Nepal | April 10, 2020

Power producers seek ‘take or pay’ provision implementation

Himalayan News Service

Kathmandu, November 24

Independent power producers have sought early implementation of Power Purchase Agreement on ‘take or pay’ basis, which was included in the long-term plan of Ministry of Energy titled ‘National Energy Crisis Prevention and Electricity Development Decade, 2016 ‘ and has already been endorsed by Cabinet.

Speaking in a programme organised here today, Khadga Bahadur Bisht, president of Independent Power Producers’ Association Nepal (IPPAN), said that the board at Nepal Electricity Authority (NEA) — the single power off-taker — has been taking time to implement the Cabinet’s decision.

“NEA has not abided by government’s policy and has kept a dispatchable (take and pay) provision in PPAs, which is a major obstacle for investors to come into hydroelectricity development.”

NEA’s provision in PPA is not on a fully load dispatchable basis. For a certain number of years — no less than 10 years from power commissioning date — NEA has sought take and pay basis. The reason for this, as per NEA officials, is that there will be surplus power in Nepal after completion of the 456-megawatt peaking run-of-the-river project, the Upper Tamakoshi hydroelectric project. This is why NEA has been urging power producers to sign PPA in which NEA will pay producers if it off-takes electricity from the project. And this will largely be governed by the demand of the future.

IPPAN has said that no investor wants to take a chance while making investment. “Though NEA has been making forecast based on suppressed demand, investors want to be assured that NEA will buy electricity they generate.”

“The country has been able to generate an additional 300 megawatt only — 250 MW from IPPs and 50 MW from NEA — in the last 10 years, and now we are depending on import to meet our demand,” Bisht said. “If we don’t create an environment for investment, our dependency on electricity import will rise in future.”

He further said that the government’s move should be directed towards energy security, for which hydropower is the most potential source of energy and can substitute import of petroleum and liquefied petroleum gas if the resources that we have is properly harnessed.

IPPAN is organising Power Summit, 2016, from December 15 to 16 in Capital to expedite power generation. It has a target to generate 10,000 MW in next decade and investors, developers, development partners and stakeholders from various countries will participate in the event. IPPAN believes a decision by NEA to implement PPA on ‘take or pay’ basis will send positive message for the summit.

 


A version of this article appears in print on November 25, 2016 of The Himalayan Times.


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