Nepal's power monopoly yet to commit purchases from 281 projects worth 16,425.77 MW

Hundreds of hydropower projects in Nepal, representing over 16,000 megawatts of potential capacity, are stalled as they await crucial power purchase agreements (PPAs) with the state-owned Nepal Electricity Authority (NEA). Developers have already sunk significant funds into surveys and feasibility studies, leaving them in a precarious position.

The delay in signing new PPAs, which began in 2022, has created a bottleneck. This affects a wide range of projects, including run-of-river schemes and larger storage and peaking projects. Industry representatives warn that these prolonged delays could jeopardize Nepal's long-term energy security, even with a current surplus during the monsoon season. Hydropower projects typically require at least five years to complete once a PPA is secured.

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Since hydropower projects typically require at least five years to complete after signing a PPA, industry representatives warn that prolonged delays could create fresh electricity supply challenges in the longer term despite Nepal’s current surplus during the monsoon.

Successive governments have cited reasons such as low domestic electricity consumption, insufficient transmission infrastructure, and uncertainty over future export markets for the hold-up. While policies have shifted, including the introduction of a 'take-and-pay' model for certain projects, implementation has lagged. Developers emphasize that without NEA approval, securing financing is impossible, as the authority holds a monopoly on electricity purchases. The NEA currently offers different rates for dry and wet seasons, which developers find insufficient for their investments.

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Because the NEA retains a monopoly over electricity purchases, developers cannot secure financing without its approval.