NREP Electricity Project Licensing in Nepal Mar 2021

N E P A L R E N E WA B LE E N E R GY P R OGR A MME
Electricity Project Licensing in Nepal- Expected

changes in the mandates of Electricity Act and
transition of responisbilities
Aashish Pradhan, Technology Market and Policy Expert
Submitted: March 2021
Submitted: March 2021
1 1 = 116.08 NPR
The USD to NPR converstion rate of Mar 2021 was 1 USD
1 2 = 116.08 NPR
Table of Contents
Acronyms .................................................................................................................. 5
1. Background .......................................................................................................... 6
2. Need Statement .................................................................................................... 7
3. The Output ............................................................................................................ 7
4. Transition of Roles ............................................................................................... 8
4.1 Existing Rules of Survey Permit of Projects Less than 100 kW .................................... 8
4.2 Existing Rules for Survey and Construction Permit for Projects 100 - 1000 kW ........... 9
4.3 Existing Rules for Power Purchase Agreement of Projects 100 - 1000 kW ................ 10
4.4 Survey License under 1 MW based onLGOA 2017 .................................................... 11
4.5 Construction License under 1 MW based on LGOA 2017 .......................................... 12
4.6 Power Purchase Agreement under 1 MW based on LGOA 2017 ............................... 13
4.7 Survey License under 3 MW based on D.Electricity Act 2020 (same LG) .................. 14
4.8 Construction License under 3 MW based on D.Electricity Act 2020 (same PG) ......... 15
4.9 Power Purchase Agreement under 3 MW based D.Electricity Act 2020 (same LG) ... 16
4.10 Survey License under 3 MW based on D. Electricity Act 2020 (diff. LG)................... 17
4.11 Survey License under 3 MW based on D Electricity Act 2020 (diff. LG) ................... 18
4.12 Power Purchase Agreement under 3 MW based on D.Electricity Act 2020 (diff. LG) 19
4.13 Survey License under 3 MW based on D. Electricity Act 2020 (Diff. PG).................. 20
4.14 Construction License under 3 MW based on D. Electricity Act 2020 (Diff PG.)......... 21
4.15 Power Purchase Agreement under 3 MW based on D.Electricity Act 2020 (Diff PG) 22
4.16 Survey License from 3-20 MW based on D. Electricity Act 2020 (same PG) ............ 23
4.17 Construction License from 3-20 MW based on D. Electricity Act 2020 (same PG) ... 24
4.18 Power Purchase Agreement 3-20 MW based on D.Electricity Act 2020 (same PG) . 25
4.19 Survey License from 3 - 20 MW based on D.Electricity Act 2020 (Diff. PG) ............. 26
4.20 Construction License from 3 - 20 MW based on D.Electricity Act 2020 (Diff. PG)..... 27
4.21 Power Purchase Agreement 3 - 20 MW based on D.Electricity Act 2020 (Diff PG) .. 28
5 Specific recommendations to address in the policy review ............................ 29
1 3 = 116.08 NPR
Electricity Project Licensing in Nepal-
Expected changes in the mandates of Electricity Act and

