The government has begun preparations to allow domestic private sectors to engage in electricity trading.

Energy, Irrigation, and Water Resources Minister Kulman Ghising stated that discussions are underway at the ministry to involve domestic private sectors in electricity trading.

The capacity of Nepal’s private sector is steadily increasing in production,’ Energy Minister Ghising said today in the ministry while speaking on water-related matters. ‘We are studying what methods and approaches can be adopted to involve the private sector in electricity trading.’

According to Minister Ghising, after discussions at the ministry, the private sector will soon be allowed to participate in electricity trading, a demand it has been making for a long time.

Section 22(2) of the Electricity Act, 2004 states that “a licensed entity (private sector) may export the electricity it has produced abroad, provided it enters into an agreement with the Government of Nepal for that purpose.

Under this provision, the Government of Nepal can enter into an agreement to allow the private sector to export electricity. Previously, a committee led by former Energy Secretary Dinesh Kumar Ghimire had submitted its report to the ministry on involving the private sector in electricity trading.

Citing reasons such as the electricity produced by the private sector not being consumed domestically and not being easily exportable abroad, the government has, over the past few years, been halting power purchase agreements (PPAs) with the private sector.

If the private sector is granted permission for electricity trading, it will not need to enter into a PPA with the Authority. Trade will be allowed once an agreement is made between Nepalese and Indian energy trading companies and approved by the ‘Designated Authority.

The private sector in Nepal has been demanding participation in electricity trading, arguing that if they are allowed to engage, they will not need to enter into PPAs with the Authority, they can also participate in the construction of transmission lines, and this will enable the full development of Nepal’s hydropower.

So far, the Authority has signed PPAs for 391 run-of-river (ROR) projects totaling 6,636 megawatts. For 49 projects with ponded reservoir (PROR), totaling 4,072 megawatts, the PPAs have also been signed, bringing the overall total to 11,060 megawatts.

The Authority has received applications for PPAs from a total of 202 projects (158 ROR, 39 PROR, and 5 reservoir-based), totaling 12,968 megawatts.

PPAs for all these projects have been halted due to concerns that market demand may not be guaranteed once they start producing electricity. Currently, 3,700 megawatts of electricity are being generated, of which 3,050 megawatts come from the private sector and the rest from the Authority.

Jalasarokar