NEA to sign first PPA with storage-type hydroState-owned power utility Nepal Electricity Authority (NEA) has been preparing to sign its first power purchase agreement (PPA) with a storage-type hydropower project.
State-owned power utility Nepal Electricity Authority (NEA) has been preparing to sign its first power purchase agreement (PPA) with a storage-type hydropower project.
The NEA will be concluding a deal with its wholly owned subsidiary, Tanahu Hydropower Limited, to purchase electricity generated by the 140 MW Tanahu Hydropower Project located in Tanahu district.
According to Prabal Adhikari, head of the NEA’s power trading department, the agreement with Tanahu Hydropower will be signed in a couple of weeks.
“A draft of the PPA is almost ready, and we will be all set to sign it after a few rounds of negotiations,” said Adhikari. “The power purchase rate is determined by our power purchase guidelines, so the talks will not take much time.”
As per the power purchase guidelines issued by the Energy Ministry and approved by the NEA board, storage projects like Tanahu Hydropower will be paid Rs12.40 per unit during the dry season which lasts from December to May, and Rs7.10 per unit during the wet season which lasts from June to November.
The guidelines also state that if the energy output during the dry season drops below 50 percent of the installed capacity, the payment rate during the wet season will be reduced by the percentage point of the decline.
For example, if electricity generation during the dry season falls to 36 percent of capacity, or a drop of 14 percentage points below the threshold, the NEA will pay 14 percent less for the power produced during the wet season.
This means the purchase rate for the energy produced during the wet season will be Rs6.10, which is 14 percent less than the fixed rate of Rs7.10. Although Tanahu Hydropower is close to signing a power purchase deal with the NEA, the construction of the power station is in limbo due to delays in appointing a contractor.
The company missed the appointment deadline as one of its financiers, the Asian Development Bank (ADB), delayed evaluating the technical proposals of potential builders. Tanahu Hydropower had planned to hire a contractor last December, it is now planning to do so by March.
Last July, Tanahu Hydropower had forwarded the technical proposals submitted by three companies vying to get the contract for the first package, which includes formulation of a detailed design of the project and construction of the headworks, to the ADB for its examination. However, the multilateral lender is yet to complete the evaluation of the proposals. Meanwhile, Tanahu Hydropower is all set to hire a contractor for the construction of the second package of the project, which includes construction of waterways and a powerhouse at the project site.
The project office has evaluated the technical and financial proposals of the two hopeful contractors and forwarded them to the financier, the Japan International Cooperation Agency (Jica), for its okay. Tanahu Hydropower will enter into an agreement with the selected company after getting a no objection letter from Jica.
The Tanahu Hydroelectric Project, located 150 km west of Kathmandu on the Seti River, will be one of the biggest reservoir-type projects in the country with an estimated annual energy generation capacity of 587.7 GWh in the first 10 years of operation.
The project can generate energy for six hours daily during the dry season. It is being built using credit extended jointly by the ADB, Jica and European Investment Bank.