PPA reopened for RoR The 930th board meeting of Nepal Electricity Authority (NEA), chaired by Minister for Energy and Water Resources and Irrigation Rajendra Prasad Lingden, on Thursday decided to reopen power purchase agreements (PPA) for up to 1,500 MW of electricity for Run of River (RoR) projects, that too, on roll order basis.
The state power utility had stopped the PPA for RoR projects for the last four years, stating that they could not meet the energy demand during the dry season and the NEA also could not use the flood energy generated during the wet season. However, the Independent Power Producers' Association of Nepal (IPAAN) had been lobbying for opening the PPA for RoR projects that had already obtained power generation licences and had already spent money for conducting the EIA or other activities. As per the existing policy, the private sector sells its energy to the NEA on the 'take or pay' principle, which means the NEA has to pay the power producers even if the state utility fails to consume the energy it purchases.
As per the decision of the board meeting, up to 1,500 MW of electricity will be purchased from the RoR projects on roll order at a base rate of Rs 8.40 during the dry season and Rs 4.80 per unit of electricity during the wet season.
In 2018, the ministry had unveiled a roadmap (white paper) in the energy sector with the aim of becoming self-reliant in energy by producing up to 15,000 MW in the next 10 years. As per the white paper, 30-35 per cent energy would be produced from reservoir or pump-storage plants, 25- 30 per cent from peaking RoR, 30-35 per cent from RoR and 5-10 per cent from other alternative sources of energy, such as solar and windmills. However, a cabinet meeting held in July last year had decided to increase the contribution of the RoRs to 40-45 per cent. Now onwards, the RoR projects will be generating up to 6,750 MW. As the private sector and NEA itself have reached the PPA for most of the RoR projects, only 1,500 MW are left for the RoR projects, which will be awarded to those producers that have already obtained generation licences on the roll order for grid connection.
IPPAN has welcomed the NEA board meeting decision, saying the investment made by the private sector would not go to waste. IPPAN has also called upon the government to open the door for the private sector in trading of energy in domestic and international markets. For this, a bill to this effect needs to be endorsed by the federal parliament. Till date, the NEA is the sole buyer and seller of energy.
Apart from power trading, the private sector should also be involved in building reservoir, pump-storage projects and peaking RoR projects as well as in building transmission lines by offering them new incentives. The energy-mix policy is a welcome move taken by the government. But it has not taken any concrete step or enacted any law to rope in the private sector in trading, transmission and generating power from reservoir projects, which involves huge investment. At the same time, the NEA also needs to scrap the generation licences of those developers who have failed to make the desired progress on the RoR projects for which they have already reached PPA.
The govt needs to enact laws to involve the private sector in power trading
A version of this article appears in the print on February 13, 2023, of The Himalayan Times.