transition of responsibilities
1st Version submitted to UKAID: March 2021
1 4 = 116.08 NPR
Electricity Project Licensing in Nepal
Acronyms
AEPC Alternative Energy Promotion Centre
DoED Department of Electricity Development
DWRC District Water Resources Committee
EA Electricity Act
ESIA Environmental and Social Impact Assessment
ESMP Environmental and Social Management Plan
EIA Environmental Impact Assessment
ERC Electricity Regulatory Commission
GoN Government of Nepal
IEE Initial Environmental Examination
IPP Independent Power Purchaser
kV Kilo Volts
kW Kilo Watts
LG Local Government
LGOA Local Government Operation Act
MW Mega Watts
MoPID Ministry of Physical Infrastructure Development
NREP Nepal Renewable Energy Programme
NPC National Planning Commission
NEA Nepal Electricity Authority
NPR Nepali Rupees
NEA Nepal Electricity Authority
PPR Power Purchase Rate
PPA Power Purchase Agreement
PG Provincial Government
5
1. Background
The Constitution of Nepal 2015 has authorized local governments for the overall
implementation of renewable energy. The Local Government Operation Act (LGOA) of 2017
defined the range of renewable energy as 1 MW and authorized local governments in the area
of permits, operation and management of projects. In 2019, Nepal Planning Commission
(NPC) issued a directive and defined the new range of project implementation for all three
levels of government, i.e. up to 3 MW and up to 11 kV for local, 3-20 MW and 11-33 kV for
provinces and above 20 MW and above 33 kV for federal government. The final draft of the
Electricity Act tabulated in the parliament also incorporated the provision from NPC.
In terms of guideline, the local governments still use the LGOA 2017 and many have
developed their permit related documents by following the Department of Electricity
Development's (DoED) Draft Directive for Electricity Development of 1 MW project for local
governments. While provincial governments are still waiting for a specific mandate authorizing
the range and type of electricity projects and infrastructures. Most of the provincial agencies
concerned with energy are only aware of the propositions on different range of project capacity
made in the draft Electricity act but are mostly unaware of their role in processing permits,
issuing survey and construction licenses, power purchase agreements and tariff.
At federal level, Nepal Electricity Authority, Department of Electricity Development Board and
Electricity Regulatory Commission are actively working in approvals of different stages of
licensing and agreements based on the jurisdiction defined in Electricity Act 1992 and
Electricity Act 2017. As of 15 th March 2021, local governments are already using their
jurisdictional rights for facilitating development of 17 hydro projects and one wind mini-grid
system all under 1 MW scale. Three new application received by DoED, one solar and two
winds, are already forwarded to local government for their approval. Some local governments
have also approved the guideline for development of 1 MW hydropower electricity projects,
which was originally drafted by DoED.
Based on the online interaction with local governments in P2, PL and PK, many local
governments have yet to finalize these guidelines and tailor it based on their needs. At the
provincial level, the Ministry of Physical Infrastructure Development (MoPID), which is also the
focal agency for energy, are waiting for a formal mandate through the new federal electricity
Act. In Province 2 and Karnali, the MoPID has already initiated development of hydro and
solar norms for project feasibility and development and further requested NREP for providing
a guideline for their transitioning roles, especially in processing permits, issuing survey and
construction licenses, power purchase agreements and tariff. This document provides such
guideline based on the existing and incoming electricity rule and Acts. During the preparation
of this guideline, the following documents were reviewed:
1. Guideline related to permit of electricity projects (with 1st Amendment- Aug 2020)
2. Bylaws on purchase/sale of electricity and conditions to be fulfilled by the Licensees 2076
3. Electricity Regulatory Commission Rules 2076
4. NPC Directive 2019
5. Grid connected alternative energy working procedure 2074
6. Environment Protection Rules 2054
7. Electricity Rules 2050
8. Electricity Act 2049 and the latest draft
1 6 = 116.08 NPR
Specific flowcharts were developed to identify steps, existing gaps and further questions from
sub-national and private sector regarding the transition of rights related to electricity project
development. These flowchart of the following three specific documents are presented in this
guideline:
1. Electricity Act 2049 and Electricity Rules 2050
2. DoED's 1 MW draft Directive for electricity project development 2019
3. NPC Directive 2019 and draft Electricity Act 2020
Preliminary stakeholders at the national level, including Electricity Regulatory Commission
and the three partner provinces were conducted. A detailed consultation workshop is planned
for next quarter.
2. Need Statement
Based on this background, the guideline intends to provide clarity on two emerging needs of
public and private sector:
1. The public sector, especially the Ministry of Physical Infrastructure Development (MoPID),
wants the transition of responsibilities from federal to provincial and local level in the areas
related to permits, tariff, project development, investment and management of energy
projects and electricity project in particular.
2. Both public and private sector wants clarity on the changing mandates from Local
Government Operation Act 2017 to proposed Electricity Act 2020+.
3. The Output
Based on the documents reviewed, this document provides a guideline, with a mix of flowchart
and highlights, for developers and public institutions to follow as guided by current applicable
guidelines and the guidelines that are expected to come following the transitionary changes
in the upcoming electricity Acts, as below:
S.N. Content Sub Sections Reference

