Paradigm Shift

Nepal’s hydro is predominately RoR schemes and almost all pipeline hydropower projects are also RoR.

Installed Capacity

Details	Capacity (MW)
Total Hydro (NEA)	477.93 MW
Total Hydro (IPP)	324.446 MW
Total	802.376 MW

Source:- NEA’s Annual Report 2016

According to NEA’s annual report 2016, the total capacity of financial closure concluded/under construction projects is 1,421.53 MW whereas the total capacity of the projects that are close to financial closure is 779.3 MW. This makes a total of 2,500 MW.

However, these figures are taken from NEA’s annual report 2016. Three quarters have gone by in the current fiscal year, and a lot of new hydropower projects have expedite their work that are not included in the above lists, for instance, Upper Trishuli 1 (216 MW).

All these figures suggest that there will be around 3,500 MW (mostly RoR) in the next five to six years time. Once the energy starved country will soon have excess energy (at least during wet season) though there will be a shortfall during dry season. Projects operate at one third of their installed capacity during dry period.

I strongly believe it is now 'game over' for new RoR project. Any developer thinking of developing new RoR projects should think twice.  First, NEA will make it very hard to do the PPA of such projects. Believe it or not, NEA is going to face the problem of spill energy once Upper Tamakoshi comes into operation. This is largely due to RoR projects.

Second, National Energy Crisis Reduction and Electricity Development Decade plans to develop 10,000 MW in ten years with a generation mix of pump/storage (40 to 50%), peaking RoR (15 to 20%) RoR (20 to 25%) and other sources (5 to 10%). Now, if all the financial closure concluded/under construction and project close to financial closure are constructed then RoR has already exceeded the limit of 20 to 25%.

Way Forward

Storage and PRoR schemes are what we should focus on. With new proposed rates for Storage (Rs. 12.40 per kWh during 6 months and Rs. 7.10 per kWh for the remaining months) and PRoR (Rs. 10.55 per kWh during 6 months and Rs. 4.80 per kWh for the remaining months), developers should explore this avenue. Also, the country doesn’t need more RoR projects. We need projects that can generate electricity when we need it. 

Although the proposed tariff structure is not free of flaws like, 50% energy production during dry season to get the Storage rates which will drastically downsize the installed capacity (ignores project optimization), no word on escalations whatsoever and no firm commitment from Government to support land acquisition, the proposal to offer rates for Storage and PRoR is a welcoming step. Now, it is the time for the developers to push government and to come up with a workable model.