Nepal | September 28, 2020

NEA to frame separate standard PPA templates for hydel projects

Pushpa Raj Acharya
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Labourers work in Ghalemdi River Hydropower Project

Fiel – Labourers are seen working for the under-construction 5MW Ghalemdi River Hydropower Project in Narchyang-1 of Myagdi district, on Sunday, November 27, 2016. The Project is aimed to come into operation by next Dashain festival. Photo: RSS

Kathmandu, February 23
There will be less room for power play in grid connection agreements with the power off taker for hydropower developers as Nepal Electricity Authority (NEA) — country’s single power off taker — is going to frame three standard templates for the power purchase agreement (PPA).

Developers will not have room for negotiation on rates, minimum energy supply condition and other arbitration issues once the templates are finalised. Developers will just have to fill the project specific information in the grid connection agreement and this is expected to create a level playing field for all projects.

NEA is going to develop the standard template for PPA based on the capacity and source of investment of the projects. Reportedly, separate templates for projects of up to 100 megawatts and with investment in local currency, for those above 100  megawatts with investment in local currency and for projects of above 100 megawatts with investment in both foreign currency and local currency, will be developed in line with the recent instruction from the Ministry of Energy (MoE), according to Prabal Adhikari, chief of the Power Trade Department of NEA.

The MoE has asked NEA to implement the two guidelines developed by the panel of Joint Secretaries Dinesh Kumar Ghimire and Chiranjibi Chataut. The Ghimire-led panel has prepared guidelines for the PPA of foreign currency denominated projects and Chataut-led panel has prepared guidelines for separate PPA rates for storage and peaking run-of-the-river (PRoR) projects during wet season and dry season. The MoE had forwarded both guidelines to NEA for implementation through a minister-level decision some three weeks back.

Following MoE’s instruction, NEA board started discussions on both guidelines, as per NEA officials. New templates for the PPA will be designed once the board endorses the guidelines. It is reported that the board can endorse the guidelines as they are or with amendments.

Ghimire-led panel has recommended NEA to sign PPA in dollar terms for foreign investment projects depending on the foreign investment in the project.  NEA has said that for foreign investment projects it will design the template based on the PPA of 37.6MW Kabeli A project, which was awarded through global competitive bidding and its PPA was approved from Cabinet and was included as component of Project Development Agreement.

Likewise, Chataut-led panel has recommended the new rates for storage and PRoR projects. The panel has also stated that the dry season which was previously four-month long (from mid-December to mid-April) has to now be categorised for six months from December to May. Earlier, the developer had to provide at least 15 per cent of the rated capacity during dry season and now the MoE has asked NEA to revise it to 30 per cent as it has extended the period of dry season.

Though the MoE has written to NEA to implement the guidelines, however, the NEA board can defer the recommendation, or endorse them as they are or with  amendments. The NEA board will minutely scrutinise the pros and cons of revised rate from the commercial, technical and legal aspects before making any decision.

Chataut-led panel has recommended higher rates for storage projects as compared
to PRoR and RoR projects. According to the proposed rate, generator of reservoir project can sell per unit electricity at Rs 12.40 during dry season (from December to May) and at Rs 7.10 during wet season (from June to November). Likewise, Rs 10.55 and Rs 4.80 per unit electricity purchase rate has been proposed for PRoR-type projects during dry and wet seasons, respectively. As there is domination of RoR projects, which generate only one-third of their capacity during dry season, currently, NEA has been offering Rs 8.40 and Rs 4.80 per unit for dry season and wet season, respectively.

A version of this article appears in print on February 24, 2017 of The Himalayan Times.

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