NEA to resume signing ‘take or pay’ accords

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    The ‘take and pay’ model allows the NEA to buy energy from hydro projects whenever needed and pay accordingly

    Jan 30, 2018-The Nepal Electricity Authority (NEA) is planning to resume signing power purchase agreements (PPA) with run-of-the-river type projects under the ‘take or pay’ modality until their combined installed capacity reaches 5,100 MW.

    The state-owned power utility had stopped signing PPAs under this modality for the past three months, and had switched to the ‘take and pay’ modality. The ‘take and pay’ model allows the NEA to buy energy from hydro projects whenever needed and pay accordingly. Under the ‘take or pay’ system, on the other hand, the NEA has to buy the contracted amount of electricity or pay a fine.

    The NEA had stopped signing PPAs under ‘take or pay’ modality after the combined installed capacity of the power projects reached 3,000 MW set by the government in its National Energy Crisis Reduction and Electricity Development Decade plan.

    As per the plan introduced in February 2016, the Energy Ministry would develop 10,000 MW of hydroelectricity in 10 years, with 30 percent of the total power envisaged to come from run-of-the-river type hydropower projects.

    The plan didn’t allow the NEA to sign PPAs under the ‘take or pay’ modality after the total installed capacity reached 3,000 MW. A week ago, the Energy Ministry hiked the limit to 5,100 MW, and told the NEA to resume signing PPAs under the ‘take or pay’ modality. According to NEA spokesperson Prabal Adhikari, the ministry has instructed the utility to increase the share of run-of-the-river projects in the total energy mix in line with the government’s new target of developing 17,000 MW within seven years. “We will now take the proposal to the NEA board for its approval,” said Adhikari. “Once we get the go-ahead from the board of directors, we will start signing PPAs under the ‘take or pay’ modality.” NEA has so far signed PPAs under the ‘take or pay’ model with run-of-the-river projects with a combined capacity of 3,000 MW. It has signed a PPA under the ‘take and pay’ modality with a project with a capacity of 100 MW. “First of all, we will change the PPA with the 100 MW project to a ‘take or pay’ modality,” said Adhikari. “This way, we will be able to sign PPAs under this modality with projects with a combined installed capacity of 2,000 MW.”

    Source: The Kathmandu Post