March 15: Nepal Electricity Authority (NEA) has reduced the power purchase agreement (PPA) rate for solar power projects by Rs 1.36 per unit.

Earlier, the NEA had fixed Rs 7.30 per unit for power purchase agreement with solar plants. Now, the base rate has been fixed at a maximum of Rs 5.94 per unit.

NEA had already decided to sign PPA with the solar plants through open competition. However, the base rate of PPA was not specified.  A task force formed for the same purpose has fixed the PPA rate.

This is also the maximum base rate. The contractors participating in the open competition have to submit bids at rates lower than the base rate.

NEA spokesperson Suresh Bhattarai confirmed that the base rate for PPA with solar plants has been fixed at Rs 5.94. He said that the companies participating in the tender bids for PPA should submit bids equal to or lower than the base rate.

Similarly, NEA has set certain criteria for the companies participating in the PPA.

“The solar projects must set up plants in places where we say if they want to participate in PPA,” said Bhattarai.

He said that such criteria have been set keeping in view the technical aspects including the transmission line of NEA and the areas where electricity is in demand.

He said that the PPA rate of solar plants has been reduced in line with the international market rate. "It costs less to build a solar plant. On top of that, it will generate electricity only in the afternoon when NRs 3. Moreover, solar power is cheap in the international market,” said Bhattarai.

Meanwhile, Krishna Prasad Acharya, chairman of the Independent Power Producers Association of Nepal (IPPAN), said that they will study the base rate set by NEA and then  only come up with an official view.

NEA had decided to sign PPA with solar plants through open competition as per the policy of making electricity tariff universally accessible and in line with international norms.

NEA is now preparing to invite tenders for PPA with solar plants by completing the required process. NEA will have to sign PPA in such a way that the contribution of solar plants to the national grid does not exceed 10 percent of the total capacity. The government has adopted a concept of energy mix under which the share of electricity generated by solar projects should be 10 percent of the total capacity of the national grid.

At present, the installed capacity of electricity in the national grid is about 2200 MW. Accordingly, NEA will be able to purchase 220 MW of power from the solar projects immediately.