A power purchase agreement (PPA) is a contract between an electricity generator and a buyer, usually a government or a utility company. The PPA outlines the terms of the sale of electricity from the generator to the buyer. In Nepal, the government has been promoting PPA as a means of increasing investment in the power sector and improving access to electricity.
Nepal has plenty of hydroelectric potential, but only a small percentage of it has been developed. The country is heavily reliant on imported electricity, and many areas still lack access to electricity altogether. However, the government has been working to change this by promoting investment in the power sector and encouraging the development of renewable energy sources.
One way the government has been doing this is by offering power purchase agreements to investors. The PPA provides a guarantee to the investor that they will receive a certain price for the electricity they generate, which can help to mitigate some of the risks associated with investing in the power sector.
PPAs in Nepal are typically long-term contracts and can have a duration of 15, 20, or even 25 years. They include provisions for the price of electricity, payment terms, and penalties for non-compliance. The terms of the PPA are negotiated between the generator and the buyer, and they must be approved by the Nepal Electricity Regulatory Commission.
PPAs in Nepal are typically awarded through a competitive bidding process. The government will issue a request for proposals, and interested investors can submit their bids. The government will evaluate the bids based on various criteria, such as the price of electricity, the experience of the investor, and the proposed technology. The investor with the winning bid will be awarded the PPA.
PPAs have been successful in attracting investment in the power sector in Nepal. For example, in 2018, the government awarded a PPA to an Indian company for the development of a 900 MW hydropower project. The project is expected to bring in an investment of more than $1 billion and will help to increase Nepal`s electricity supply.
In conclusion, power purchase agreements have been instrumental in attracting investment in the power sector in Nepal. The government`s promotion of PPA has helped to encourage the development of renewable energy sources and improve access to electricity for the Nepali people. PPAs provide investors with a guarantee of a certain price for the electricity they generate, which can help to mitigate investment risks. The competitive bidding process ensures that the government is able to attract the best investors and secure the best deals for the country.