March 4: Hydropower sector is often linked with Nepal’s prosperity. It is believed that the country’s economy will improve if the electricity produced in the country is exported. However, the government’s policy is causing problems for hydropower developers who have made massive investment with the hope of bountiful return.

Despite the possibility of reaping huge economic benefits from internal consumption of electricity as well as export of power generated in the country, more than 200 run-of-the-river (ROR) based projects which are under construction since the last three years are yet to sign any power purchase agreement with the concerned stakeholder. They have been given survey license but are unable to obtain permission to sell the electricity due to the rigid policy adopted by the government.

The Nepal Electricity Authority (NEA), the sole licensed body to trade electricity, has suspended PPA for ROR projects saying that the quota has been exhausted.

According to the government's policy on energy, 30 percent of the total electricity connected to the national grid has to come from the ROR projects. The remaining electricity will be sourced from reservoir-based projects, solar plants, and others.

This arrangement has been implemented with the target of generating 15,000 MW of electricity in 10 years. According to the energy producers, the PPA for 215 ROR projects with a combined capacity of 9000 MW has been suspended at the moment.

PPA is an important aspect of power projects. Banks and investors invest in loans and shares in the projects based on PPA. However, the financial management of these projects has not been possible as the government has not come up with a clear policy. It puts the investment of promoters at risk and also the future of the entire projects.

The government has distributed the survey license to these projects. The promoter company needs to sign the PPA and get the production license within five years after obtaining the survey license. The future of the projects is at stake due to the suspension of PPA by the government. Promoters say that if the PPA is not opened immediately, the survey license will be revoked. They complained that the investments made so far have been wasted.

It has been almost five years since some projects got survey licenses. Without immediate PPA, the survey license of such projects will be revoked within the deadline.

It costs up to Rs 100 million to survey a project of up to 10 MW. Even if you get a survey license, you have to pay Rs 1 million to Rs 3 million annually to the government depending on the size of the project. The promoters argue that the investment will be wasted if the survey license is revoked due to the suspension of PPA.

The government has a long-term plan to trade electricity with India, Bangladesh, China, and other countries. Accordingly, the private sector has invested heavily in hydropower. Entrepreneurs say they are discouraged by the lack of PPA.

They say that a clear policy should be brought immediately regarding PPA. "The government must open PPA. If not, alternative arrangements should be made,” said an entrepreneur. If the private sector is not allowed to do business and the PPA is not allowed, the development of the energy sector will be pushed backwards, he opined.