ERC’s PPA Framework for Pumped Storage: A Turning Point for Nepal

  

 

Critical Step for Nepal’s Energy Future

 

Nepal’s total peak electricity demand, according to NEA data, currently stands at 2,859 MW, while total installed generation capacity is around 3,600 MW. At first glance, this might suggest a comfortable surplus. However, the reality is far more complex.

Nepal’s Hydropower at a Crossroads: Why Storage is the Missing Piece

 

Over the past 60 years, Nepal has made remarkable progress in expanding its generation capacity from just 50 MW to 3,500 MW. The private sector has played a crucial role in this growth, contributing around 80% of the total installed capacity within a short period.

Deconstructing the Storage Hydro PPA Pricing Framework: A Critical Review of the ERC Discussion Paper

 Introduction: Nepal’s Growing Need for Energy Security

In recent years, Nepal has experienced a substantial increase in electricity generation capacity, mainly driven by run-of-river (RoR) hydropower projects. However, the country’s energy landscape is still heavily dependent on seasonal river flow, leading to surpluses in the wet season and deficits during the dry season. Recognizing this vulnerability, the Government of Nepal has prioritized storage hydropower projects in the national budget, marking a strategic shift toward energy security and grid reliability.

ERC’s New Draft on Open Access — An Example with Cost Calculation

 

ERC has recently released a draft regarding open access. Experts have long demanded that the private sector be allowed to use the transmission line by paying certain fees. So, this draft is a positive step forward. In this article, I try to calculate how much an open access user has to pay if we export 10 MW. 

Peaking Power: Comparing RoR Hydro, Peaking Hydro, Solar, and Battery-Backed Solar in Nepal

Introduction

In recent times, there has been significant buzz surrounding battery storage for solar power projects in Nepal. Some industry observers believe the recent introduction of the “take and pay” mechanism for Run-of-River (RoR) hydropower projects is part of a broader shift aimed at prioritizing solar power coupled with battery storage. This prompted me to analyze how battery-backed solar stacks up against traditional RoR hydro and peaking RoR projects in terms of energy supply during critical demand periods.

"Hydropower at Risk: Why Nepal Must Embrace Innovation and Abandon Take and Pay PPAs"

The recently announced budget has created a buzz, especially with the introduction of a "Take and Pay" Power Purchase Agreement (PPA) for run-of-river (RoR) hydropower projects. On one hand, the government has set an ambitious target of achieving 28,500 MW electricity production, but on the other, it has taken a contradictory step by formulating policies like the Take and Pay PPA. This system, where electricity is purchased only when consumed rather than through long-term contracts, has led to financial instability for power producers.

 

Misaligned Priorities: Why Nepal’s Hydropower Sector Needs a Regulatory Reset

 

Introduction

Nepal’s hydropower sector is at a critical juncture. While the government claims to prioritize storage-based hydropower projects, real progress is lacking. The recently announced budget emphasizes the importance of storage, but practical and policy-level gaps continue to undermine that objective.

Without decisive changes in regulation, planning, and pricing, Nepal risks wasting its hydropower potential — especially the opportunity to address dry-season energy shortages.

Analyzing Pure Energy Limited’s IPO Approval: A Deep Dive into Financial Viability and SEBON’s Decision

In a surprising move, Pure Energy Limited, a solar project with a total installed capacity of 20 MW, has recently received IPO approval from the Securities Board of Nepal (SEBON). This decision comes at a time when SEBON has been hesitant to approve IPOs for numerous hydropower projects in the pipeline. This raises an important question: On what grounds did Pure Energy Limited secure IPO approval, especially when SEBON has been cautious about protecting general investors from potential profitability risks?

 

Price Discrimination in Nepal’s Energy Sector: Challenges and Opportunities

 

The Government of Nepal has set an ambitious target to generate 28,500 MW of electricity by 2035, aiming to boost both domestic consumption and export capacity. This strategic initiative reflects Nepal's commitment to harnessing its hydropower potential, promoting sustainable energy development, and fostering economic growth through regional energy cooperation.

