Nepal Electricity Authority has invited 11 hydropower companies to sign power purchase agreements (PPAs) amid the growing market for electricity at home and abroad.

The NEA has already decided to sign PPAs with companies that are developing run-of-river and peaking run-of-river type hydropower projects. It plans to continue signing PPAs with run-of-river type projects until the combined total of such projects reaches 6,750 MW. Likewise, for signing PPAs with peaking run-of-river projects, their combined total capacity has been capped at 4500MW.

In a notice on Tuesday, the NEA asked the 11 hydropower companies to come up with necessary documents within 35 days for signing the PPA. The PPA ensures the market for the power projects and based on the PPA, the company developing the project can receive loans from the banks and financial institutions.

The combined capacity of the projects planned to be developed by the NEA stands at 903.70 MW. Of them, seven are run-of-river type projects whose combined capacity stands at 202.80MW while the rest are peaking run-of-river projects whose combined capacity is 700.90MW.

A peaking run-of-river plant has a small reservoir or a weir and is generally operated only when there is a high demand (peak demand) for electricity. Likewise, a run-of-river hydropower project operates based on continuous discharge of water without storage and release of water.

The NEA has asked the projects to come up with an authorization letter, a bank guarantee, and PPA fee to sign the PPA.

If they fail to come up with necessary documents within the deadline, other developers will be invited to sign PPAs, according to the notice.

The developers will have to produce a generation licence, a survey licence, a letter of intent if the survey licence has expired, a grid connection agreement signed with the NEA and a letter of the Department of Industry if the project concerned is being developed with foreign direct investment, according to the notice.

In February, the NEA had decided to sign PPAs with run-of-river type projects totalling a combined capacity of 1,500 MW in line with a Cabinet decision taken eight months earlier. Earlier, for three years, the NEA had stopped signing PPAs for run-of-the river type projects citing a lack of market for electricity in the country.

“The latest call for signing the PPA is a part of an NEA decision taken in February,” said Suresh Bhattarai, NEA spokesman. “PPA will be signed on a first come first served basis.”

There are also 24 other projects that are eligible for signing PPAs with the NEA, but they have failed to produce necessary documents. Their combined capacity stands at 761MW.

But the latest NEA notice has not said anything about these projects.

The NEA’s notice has come at a time when domestic consumption of electricity has been increasing with electrified kitchens, increasing popularity of electric vehicles, and growing prospects for power exports.

India has promised to buy 10,000MW in the next 10 years, and Bangladesh has also been interested in importing electricity from Nepal. Nepal and India have also initiated a process for signing a 25-year power trade agreement.

In fact, Nepal and Bangladesh are negotiating for the export of 40MW of electricity from Nepal to Bangladesh with facilitation of India.

The government also plans to massively boost power generation in the next 12 years. Speaking at the foundation-laying ceremony for the construction of the 216MW Upper Trishuli-1 Hydroelectric Project last month, Minister for Energy, Water Resources and Irrigation Shakti Bahadur Basnet said that the government was preparing to come up with a comprehensive energy development programme that would aim to produce electricity in the range of 25,000MW-30,000MW by 2035.

Ananda Chaudhary, vice president of Independent Power Producers’ Asscociation said that they felt the NEA has taken steps to sign the PPA with hydropoer developers along with increased prospects of markets for power.

“We hope the NEA will continue signing the PPA on an incremental basis,” he said.

In the last fiscal year 2022-23, a total of 35 new PPAs with a combined installed capacity of 1,350MW including a 5MW solar plant were signed, according to NEA.

This has taken the total number of PPAs signed with various independent power producers (IPPs) to 392, and these projects’ combined generation capacity will be 7,758 MW, the state-owned power utility body said.