Development of Grid Connection Policy for Micro/Mini Hydro Plants in Nepal Alternative Energy Promotion Center (AEPC) Renewable Energy for Rural Livelihood (RERL) May 2017

Need for Grid Connection of MHP No. of Micro Hydro: No. of End-use applications: Types of End-use applications:

Need for Grid Connection of MHP contd.. Low PLF No Rural Electrification Master Plan- extending of grid line in the vicinity of MHP Better power quality of grid line by integrating Distributed Generation. Isolated MHPs are struggling for financial sustainability.

Pilot Interconnection Project GoN has announced national competitive bidding in December 2016 for interconnection of MHP to national grid for two projects namely (i) Syaurebhumi MHP of 23kW in Nuwakot District and (ii) Leguwa Khola MHP of 40kW in Dhankutta District. A total of 2 bidder has applied who has proposed ELC which would be compatible for grid interconnection. The lowest bidder whose has proposed approx USD 28,000 for interconnection of one MHP has been awarded contract in January 2017. A joint team including contractor, AEPC and Nepal Electricity Authority officials and interconnection expert had conducted field visit in March 2017.

Pilot Interconnection Project contd.. As of May 2017, the interconnection equipments are delivered at the site for both pilot projects. It is expected that it will be commissioned in June 2017. However for commercial operation may be started from August 2017.

Policy Breakthrough for grid connection of MHP less than 100kW NEA and AEPC jointly prepare the technical standard for grid connection of MHP which comply to grid code. 19th July 2014, NEA board has provided approval for grid connection of MHP. Take or Pay /Give or pay clauses shall not be applied to both parties. Transmission line loss occurred if any, due to project/Mini grid in NEA system shall not be allocated because of small amount of power injected. Financial Closure may not be applied in PPA GIS study wont be required below 500kW First PPA of 23kW Syaurebhumi MHP has been executed on 1st March 2015.

PPA Terms and Conditions The duration of PPA for grid connection of MHP is 30 year from the date of commercial operation. Cost of grid connection of MHPs has to be borne by MHP themselves. The PPA rate for <100kW MHP is 8 US cents/kWh for 4 month (dry period) and 4.57 US cents/kWh for 8 months (wet season) Annual Price escalation is 3% up to 5 years. If the grid connection is accomplished before agreed commercial date of operation, utility can import energy from the developer as per requirement at the PPA rate quoted above. For excess energy provided by MHP, 50% of the PPA rate would be provided. Billing is done every four month in bulk.

Financial Analysis of Grid Connection of MHP in Nepal Category of MHP Maximum interconnection distance in (Km) Recommended interconnection voltage (kV) Conductor type Cost of Interconnection (NRs.) IRR NPV 1 to 25 kW 1 0.4 Weasel or higher rating 2,667,500.00 26.70% 4,262,554.10 25 to 50 kW 2 11 4,632,500.00 32.10% 9,930,108 0.5 Rabit or higher rating 2,614,500.00 57.54% 13,482,108.20 50 to 75 kW 3 Squirrel 5,934,500.00 39.06% 16,923,662.30 75 to 100 kW 4 7,438,500.00 42.11% 23,513,216.40

Challenges for grid connection of MHP in Nepal The technical standard agreed by NEA is having very conservative protection which makes the cost of grid connection expensive. Availability of live grid (load shedding) for continuous connection of MHP is also a big problem The PPA application process was originally designed for large schemes, its fees are very high, too high for most communities to afford. For grid connection, there is no subsidy from government and MHP has to take loan from bank. It takes more than 3 years to repay the loan which may not be financially attractive for the community based MHP for grid connection

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