NEA Facilitates Small Investors: PPAs Open for Hydropower Projects Up to 10 MW and Solar Project

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Kathmandu, 15th February 2024: Nepal Electricity Authority has decided to open the Power Purchase Agreement (PPA) of up to 10 megawatts of hydropower projects to encourage domestic small investors in the hydropower sector.

The 963rd meeting of the Authority’s Executive Committee held on Feb 7th under the chairmanship of Energy, Water Resources and Irrigation Minister Shakti Bahadur Basnet has decided to do PPA with the run-of-the-river (ROR) and Peaking Run of River (PROR) hydropower projects up to 10 megawatts .

The electricity of hydropower projects up to 10 megawatts will be purchased on the basis of “(Take or Pay)” provision. The existing rates for dry season (2 Dec 2023 – 28 June 2024) and wet season (29 May 2024 -30 December 2024) of the projects are Rs 8.40 and 4.80 per unit respectively.

Managing Director of Nepal Electricity Authority, Kulman Ghising, said that the PPA limit set ( Quota) at half of production mix ( Generation mix) in projects up to 10 megawatts is not applicable in order to encourage the maximum use of local natural resources and the investment of domestic small investors in the hydropower sector.

Due to the quota, the PPA of hydropower projects up to 10 megawatts could not be done, now the quota will not be applied to the projects up to 10 megawatts, so the PPA can be done whenever and wherever the capacity is, this will encourage small domestic investors’, Managing Director Ghising said. Now we will do PPA of up to 10 megawatts hydropower projects that have grid-connection agreements (Grid connection agreement) 89 projects up to 10 MW have applied to the Authority for PPA. The capacity of the projects is 351 MW. Among them, 44 projects of 195 megawatts have already completed grid-related agreements.

Based on the goal of 15,000 megawatts to be produced in the next ten years with the aim of becoming self-sufficient in electricity through internal production in the long term, 25 percent of reservoir projects, 30 percent of Peaking ROR, and 45 percent of ROR will remain in the power system.

The product mix was decided. The limit of PPA was fixed on the same basis. 10. As the limit set for ROR projects i.e. 6750 MW has been completed PPA was not possible even for projects up to megawatts. Most of the projects up to 10 MW are ROR. The Authority has completed PPA of 9200 MW so far.

Purchase of increased capacity electricity

The Board of Directors of the Authority has decided to purchase additional electricity if the capacity of hydropower projects that have been PPA is increased. The authority has up to 25 percent connected capacity of the project, It has been decided that the PPA limit will not apply if there is an increase. Kulman Ghising, Managing director of the authority, up to 25 percent of the connected capacity due to changes in the design of the project, He said that the PPA will be amended with the provision of “take or send” the electricity generated from the increase. If the capacity is increased up to 25 percent, “Take or Pay” and if it is more than that, the old arrangement of `Take and Pay” will be applied. It will also make it easier to raise investment for projects

The limit of solar energy has been increased

The authority has increased the limit of PPA to be done with solar hydropower projects. The authority has been conducting PPA of solar projects through competition.

By including the existing connected capacity and projects that have been PPA by the authority, the solar power will be limited to 10 percent of the total capacity of the national grid on the basis of competition. PPA of energy will be done. Earlier, the PPA of solar projects was limited to 10 percent of the connected capacity of the national grid.

A maximum base rate of 5 rupees 94 paise per unit has been fixed for the purchase of solar power from competition. The PPA will be done with the project that bids less than the said rate in the competition.

According to the new arrangement, PPA of about 800 MW solar projects can be done, we will conduct competition for PPA of solar projects to be built near 200, 132 and 33 KV substations owned by us.

It will take some time to build hydropower projects, but since solar projects will come within one to one and a half years, priority has been given to solar energy connected to the grid to meet the growing demand for electricity in winter, said MD Ghising. The land around the substation will also be used.

The Authority has done PPA of 175 MW so far through competition. Out of that, 106 MW have been commissioned. Additional 30 MW solar projects are in the process of PPA.