspects, while developing RoR and storage-type projects,” said Koirala, “The ministry will introduce a new PPA rate for storage projects on the basis of recommendations made by the task force.”

    He added that there is a high chance that the ministry might offer the storage projects an increase of somewhere between 12 to 15 percent on the PPA rate provided to the RoR projects. There is, however, no possibility of revising the PPA rate for RoR projects.

    A member of the task force said that his committee is preparing to recommend Rs 16 per unit at maximum as PPA rate for storage-type projects. “We have adopted an Indian model in fixing the PPA rate for storage-type projects,” he said, “The Indian government has been providing Rs 16 per unit for purchasing power generated from such projects, and we have taken the cue.”

    The ministry had revised the PPA rate for RoR projects last year, setting it at Rs 8.40 per unit during the winter and Rs 4.80 per unit during the wet season. However, the ministry has not fixed the PPA rate for storage-type project so far.

    MoE spokesperson Sri Ranjan Lackoul said that the provision was being made so as to attract the private sector investment in the storage-type projects. “The government has realised the importance of storage-type project lately so as to ensure regular power supply, especially during the dry season,” he said.

    According to him, the task force will submit its report within a week and then the ministry will seek approval of the new proposed PPA rate for storage-type projects from the Finance Ministry and the Cabinet.

    Apart from the Kulekhani project, no other storage-type projects has been developed in the country so far. Hence, the NEA has been urging the government to prioritise on the construction of reservoir type hydropower projects as a long-term solution to the ongoing power crisis in the country.

    The state-owned power utility has also identified 10 storage-type hydropower projects with a combined capacity of 2,652MW to carry out a feasibility study in September, 2012 under the assistance of Japan International Cooperation Agency (JICA).

    The projects are Madi Khola (199 MW), Lower Jhimruk (142 MW), Nalsinghgadh (400 MW), Chehera-I (149 MW), Naumure (245 MW), Dudhkoshi (300 MW), Sunkoshi-III (536 MW), Khokhajor (111 MW), Adhikhola (180 MW) and Lower Badhigad (380 MW).

    Source : The Kathmandu Post