NEA offers better energy rates for peaking power projects

Published On: May 4, 2017 09:31 AM NPT By: Rudra Pangeni  | @rudrapang

KATHMANDU, May 4: Changing the existing flat energy rates for dry months, Nepal Electricity Authority (NEA) has offered to pay developers better rate if the latter reserve water in the daytime and generate more energy during peak hour.

NEA Spokesperson Prabal Adhikari said that developers of peaking run of river hydropower project signing Power Purchase Agreement (PPA) after April 27 can enjoy better rates. 

The power utility has offered to pay Rs 8.50 to Rs 10.55 per unit depending on the hours the plants can reserve water and generate into full capacity during peak hours.
Prior to this, developers were getting only Rs 8.4 per unit during dry months (mid-December to mid-April). Projects signing PPA after April 27 can enjoy dry month energy rates for two more months (mid-November to mid-December and mid-April to mid-May). 
NEA has been paying developers Rs 4.8 per unit during wet months.

The new energy rate means, a peaking plant that can run for four to six hours in full capacity will fetch Rs 10.55 per unit. Rates for running the plant in full capacity for 3 hours to 3 hours and 59 minutes, and 2 hours to 2 hours and 59 minutes have been set at Rs 9.40 and Rs 8.80 per unit, respectively. Similarly, plant that runs in full capacity for one hour to 1 hours and 59 minutes get Rs 8.5 per unit. However, the power plants have to generate a minimum 30 percent of their annual energy during mid-November to mid-May. Previously, the minimum energy output to enjoy dry energy prices was 15 percent for a period of four months. 

The new rates is expected to encourage producers to build peaking power plants instead of run-of-river projects whose generation falls significantly during dry months when energy demand hits peak.

The government has a few peaking projects, including the Kaligandaki A hydropower Project. But private developers do not have any such project. 

Independent power developers say it is too early to comment on the new energy rates offered by the NEA. “No one holds the license of peaking project as of today. It is too early to comment on the new offer,” Kumar Pandey, vice-chairman of Independent Power Producers’ Association, Nepal, told Republica.

NEA has set PPA rates for reservoir plants at Rs 12.40 per unit for dry months and Rs 7.10 per unit for wet months. NEA has a separate formula to calculate energy rates if power generation during dry months falls below 50 percent.

Meanwhile, the Department of Electricity Development (DoED) has revised its regulations, fixing project design at Q45 and above for run of river projects to generate more energy during dry months. The new design specification will not allow hydropower producers to set installed capacity based on river flow during rainy season. They have to set installed capacity based on hydrology of dry months. 

 Private producers have said that new provision can reduce total energy output. “It will reduce the project’s capacity by 10 percent. If this happens, the government will also lose revenue which is based on per 100 KW installed capacity and total annual energy output,” said Pandey.

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