1 Survey Permit for projects less than 4.1 to 4.3 Existing Rules (EA, ERC, DoED,
100 kW and Survey, Construction and NPC and their mechanisms)
PPA for projects 100 – 1000 kW
2 Survey & Construction License and 4.4 to 4.6 Local Government Operation Act
PPA for Projects under 1 MW and Existing Rules
3 Survey & Construction License and 4.7 to 4.9 Electricity Act (Draft 2020) and
PPA for Projects under 3 MW for same Existing Rules (no overlap)
LG
PPA for Projects under 3 MW for Existing Rules (no overlap)
different LGs
PPA for Projects under 3 MW for Existing Rules (no overlap)
different PGs
PPA for Projects of 3-20 MW for same Existing Rules (no overlap)
PG
PPA for Projects of 3-20 MW for Existing Rules (no overlap)
different PGs
1 7 = 116.08 NPR
4. Transition of Roles
4.1 EXISTING RULES OF SURVEY PERMIT OF PROJECTS LESS THAN
100 KW
According to Section 3 Survey, Generation,
Transmission or Distribution of Electricity of
Electricity Act 2049 (1992), no license shall be
required to be obtained by a project proponent (a
national or a corporate body) for the generation,
transmission or distribution of electricity up to 1000
kilowatt and for conducting necessary survey
thereof.
According to Water Resources Act 2049 (1992),

the proponent will need to have a permit from the
District Water Resources Committee (DWRC)
prior to commencement of any survey,
construction and operation of production or
transmission or distribution system.
The proponent independently distributes and fixes

the selling price of electricity in consultation with
the buyer (a project, community, or distribution
network).
In process, the proponent applies for survey permit

to DWRC and depending on the norms of DWRC,
the survey permit is either granted or rejected.
After the permit, the proponent designs and
implements the project for generation and
distribution of power supply. The tariff are fixed
based on the consensus between the seller and
the buyer.
For solar projects under 1 MW installed
The permit granting entity, the DWRC, is phased capacity, the Grid connected Alternative Energy
out and transferred to local government's Working Procedure 2074 has removed the
jurisdiction. The current directive from Departmentrequirement of any permits related to net-
of Electricity Development (DoED) has removed metered solar system, specifically for self-
DWRC from their prescribed format. consumtion projects. Only grid connected
projects require permits from Nepal Electricity
The Local Government Operation Act 2017 has Authority.
also phased out DWRC and increased the
capacity up to 1 MW of generation capacity. For tariff, according to Schedule 5 of the
Hence, the project size below 100 kW is also Electricity Regulatory Comission Bylaws 2017,
phased out. The latest amendment of Guideline for local level or authority or government, in
Permit and License of Electricity Project has also accordance with the rate prescribed in this
phased out the 100 kW range. schedule, will approve the rate determined by
the buyer for power purchase and selling rate for
projects under 100 kW.
1 8 = 116.08 NPR
4.2 EXISTING RULES FOR SURVEY AND CONSTRUCTION PERMIT FOR
PROJECTS 100 - 1000 KW
According to Section 3 Survey, Generation,
Transmission or Distribution of Electricity of
Electricity Act 2049 (1992), no license shall be
required to be obtained by a project proponent
(a national or a corporate body) for the
generation, transmission or distribution of
electricity up to 1000 kilowatt and for
conducting necessary survey thereof.
Before commencing the work, the proponent

needs to submit the information following the
Schedule 1 of Rule 3 of Electricity Regulation
2050 to the Department of Electricity
Development. Both survey and construction
follow similar process and submit documents
to DoED and DWRC, but specific
requirements for survey and construction is as
below:
For survey:
- Desk study with salient feature, scope of
work and work schedule
- Topographical map with reference to
major project components, longitude,
latitude, etc.
- Distribution area and number of customers
- Information on water uses
- Letter of recommendation for project
development Currently, the projects financed by the World Bank
require projects under 1 MW to conduct
For construction (production, transmission, Environmental and Social Impact Assessment
and distribution) (ESIA) or Environmental and Social Management
- Feasibility study report and cost Plan (ESMP).
- Work schedule
- Letter of Intent for Power Purchase Similar to the survey permit under 100 kW, the
Agreement for sale to utility of Power permit granting entity, the DWRC, is phased out and
Sales Arrangement for isolated consumers transferred to local government's jurisdiction. The
- Documents on financial closure current directive from Department of Electricity
Development (DoED) has removed DWRC from
The permit process does not have exclusivity their prescribed format.
for other non-hydro renewables. The
information requirment for the permit process The areas concerning new capacity, net-metering
does not mention the degree of environmental and tariff are changed based on the Local
assessment. Government Operation Act 2017, Grid Connected
Alternative Energy Working Procedure 2074 and
Electricity Regulatory Commission Bylaws 2017.
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4.3 EXISTING RULES FOR POWER PURCHASE AGREEMENT OF
PROJECTS 100 - 1000 KW
Nepal Electricity Authority (NEA) is
the sole buyer of electricity and the
Power Purchase Agreement will be
done between NEA and
Independent Power Producer (IPP)
up to 25 MW. In the earlier
guideline, the proponent applies to
DoED through a Letter of Intent for
the PPA if sold to NEA or Letter of
Intent for Power Sales Agreement
for isolated consumers.
Based on the new Electricity

