Surging Through Adversity: A Deep Dive into Upper Tamakoshi Hydropower’s Electricity Generation and Strategies for Sustainable Growth

433
With the low snow melting, Nepal’s largest 456 MW Upper Tamakoshi Hydropower’s generation has been severely affected this year. MOHAN PRASAD GAUTAM, Chief Executive Officer of Upper Tamakoshi Hydropower Ltd, with extensive experience in working on hydropower projects, shared his insights on the challenges they are facing in an interview with NEW SPOTLIGHT at his office. Excerpts:

How do you assess the electricity generation pattern from Upper Tamakoshi in the last three years?

If we look at the pattern of electric generation, we faced a significant setback this year due to low water flow. The extreme weather conditions resulted in slow snow melting during April and May, which had a considerable impact on the generation and revenue of the company. In comparison to previous years, the dry season from Chaitra to Jestha (April to June) was notably worse.

Can you explain the generation pattern?

The project initiated testing and commissioning in July and August 2021, providing free electricity to NEA. Starting from September 9, 2021, the company began commercial generation of electricity from all six units. In 2021, the company supplied 43.54 percent (137,359.39 MWh) of contract energy and 58.48 percent (186,981.36 MWh) of electricity to NEA in Shrawan and Bhadra as per the contract. After commencing generation from all six units, the company managed to deliver 100 percent energy until Falgun in 2078.

What has been the pattern of generation since then?

During the initial two years of commercial electricity generation, the company successfully met its targets. However, in the months of Chaitra (2079) and Baisakh, Jestha (2080), the electricity generation experienced a drastic decline compared to the previous periods. In Chaitra 2078, the company supplied 99,545.61 MWh, 102,897.85 MWh in Baisakh, and 213,747.66 MWh in Jestha 2079. However, the electricity generation witnessed a significant drop in Baisakh and Jestha 2080. These two months were the worst for the company, as it couldn’t supply 50 percent of the contracted energy, resulting in penalties. The period from Chaitra to Jestha was the most challenging for us.

Considering this year’s scenario, what do you anticipate for the future?

The weather pattern remains uncertain for the upcoming session. We are actively gathering real-time data from the Department of Hydrology and Meteorology (DoHM) and our gauging stations. The slow snow melting in Chaitra and Baisakh this year was attributed to fluctuations in temperature, making it challenging to predict future conditions.

What is the current state of power generation?

Due to low water flow caused by minimal snow melting, the company has incurred significant financial losses in the last four months. The reduced water flow also affects Nepal’s internal power generation. In Falgun (2079), the company generated 55,035,730 kWh, while in Chaitra, it generated 50,225,010 kWh. In Baisakh, Jestha, and Asaadh, the company generated 53,934,220 kWh, 144,332,460 kWh, and 323,123,690 kWh, respectively.

How do you interpret the trend?

Looking at the trend, the company supplied 135 percent of the contracted energy in the last Chaitra, but this year it was only 69.33 percent. According to our hydrological study, this year’s water flow was significantly lower at 45.12 percent. As per the contract agreement, the company is now subject to penalties. In Jestha 2079, the company delivered 74.9 percent of the contract energy, but this year, it only delivered 51.43 percent, resulting in a 24 percent penalty.

How do you assess the overall scenario?

The months of Chaitra, Baisakh, and Jestha were severely affected, which will have a drastic impact on the project’s annual revenue due to the low hydrological flow in the river. This extreme event is evident across all snow-fed river hydropower projects this year. Further analysis is needed over the next few years to determine if it’s a result of climate change. We are requesting real data from the Department of Hydrology and Meteorology to compare with our gauging stations. After Asadh, the percentage has improved due to rain, and the company has supplied over 100 percent of electricity as per the contract agreement.

What is the company’s response to the situation?

Although there is a provision in the agreement to revise the rate every five years after generation, this is only our second year. We have discussed the matter with NEA following the analysis of real-time data from DoHM. They have assured us to consider the penalty. After completing the Rolwaling Hydropower Project, the situation may improve during the dry season. According to our study, the plant’s peak hour is likely to increase by two hours after the completion of the Rolwaling diversion.

Is this the primary challenge during your first one hundred days in office?

Yes, this is a major challenge as it will significantly impact the company’s annual revenue and income. On average, the company’s revenue is around Rs. 1 billion, with an annual revenue of over Rs. 10 billion. This year, the company lost around 15 percent of its revenue due to low water flow. The main concern is meeting the revenue and schedule payback principle and interest.

What is the current interest rate?

The company is currently paying double-digit interest to the Employment Provident Fund, Citizen Investment Fund, and others. We are requesting the concerned lenders to reduce it to single digits because the company is now risk-free and generating revenue. The company is asking the major lenders to reduce the interest to single digits from the current 11 percent.

How can the company attract more investors?

There are two options to make the company attractive: either revise the Power Purchase Agreement (PPA) and increase the tariff or involve NEA, with its 41 percent share in the company, to protect its interests. If PPA cannot be revised now, NEA must consider revising it after the completion of the Rolwaling project, which will add 212 GWh.

What is the company suggesting for PPA revision?

We are suggesting a PPA rate of Rs. 4.80 and Rs. 8.40. Our project is a 4-hour peak load project, and there is a separate rate for peak load, which is Rs. 10 something, but it is not applicable to Upper Tamakoshi. The current PPA considers four months as the dry season and eight months as the lean season. Currently, the company receives Rs. 3.70 in the rainy season and Rs. 7 in the dry season. In other projects, the dry season tariff is fixed at Rs. 8.40 and may increase up to Rs. 10 after escalation.

What is the current status of the Rolwaling project?

The construction work is set to start within a year. The 20.6 MW Rolwaling Project, with 30 percent dry energy, has already signed a contract agreement with a cost of Rs. 6 billion. NEA engineering has already acquired a consultant. The challenge lies in transportation. A mule track has already been constructed from Lamabagar to the dam site. An audit tunnel has also been completed, and work will now begin on a six-kilometer tunnel. The first phase involves the Rolwaling diversion, and the second phase relates to electro-mechanical and powerhouse installation. There are social issues, and demands for roads are being made, but the state does not have a clear policy due to its location in the Gaurishanker Protected Areas.

Source: SPOTLIGHT