Key Aspects of the 2035 Energy Target

• Domestic Consumption: Approximately 13,000 MW is intended for domestic use, aiming to meet the growing energy needs of the country.
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• Export Capacity: Around 15,000 MW is planned for export, primarily to neighboring countries like India, to enhance foreign currency earnings and support regional energy integration.
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To achieve this target, the Department of Electricity Development (DOED) has already issued licenses for 30,000 MW of hydropower projects and 704 MW of solar projects. However, the current reliance on Run-of-River (RoR) hydropower projects raises significant challenges.

Upper Trishuli 1 Dollar Exchange Risk Explained

While Nepal government is all set to organize another investment summit, Nepal Water and Electricity Development Company (Korean) has threatened to pull out from Nepal after the government asked it to contribute a hefty sum to a hedge fund to be used as a cushion against exchange risk. According to newspaper, the Korean company is ready to contribute only USD 5 million. I was curious if it is sufficient to cover the exchange risk.

Blunders : one after another

The tendency of our Nepali experts introducing new policies without analyzing the impact and crunching numbers is something I have never understood. I wonder if they ever do analysis beforehand (most probably, they don’t).

HIDCL’s right share proposal

Hydroelectricity Investment and Development Limited (HIDCL) has notified Nepal Stock Exchange (NEPSE) regarding the issuance of its 100% right share.

Upper Tamakoshi – a reality check for much hyped hydropower?

After long delays due to various reasons, Upper Tamakoshi is now all set to float its local shares. According to its invitation letter, the projected cost is estimated to be Rs. 66.08 billion. This makes per MW cost of Rs. 14.49 crore. Although the per MW seems to be at the lower side compared to recent market trend (above Rs. 20 crore), the project, however, will not able to keep up its hype due to its lower PPA rate which is at Rs. 4.06 per kWh (average) for the first year.

Compensation clause for 30% dry energy.

With new guidelines effective from this year, there is an option of 30% dry energy for RoR projects. In this option, hydropower projects will receive NRs. 8.40 per kWh for six months (Mangsir 16 – Jestha 15) and NRs. 4.80 for the remaining 6 months (Jestha-16 to Mangsir 15). However, the total dry energy should be more than 30% of the total energy supplied. Any projects suppling dry energy below 30% will be penalized. The formula for such compensation to NEA will be the following

Vicious Cycle and ways to overcome it

It is needless to say that we have not been able to harness 2% of the total hydro potential. With a stable government on the horizon, I think it is the right time to debate on how to exploit our resources.

Financing capacities of Nepali banks

The total loan and advance of Nepalese commercial banks stood at NRs. 1,801.567 billion at the end of Ashwin 2074 or mid October, 2017 (source: NRB). With 5% minimum lending requirement in hydropower sector as provisioned by Central Bank of Nepal, the total loan available is NRs. 90.078 billion. On the other hand, hydropower projects with install capacity of 2,043.6 MW have done the financial closure while 910.31 MW are in the process of securing debt (NEA’s Annual Report 2017). Assuming NRs. 180 million per MW as the construction cost, and 70:30 as Debt equity ratio, the total loan requirement is NRs. 372.19 billion. Even at the 10% as minimum lending requirement (assuming that Central bank will increase the provision), the total funds available will be around NRs. 180.157 billion.

West Seti Hydropower in limbo

It looks like another company is going to pack its bag. China Three Gorges International Corporation, the potential builder of West Seti Hydropower Project (750 MW), showed dissatisfaction over the Power Purchase Rate Policy proposed by Nepal Government. Storage project like West Seti is entitled to receive NRs. 12.40 per kWh and NRs. 7.10 per kWh during dry and wet season respectively.

Budhigandaki vs Upper Karnali vs Arun 3

In a country like Nepal where financial resource is scarce, we have no other option than use it wisely to get optimum benefits. However, things are not applied in Nepal as learned in economic class during our uni days.

Election Manifesto

Having a huge hydropower potential, all politicians, policy makers and experts have come to a common understanding that hydropower development is a key determinant of the growth potential of Nepali economy. As such, all major political parties have declared to exploit the hydro resources in their election manifestos.

Rates for Peaking Run of River

Developers of peaking run of river hydropower project can enjoy better rates. Developer will be entitled to receive Rs. 8.50 to Rs. 10.55 per unit.