NEA not to sign PPA with new projects

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    KATHMANDU, April 26

    Power Purchase AgreementsThe Nepal Electricity Authority (NEA) will not sign Power Purchase Agreement (PPA) with new projects stating that electricity will be wasted during the rainy season after five years.

    NEA has taken the decision stating that billions will be lost with a surplus of 775 MW in the system during the rainy season after 2018 while there will still be load-shedding during the dry season. NEA, however, will procure electricity during the dry season. It has projected that there will be a surplus of 775 MW during the rainy season due to completion of 456 MW Upper Tamakoshi Project and a few other projects constructed by the private sector. The investors are disappointed after NEA said that it will procure electricity from mid-November to mid-April but not during the rest of the year. NEA has projected that there will be load-shedding of six to eight hours a day during the dry season even though there will be surplus electricity during the rainy season as all the completed and under-construction projects apart from Kulekhani are run of the river (ROR) types. Generation in ROR projects fall to up to 30 percent of the installed capacity during the dry season due to fall in water level.

    The NEA decision will ensure that new projects will not be constructed. Over three dozen projects with combined installed capacity of over 1000 MW are waiting for PPA with NEA. NEA has a monopoly over transmission and distribution of electricity in Nepal and also generates most of the electricity. “We have taken the decision to not sign PPA with new projects as there will be a state of imbalance with surplus electricity during rainy season and scarcity during the dry season,” Director at the Power Trade Department of NEA Hitendra Shakya said. “We will now sign PPA only with the promoters of projects with whom we have signed power connection agreement and not with new projects,” he added. He claimed that the decision has been taken under recommendation of the System Operation Department of NEA. NEA has signed power connection agreement with 20 projects with combined capacity of around 750 MW. Shakya stated that NEA will no longer sign PPA on take or pay basis and PPA will only be signed with new projects once market for electricity is ensured following construction of transnational transmission line.

    “This decision of NEA is a matter of concern for the private promoters,” President of the Independent Power Producers’ Association, Nepal (IPPAN) Khadga Bahadur Singh said. “Investment will not arrive for projects to sell electricity only during the dry season. Domestic and foreign investment in the hydropower sector will be stopped if the decision is implemented,” he added. He recommended that demand and supply of energy should be projected by establishing an independent energy consumption projection unit, and electrification should be intensified to increase electricity consumption. “To refuse to sign PPA due to projection that there will be surplus energy during the rainy season is to bring energy development in the country to a grinding halt. Demand of electricity will rise if it is supplied regularly by maintaining a balance between demand and supply,” he claimed. Joint Secretary at the Energy Ministry Keshav Dhwoj Adhikari, however, argued that NEA has not said it will not sign PPA and claimed that it plans to sign PPA only with projects whose construction is certain.

    Promoters state that the policy of procuring electricity only during the dry season will not make projects financially lucrative and stop flow of investment. NEA has signed PPA with 153 projects with combined installed capacity of 2000 MW until now. Installed capacity will rise to 1700 MW by 2016 if all the projects with whom PPA has been signed are completed in time. Though these projects will generate 1700 MW during the rainy season, it will fall to around 800 MW during the dry season due to receding water level as all of them are ROR projects. Demand of electricity rises by around 10 percent every year, according to NEA. The ministry has issued license to 86 promoters for generation of 2229 MW until now.

    Source : Karobar Daily