The 10MW Dolakha-based Spirin Khola hydroelectric project, remained closed during the night hours for more than three months from late August to November after the Nepal Electricity Authority (NEA) refused to buy its power citing power spillage.

The August-November period is when Nepal’s hydropower projects run at their full capacity, while the demand for power decreases as it is the wet season.

The country’s power spillage reached as high as 800MW at times, with the domestic demand falling as low as 700 MW during the Dashain festival, when the factories are closed. The total installed capacity of the country’s power projects is more than 2,200MW.

Amid reduced domestic demand, coupled with India permitting Nepal to export not more than 364MW of electricity, the Nepal Electricity Authority (NEA) refused to purchase all the available power from certain private sector power developers so that it could cut its losses caused by spillage.

The Spirin Khola hydroelectric project became a victim of the situation, being forced to suspend production for several months for the entire night, every day. “The NEA told us to stop production from 9pm to 5am every day from late August till November,” said Sujan Poudel, senior administrative officer of Synergy Hydro Limited, which operates the project. “It told us to shut down production even in the daytime during public holidays, and Dashain and Tihar festivals.”

During the festivals and public holidays, economic activities, including industrial operations, slump contributing to a reduction in the demand for power.

Spirin Khola is one of the more than 40 hydropower projects with which the state-owned power utility body has signed a power purchase agreement (PPA) on a ‘take and pay’ basis, which allows the NEA to purchase power whenever it needs.

The majority of the PPAs signed by the NEA with independent power producers are on a take-or-pay basis, which forces the power utility to buy all the power these plants produce.

Despite the take and pay-based PPA, the Spirin Khola project had not faced a prolonged closure of power plants in the past. “It is for the first time since our plant started producing power 10 years ago that we have had to shut down the plant for such a long period,” said Poudel.

When it started producing power, the country was in the midst of a prolonged power outage. However, since the middle of 2018, there has been no declared load shedding in the country.

The country has faced the problem of power spillage since the 456MW Upper Tamakoshi Hydropower Project came into operation in July 2021. India, for the first time in November last year, allowed Nepal to sell 39 MW of electricity produced by the 24MW Trishuli Hydropower Project and the 15MW Devighat Hydropower Project in the Indian power market, which helped control massive power spillages.

In early June this year, the southern neighbour allowed Nepal to sell a maximum of 364MW in the Indian power market.

But as the domestic power production increased and the demand for power decreased domestically in the wet season this year, the limited exports alone could not stop the power from going to waste.

In fact, the NEA said that the industrial power demand had slumped sharply in the last few months, indicating that the country’s economy was slowing down.

“The industrial sector usually consumes around 500MW, but the demand from the sector has decreased by half in recent days,” Kul Man Ghising, managing director of the NEA told the Post in late November.

As a result, not only the Spirin Khola hydroelectric project, more than two dozen power projects were told to stop the production of power, according to the Independent Power Producers’ Association (Ippan).

“As many as 27 hydropower projects reported to us that they have been told to either stop or reduce production,” said Ganesh Karki, a vice president of the IPPAN, who himself is running his plant—Singati Hydropower Project—at 60 percent of its rated capacity for the past two months.

As a result, these hydropower projects had to face losses worth billions of rupees, according to IPPAN. “As many as 11 hydropower projects reported that they had faced combined losses of Rs 928.58 million,” said Karki.

These include Chepe Khola, Lower Modi, Dordi Khola, Ghalemdi Khola, Nyadi, United IDI Mardi, Chhyangdi, Buddha Bhumi, Upper Syange and Synergy Power and Naugarh Gad projects. Most of these projects have signed PPAs with the NEA, based on take and pay basis.

However, Suresh Bhattarai, spokesperson of the NEA, said that only the projects which had signed take and pay-based PPA, were told to shut down power plants for a certain number of hours daily.

“The basic feature of take and pay-based PPA is that we buy the power only when we need it,” he said. “As there was more production than we required because of the limited demand for power within the country, we didn’t buy all the power produced by such projects.”

But the independent power producers said that even the projects with which the NEA had signed take or pay-based PPAs, were told to reduce their output, an allegation Bhattarai flatly rejected.

“There are certain projects which sell us a certain portion of power under a ‘take and pay’ basis,” said Bhattarai.

As the power plants had to be shut down this year to save the NEA from facing huge losses, the situation may worsen next year, if the domestic consumption and exports are not increased.

The NEA has projected that an additional 705 MW would be added to the country’s power system by the end of the current fiscal year 2022-23.

“This situation calls for increasing both domestic consumption and exports,” said Karki, the IPPAN vice president.

Though India recently allowed Nepal to sell extra power including 22.1 MW from Chilime; and 23.5 MW from Solukhola hydropower projects in addition to the 364MW power it had allowed earlier, that won’t quite be enough for the consumption of all the power that Nepal is expected to produce in the current fiscal year.

“Had the private sector also been granted the licence for power trade, they would have explored markets for the increasing production of power, which has not happened to date,” lamented Karki.

An ordinance meant to grant such a licence remains stuck at the President’s Office for the last two and half months.

As matters stand, along with the arrival of the winter season, the power production has drastically come down with the reduced water levels in Nepal’s rivers, according to the NEA.

“The current production has come down to around 1,000MW. So, there is no need to cut production at the moment,” said Bhattarai.