IPPAN Presents 11-Point Demand to NEA

The Independent Power Producers’ Association Nepal (IPPAN) on Monday, August 11, submitted an 11-point demand to Nepal Electricity Authority (NEA) Managing Director Hitendra Dev Shakya, calling for urgent action on long-standing issues. 

Among the demands are extending the Required Commercial Operation Date (RCOD) deadline, managing electricity that would otherwise go to waste, scrapping the contingency provision, opening PPAs without conditions to achieve the target of 28,500 MW, expediting the process for PPAs of up to 10 MW, and removing the conditions set by the Authority when opening PPAs for 5,000 MW.

Similarly other demands are removing a hydrology penalty, addressing transmission line impacts on projects, eliminating take-and-pay PPAs, providing posted rates, adjusting energy tables, and clarifying NEA’s stance on the future role of hydropower.

Senior Vice President Mohan Kumar Dangi led the delegation which submitted the demands.

Dangi said 22 projects are currently under contingency arrangements, which should be abolished. PPA approvals for projects under 10 MW have been halted since the take-and-pay provision was introduced in the national budget.

IPPAN Vice President Ram Prasad Acharya added if NEA was unwilling to sign PPAs, the Department of Electricity Development should stop issuing licences. He criticised the use of different policies for projects above and below 10 MW.

General Secretary Balram Khatri warned that halting PPAs for smaller projects could deter investors. 

The association also proposed allowing up to 1 MW of solar generation at hydropower sites to meet winter demand at hydropower tariffs, and shifting subsidies from cooking gas to electric cooking infrastructure.

NEA’s Shakya said that the committee formed to review RCOD has already submitted its report and the authority's decision would be based on it. “However, for certain projects, a decision will require a review of specific conditions,” Shakya added.

IPPAN officials disagreed, questioning why the deadline could not be extended for all projects at once, especially when delays in electricity generation ultimately benefit NEA itself.

On the contingency arrangement, Shakya cited concerns about the Commission for the Investigation of Abuse of Authority (CIAA) and said it could not be removed immediately.

“To scrap the contingency clause, either exports must increase or domestic consumption must grow. Otherwise, we cannot remove it. If the clause remains and I still make payments, I will be caught in the CIAA’s net,” Shakya said.

Shakya also emphasised that the only way to solve the issue is by working with the private sector to enhance and construct new transmission line capacity. He noted that in the West Seti Corridor, four entities including the private sector have already started joint construction of transmission lines. When the private sector builds transmission lines, a revenue guarantee will be provided, similar to how PPAs are made for hydropower generation.

He revealed that for projects with a total capacity of 5,000 MW that already have PPAs, and another 4,900 MW that will soon have PPAs, electricity will be exported directly to India for six months. 

NEA plans to invite developers for discussions, confirm production dates, and then sign agreements with India specifying how much electricity can be supplied on a given timeframe. Developers who fail to deliver power on the agreed dates will face penalties according to Indian regulations.

Shakya said NEA cannot bear all risks alone and asked IPPAN to cooperate in risk sharing. He also suggested that another option to open PPAs is to allow the private sector to buy and sell electricity directly.

Referring to remarks he made a few days earlier, Shakya clarified that he did not mean hydropower would lag behind completely. He explained that in the future, as solar power becomes cheaper and allows for battery storage, it could become less expensive than hydropower, potentially reducing hydropower’s competitive advantage.

“Solar is becoming cheaper, so if, in the future, cheaper electricity comes from solar, then the question is what will happen to hydropower? I was saying that such a situation could arise in 10 years, not that we will not need hydropower at all,” he said.

Shakya added that hydropower uses about 60 percent domestic goods and local manpower, while everything in solar from panels to batteries has to be imported. For this reason, hydropower contributes more to the national economy.

“As of today, hydropower is still the most relevant. In future price comparisons, solar may appear cheaper. But solar will not uplift the economy. I am well aware of that,” he said.

Regarding IPPAN’s suggestion to divert subsidies from cooking gas to electric cooking, Shakya said high distribution costs and the fact that electric cooking is mostly used only in the morning and evening make such a measure impractical.