Solar power project developers have however been against the price cap set by the NEA arguing that it is not scientific. “Our executive committee meeting reached a conclusion after the calculation that less than Rs 7.30 per unit is not feasible to recover the cost in 10 years,” said Prakash Bikram Basnet, President of Solar Electric Manufacturers’ Association of Nepal. “We have also decided that our member companies won’t participate in the bid invited by the NEA until our demand is addressed.”
According to Basnet, 123 solar energy companies are members of the association currently. “As many as 15 of them are involved in large-scale commercial projects,” he informed. He said that implementation of the maximum price cap imposed by NEA would mean the developers have to wait 12-15 years to recover the investment. “As the solar plants should be returned to the government including the lands covered by it after 25 years, there will be little time left to make profits from the investment,” said Basnet. NEA decided to abolish the three-year fixed pricing system and only accept bids for solar energy earlier in January. It took the step to introduce a competitive pricing mechanism in light of the declining cost of solar energy globally. Under open bidding, solar energy costs in India reached a record low of INR 2 per unit in November 2020. However, proponents of solar energy say prices of solar modules, which account for about 40 percent of costs, increased by 20 cents per watt in foreign markets like Singapore and China. According to Basnet, prices of iron and steel, cables, and shipping expenses have increased. International reports also suggest that solar and wind energy prices have risen due to supply chain constraints. However, NEA is not in favor of revising the rate as sought by the private developers. According to NEA Spokesperson Suresh Bahadur Bhattarai, the authority has set the PPA rate based on global market trends. "Those who want to participate in the bid are welcome. We have not forced them to join the bid," he said. As per NEA’s tender notice, only the companies that offer prices less than Rs 5.94 per unit will be eligible to sell electricity to NEA after developing the plant. This is for the first time that the state-owned power utility sought to buy solar power through a competitive bidding process. The bid notice states that Requests for Proposals (RfPs) must be submitted by February 26. The solar project must be finished within 18 months of the day the NEA and developer signed the PPA, according to the bid notification. The bidders cannot offer to deliver less than 1MW at the delivery point. Depending on the location, they can provide a maximum capacity set for particular places ranging from 10MW to 30MW. The bidders can propose any solar photovoltaic power-producing technologies. The developer will also be responsible for evacuating power from the plant to the nearby NEA substation, reads the RFP notice. Solar energy currently makes up a very small portion of the nation's energy mix. As of the previous fiscal year, which concluded in mid-July, up to 44 megawatts of solar energy had been connected to the national grid, according to the Ministry of Energy, Water Resources, and Irrigation. This accounts for only 1.94 percent of Nepal's total installed capacity of power projects. According to the energy ministry, Nepal generated 2268MW of electricity overall in the middle of July. As part of implementing the government policy to raise the percentage of alternative renewable sources like solar and wind to 10 percent of the total installed capacity, the power monopoly made a drive to buy solar energy in large quantities.
