NEA opens PPA for hydel projects up to 10 MW

Kathmandu, Feb. 15: Nepal Electricity Authority (NEA) has decided to open the Power Purchase Agreement (PPA) for hydropower projects up to 10 megawatts to encourage domestic small investment in hydropower.

The 963rd meeting of the NEA's Board of Directors chaired by Minister for Energy, Water Resources and Irrigation Shakti Bahadur Basnet recently decided to sign PPA with the run-of-the-river (RoR) and semi-reservoir (PRoR) hydropower projects of up to 10 megawatts.

The power generated by the small projects will be purchased on the basis of 'take or pay' provision, according to the NEA.

The electricity of such projects will be purchased at Rs. 8.40 per unit for the dry season (December to May) and Rs. 4.80 per unit for the rainy season (June- November).

Managing Director of NEA Kul Man Ghising said that the PPA limit (quota) set at the generation mix in the projects up to 10 megawatts would not be applied 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, PPAs for hydropower projects up to 10 megawatts were not possible. Now, the quota is no longer applicable to projects up to 10 megawatts, PPAs can be made whatever the capacity is, this will encourage small domestic investors," said Ghising.

"Now we will make the PPA of hydropower projects up to 10 megawatts that have and will be under Grid Connection Agreement."

Eighty-nine projects up to 10 MW have applied to the Authority for PPA. The capacity of these projects is 351 MW, said the NEA. Of them, 44 projects of 195 megawatts have already completed grid connection agreements.

Based on the goal of producing 15,000 megawatts of power in the next 10 years, the production mix was decided so that 25 per cent of reservoir projects, 30 per cent of peaking RoR, and 45 per cent of RoR would be part of the power system.

The limit of PPA was fixed on the same basis. Since the limit of 6,750 megawatts set for RoR projects has been completed, projects up to 10 megawatts have not had PPA.

Most of the projects up to 10 MW are RoR. The Authority has completed the PPA for 9,200 MW so far.

NEA to purchase added electricity

The Board of Directors of the Authority has decided to purchase additional electricity if the capacity of the hydropower projects that have made PPA has increased.

The Authority has decided that the limit of PPA will not be applied if the installed capacity of the project increases up to 25 per cent.

Ghising said that the PPA would be amended with a provision to 'take or pay' the electricity produced by increasing the installed capacity up to 25 per cent after making changes in the design of the project.

The present provision will increase the capacity of the project and make it easier for the projects to raise investment.

Limit of solar energy increased

The Authority has increased the limit of PPA to be done with solar hydropower projects. The NEA has been making PPA of solar projects through competition.

The NEA will sign the PPA of solar energy on the basis of competition within the limit of 10 per cent of the total capacity of the national grid, which will include the existing connected capacity and the projects that have already had PPA.

Earlier, the PPA of solar projects was limited to 10 per cent of the connected capacity of the national grid.

A maximum base rate of Rs. 5.94 per unit has been fixed for the purchase of solar power through 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-megawatt solar projects can be done, we will make a competition for PPA of solar projects built near the 200 kV, 132 kV, and 33 kV substations of the NEA," he said. "Hydropower projects will take some time to build, but solar projects will come within a year and a half, so solar energy connected to the grid has been given priority to meet the growing demand for electricity in winter."

The Authority has done the PPA of 175 MW so far through competition. Out of that, 106 megawatts have been brought into operation. Additional 30 MW solar projects are in the process for the PPA, said the NEA.