Nepal | July 08, 2020

MoE mulls purchasing thermal energy from private sector

Plans to buy up to 3,000 megawatts of electricity through take-or-pay agreements

Himalayan News Service
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Kathmandu, February 16

The Ministry of Energy (MoE) is mulling over purchasing thermal energy from the private sector as a stopgap measure to address the problem of frequent power cuts faced by various industries in the country.

The MoE is thinking of making this move, as short-term energy needs of industries cannot be met through hydro and other alternative sources in the next few years.

“Various industries are not being able to operate in full capacity due to power shortage. The only way to tackle this problem in short term is through use of thermal power because it would take at least a few years to generate adequate electricity through hydro and other alternative sources,” Energy Secretary Suman Prasad Sharma said.

As per the plan, the government will not make any investment to set up infrastructure to generate thermal power. Instead, it would purchase the power from the private sector and other interested parties.

“We will be purchasing electricity from private sector based on demand made by industries. So, we will only be working as a wholesaler that will supply power purchased from various parties to industrial units,” Sharma said. This stopgap measure, as per him, is one of the agendas included in the 97-point Policy on Power Crisis Alleviation and Energy Development Decade that the MoE is planning to launch soon.

“Other plans in the policy include purchasing additional 2,000 to 3,000 megawatts of electricity on take-or-pay basis from hydroelectricity projects operating in country,” Sharma said. Under the take-or-pay deal, the buyer of power, like Nepal Electricity Authority (NEA), will have to purchase electricity throughout the year even if it is facing a surplus.

“We are incorporating this measure to lure investment towards the hydro sector,” Sharma said. At present, NEA prefers to sign power purchase agreements on take-and-pay basis, as it provides leverage to the power utility to buy electricity only when there is a need.

“Also, the policy will pave way for NEA to purchase electricity from hydro project developers in a mix of US dollars and Nepali rupee,” said Sharma. This measure will end existing practice of sealing rupee-denominated power purchase deals.

“Under this arrangement, hydro project developers will be paid for the electricity they supply to NEA in US dollars for a maximum of 10 years. The payment in US dollars will continue to decline every year in proportion to fall in debt liabilities of developers,” said Sharma.

Among others, the policy incorporates measures to develop 10,000 megawatts of electricity in the next 10 years and reduce load-shedding hours in the coming years.

“For this, we’re planning to meet 40 to 50 per cent of energy demand through storage-type hydro projects, 25 to 30 per cent through run-of-the-river projects, 20 to 25 per cent through peaking projects and five to 10 per cent through renewable energy projects,” Sharma said.

A version of this article appears in print on February 17, 2016 of The Himalayan Times.

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