The Nepal Electricity Authority (NEA) has taken a step toward bolstering the nation's power industry by deciding to offer power purchase agreements (PPA) for hydropower projects with a combined capacity of 5,000 MW. The move came in response to years of pressure from private hydropower developers who had found themselves in limbo during the NEA's five-year pause on PPAs. Reviving stalled PPAs has been made possible by Energy Minister Deepak Khadka's approval of Hitendra Dev Shakya's nomination as the new NEA managing director. It appeared that the new authorities at the electricity authority desired to put the ongoing feud in the NEA to rest and carry out the task they are meant for — generating power. For this, they started mobilizing private power developers. The issuance of PPAs soon after NEA Managing Director Kul Man Ghising was dismissed hints at this. Following Ghising’s dismissal, the NEA board, which remained inactive for over two months due to the minister-managing director feud, promptly issued the PPAs for run-of-river (RoR) projects. The NEA's decision to issue PPAs for projects demonstrates the urgent need to boost electricity generation and attract private investment. Because of the controversy surrounding Ghising's termination and ongoing feud between him and the minister, NEA's financial situation has also suffered. Due to differences, the electricity authority has failed to recoup outstanding tariffs from industries for using dedicated trunk lines in the industrial corridor, besides carrying out vital projects. The issuance of PPAs can help bring sufficient resources to the NEA, which was hit badly due to the ongoing tussle between the minister and the managing director.
There is no doubt that if Nepal's enormous hydropower potential is realized, it might become a major exporter of electricity and may well turn into a game changer for Nepal’s overall economic progress. But while developing vast energy potential, the top priority must be given to long-term stability, price competitiveness, and efficiency. However, many energy experts say that authorities should think of storage-based and semi-reservoir hydropower projects, such as pumped storage facilities, which are more cost-effective and can supply electricity during periods of high demand. They claim that RoR projects are seasonal and reliant on river flow. The cost per unit of electricity generated by pumped storage projects was just one-third that of RoR projects, according to a study carried out by the NEA that demonstrated the economic viability of such projects. Climate change-induced variations in water flow may also jeopardize the dependability of RoR projects, they warn. Notwithstanding the aforementioned difficulties, the NEA is making progress in resurrecting PPAs for RoR projects. Nonetheless, such efforts should be a component of a larger strategy to guarantee Nepal's long-term energy security. Despite the importance of private investment, the government must combine the immediate demand for electricity generation with sustainable energy regulations.
Apply it right
Ultimately, the hydropower business in Nepal has enormous potential, but it can only be economized with an open and thoughtful approach. Government decision-making on electricity generation must be based on strong economic and technical principles rather than political brinkmanship. Political rivalries or the whims of corporate entities should not determine the country’s energy security. Therefore, our authorities working to ensure energy security must focus on people's long-term interests and on the country’s economy so closely tied with energy.
