NEA sends back PPA guideline for revision

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    Apr 12, 2017-  The NEA returned the guideline some days ago after a committee formed to study its possible implications told the board that it needed to be revised

    The government’s plan to enforce new power purchase rates for different hydropower projects is likely be delayed as the Nepal Electricity Authority (NEA), the sole buyer of the electricity produced in the country, has sent back the power purchase agreement (PPA) guideline to the Energy Ministry for a revision.

    The NEA returned the guideline some days ago after a committee formed to study its possible implications told the board that it needed to be revised.

    The state-owned power utility has asked the ministry to insert a provision allowing it to sign PPAs with hydropower projects that generate 15 percent of their total energy output during the four-month period from December to March marked as the dry season.

    The ministry had put in place a mandatory provision requiring hydropower developers to supply 30 percent of their total power output during the six-month period from December to May which has been identified as the dry season.

    After this provision was inserted in the guideline, private power producers complained that they might have to redesign their run-of-the-river projects.

    Currently, the NEA signs PPAs with projects that can operate at full capacity 40 percent of the time.

    If power producers have to provide 30 percent of the total energy output during the dry season, the projects will have to be able to operate at full capacity for, say, 50 percent of the time.

    Reconfiguring the project design in this manner will raise the project development cost, which might discourage potential investors. “Also, there are many rivers where it is impossible to generate energy in the pattern mentioned in the guideline,” said Prabal Adhikari, chief of the power trading department at the NEA. “Therefore, we have requested the ministry to reconsider the provision.”

    Likewise, the NEA has asked the ministry to allow it consider projects as peaking run-of-the-river type even if they generate peaking power for an hour. As per the guideline, hydropower plants have to generate peaking power for at least three hours to be considered as peaking run-of-the river type.

    “We suggested including this provision as electricity produced during the peak-load hour is of great value,” said Adhikari.

    According to the guideline, the tariff for peaking run-of-the-river projects has been fixed at Rs10.55 per unit during the dry season and Rs8.40 per unit during the wet season, significantly higher than for run-of-the-river projects which get Rs8.40 per unit during the dry season and Rs4.80 per unit during the wet season.

    Also, the authority has asked what should be done about projects promoted by foreign investors which have an installed capacity of less than 100 MW. As per the guideline, the NEA can sign PPAs in convertible currency only with projects being developed by foreign investors that are larger than 100 MW.

    “Some projects promoted by foreign investors with an installed capacity of less than 100 MW have obtained approval from the Department of Industry and the central bank,” said Adhikari. “Such projects will be in limbo if we are allowed to sign PPAs in dollar terms only with projects exceeding 100 MW.”

    Source: The Kathmandu Post