NEA decision to open PPA for run of the river (RoR) type hydropower projects for 1500 MW

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Kathmandu, 10 Feb 2023. The Nepal Electricity Authority is going to purchase up to 1500 megawatts of electricity from run-of-the-river (ROR) hydropower projects.

The 930th meeting of the Authority’s Board of Directors held on Thursday under the chairmanship of the Deputy Prime Minister and Minister of Energy, Water Resources and Irrigation Rajendra Prasad Lingden has decided to conduct PPA of up to 1500 MW of ROR projects based on the roll order of grid connection agreement dates.

The electricity of these projects will be purchased on the basis of the principle of ‘Take or Pay’. Electricity for the projects will be purchased at Rs 8.40 and Rs 4.80 per unit for the dry season (2 Dec-29 June) and rainy season (30 June-1 Dec) respectively.
According to the details of the Authority up to February 1, 3 thousand 192 megawatts connection agreements have been signed with 136 projects. Based on the roll order of the date of signing the connection agreement, all the provisions including electricity purchase and sale rates will remain the same.

In April 2018, the Ministry of Energy decided the production mix of power projects based on the current situation and future roadmap (white paper) of the energy, water resources and irrigation sector, with the aim of becoming self-sufficient in electricity through internal production in the next ten years.
In 15,000 megawatts, the ratio of reservoir and pump storage 30-35 percent, peaking ROR 25-30 percent, ROR 30-35 percent and other alternative sources 5-10 percent will be maintained and arrangements will be made for electricity purchase agreement based on the principle of take or pay.

The meeting of the Council of Ministers on July 8, 2022 reviewed the production mix ratio and reduced it by 10 percent for reservoirs and increased it by 10 percent for ROR. In which the ratio of 20-25 percent reservoir, 25-30 percent peaking ROR, 40-45 percent ROR and other alternative sources 5-10 percent was maintained.
The ratio of 35% (5250MW) was increased to 45% i.e. 6750MW by adding 10% to the limit ratio set for ROR projects. This has opened the way for the ROR to conduct a 1500 MW PPA.

Kulman Ghising, managing director of the authority, said that according to the production mix decided according to the decision of the Cabinet, based on the roll order of the connection agreement, it has been decided to do PPA until the limit of 6750 MW is reached for the ROR project.

Due to the possibility of a big financial risk to the authority due to the lack of assurance of the market for the sale of electricity during the rainy season, the PPA of ROR hydropower projects was stopped about three years ago, now it takes 5-7 years to complete the construction of the PPA projects. Managing Director Ghisingh said that the decision to do PPP was taken as the market was open for sale.

“Due to the lack of PPP, if hydropower projects cannot go into construction, in the next 5-7 years, electricity production from new projects will be halted (Generation Holiday), and the investment made by investors in the project will not sink.”

So far, the Authority has completed 6,366 megawatts of PPA. Out of that, 1,531 megawatt projects have been completed and are in operation. 3 thousand 281 megawatt projects are under construction with financial management.

A committee was formed to decide on the final format

The Board of Directors of the Authority has formed a committee to determine the format of the electricity purchase and sale agreement for hydropower projects of various types with capacity exceeding the approved limit. The committee formed under the coordination of the Joint Secretary of the Ministry of Energy, Water Resources and Irrigation has the Joint Secretary of Law, the Director General of the Power Development Department, the Deputy Executive Member of the Authority Planning, Monitoring and Information Technology Directorate and the Member-Secretary of the Electricity Trade Department.

The committee will study and submit a report on the design criteria of the projects based on the flow of water available in rivers and streams. Various projects of 11,000 megawatts have submitted applications to the Authority, including projects with grid connection agreements.

List of Projects [Connection Agreements)