February 15: Nepal Electricity Authority (NEA) has decided to initiate Power Purchase Agreement (PPA) with hydropower projects of up to 10 megawatts to encourage domestic investors to invest in small hydropower projects.

The 963rd meeting of the Board of Directors of the NEA held on February 7 under the chairmanship of the Minister for Energy, Water Resources and Irrigation Shakti Bahadur Basnet decided to sign PPA with the run-of-river (RoR) and semi-reservoir (PROR) hydropower projects of up to 10 megawatts at any time and any amount.

NEA will purchase electricity from the hydropower projects up to 10 megawatts on the basis of 'take or pay' scheme. The electricity of the project will be purchased at Rs 8.40 and Rs 4.80 per unit for the dry season (start of December to May end) and rainy season (start of June to November end) respectively.

Executive Director of Nepal Electricity Authority Kulman Ghising said that the PPA limit set on the basis of production mix is not applicable in projects up to 10 megawatts in order to encourage the maximum use of local natural resources and the investment from domestic investors in small hydropower projects.

"PPA of hydropower projects up to 10 MW could not be signed due to the provision of quota. Now the quota will not applicable for projects up to 10 MW, so PPA can be signed anytime. This will encourage small domestic investors," said Executive Director Ghising.

Altogether 89 projects up to 10 megawatts have applied to the NEA for PPA. The capacity of the project is 351 MW. Among them, 44 projects with total capacity of 195 megawatts have already completed grid-related agreements.

The NEA had set the target of becoming self-sufficient in electricity through internal production of 15,000 megawatts of electricity in the next 10 years, under the concept of energy mix which would see 25 percent contribution from reservoir-based projects, 30 percent of peaking ROR, and 45 percent of ROR.

The limit of PPA was fixed on the same basis. Since the limit of 6750 MW was set for ROR project has been fulfilled, PPA was not possible even for projects up to 10 MW. Most of the projects up to 10 MW are ROR. The Authority has signed PPA of 9200 MW so far.