The Nepal Electricity Authority’s (NEA) plan to diversify the energy mix by launching 22 grid-connected solar projects with a total installed capacity of 61 MW is in limbo due to the government’s policy inconsistency. 

In July 2017, the state-owned power utility had prepared to sign power purchase agreements (PPA) with 22 solar projects at Rs8.45 to Rs9.61 per unit of electricity, but it had to drop the plan due to a policy change by the government.

The power purchase rate was fixed as per the guideline of the National Energy Crisis Reduction and Electricity Development Decade declared by the government in February 2016. This allowed the NEA to buy solar electricity at up to Rs9.61 per unit.  

Accordingly, the NEA published a request for proposals in June 2016 seeking bids from interested parties to install solar plants and supply electricity at a base price of Rs9.61 per unit. The NEA selected more than half a dozen bidders who had quoted prices ranging from Rs8.45 to Rs9.61 per unit of electricity.

However, the authority had to halt the bidding process as the Energy Ministry was going to introduce a guideline on grid-connected solar energy development. Last November, the ministry issued the new rule which fixed the power purchase rate for solar electricity at Rs7.30 per unit. 

The NEA told the 22 hopeful developers of solar projects about the new rate fixed by the ministry which would apply when signing the PPAs and got ready to conclude the deals accordingly. However, the NEA had to stop in its tracks when the ministry instructed it to sign the PPAs at the original rates.

“The ministry’s instruction has confused us and left us unsure,” said a highly placed NEA source. “As we have a new guideline which has fixed a lower power purchase rate, we should not stick to the rate which was established when the country was in the midst of an energy crisis. If we sign power purchase deals agreeing to pay Rs8.45 to Rs9.61 per unit, we will face an additional financial burden of billions of rupees.” Since the decision was taken by a caretaker government, the NEA management has planned to wait until the next administration takes office in the hope that it will apply the new power purchase rates, the source added. 

The hopeful solar power developers will have to install solar plants with an installed capacity ranging from 0.5 MW to 8.5 MW at 22 locations across the country after signing the PPA with the NEA. They will be given 18 months’ time to complete the installation of the power plants.

The power utility came up with the plan to purchase electricity generated from solar plants in a bid to diversify its energy sources. The NEA’s diversification plan is in line with the government’s policy to promote renewable energy other then hydroelectricity. 

The government has asked the NEA to promote energy sources like solar and wind so that they make up 10 percent of the total installed capacity in the country.