Regulatory Commission Rule
2019, all projects above 100 kW
and up to 100 MW needs to get
consent from ERC for approval of
PPR and PPA. Based on this rule,
for RE projects over the size of 1
MW, the PPR for PPA is
determined through competition
but will not exceed NPR 7.30 per
kWh. For RE projects less than 1
MW, the PPR will be NPR 7.30 per
kWh excluding any annual
increment rate. This rate applies to
corporate and consumers of net
metering.
ERC approves the PPR based on

total project cost, source of funds,
payment process, grants, return on
equity, expenditures, repair and
maintenance, working capital, tax,
service charges, loan equity ration
and other GoN's policy and
regulation.
The charges for ERC is as per the

ERC Act Section 20 and ERC
Rules Point 17.
1
The USD to NPR converstion rate of Mar 2021 was 1 10
USD = 116.08 NPR
4.4 SURVEY LICENSE OF PROJECTS UNDER 1 MW BASED ON LOCAL
GOVERNMENT OPERATION ACT 2017
According to Section 3 Survey,
Generation, Transmission or
Distribution of Electricity of Electricity
Act 2049 (1992), no person shall be
entitled to conduct survey, generation,
transmission, or distribution of
electricity without obtaining license
under this Act. Licenses for
construction and operation will be
required only after the studies are
completed under a Survey License.
The proponent shall apply along with

the economic, technical and
environmental study (IEE/EIA) and
other as prescribed by the Local
Government or the format prescribed
in Schedules 2, 3, 4 of Rules 4, 5 and
6 of the Electricity Regulation 2050.
Specific documents are as below:
Survey
- Topographical map with reference
to major project components,
longitude, latitude, etc.
- Desk study report, estimated cost
and scope of work based on
Guideline of Study of Hydropower
Projects 2018
- Company documents- registration,
memorandum of association and The proponent shall submit the application fee of an amount
articles, Permanent Account equal to 15 % of the license fee to the DoED based on the
Number and company details Schedule 11 of Rule 24 of the Electricity Regulation 2050.
- Individual- copy of citizenship
- Financial evidence on survey The survey license is issued in 30 days of receiving the
activities complete application. The license application fees are as
- Authorization letter appointing below:
contact person in the company for Installed Capacity (kW) License Fees (NPR)
DoED 1,000 – 5,000 1,000
- Information of water use 5,001 – 25,000 5,000
25,001 – 100,000 25,000
The current application template is 100,001 – 400,000 100,000
made by DoED. 400,001 – 1,000,000 400,000
1,000,001 – above 1,000,000
The current changes and potential applicability in terms of

maximum capacity, social and environmental assessments
are similar to Chapter I.
1
USD = 116.08 NPR
4.5 CONSTRUCTION LICENSE OF PROJECTS UNDER 1 MW BASED ON
LOCAL GOVERNMENT OPERATION ACT 2017
According to Section 3 Survey,
Generation, Transmission or
Distribution of Electricity of
Electricity Act 2049 (1992), no
person shall be entitled to
conduct survey, generation,
transmission, or distribution of
electricity without obtaining
license under this Act.
The proponent shall apply along

with the economic, technical,
and environmental study
(IEE/EIA) and other as
prescribed by the Local
Government or the format
prescribed in Schedules 6 of
Rule 12 of the Electricity
Regulation 2050. Specific
documents are as below:
Construction
- Feasibility Study Report
including detailed
description of the project,
evacuation, approved
IEE/EIA report
- Ownership and partnership
details of individuals and the
company The proponent shall submit the application fee of an amount equal
- Detailed Financing Plan to 33.33 % of the license fee to the DoED based on the Schedule
including estimated project 11 of Rule 24 of the Electricity Regulation 2050. The construction
cost, financial capability, license is issued in 120 days of receiving the complete application.
commitment from bank, The license application fees are as below:
liability of investors and Installed Capacity (kW) License Fees (NPR)
equity and debt ration 1,000 – 5,000 1,000
- Power Purchase Agreement 5,001 – 25,000 5,000
- Company documents- 25,001 – 100,000 25,000
registration, memorandum of 100,001 – 400,000 100,000
association and articles, 400,001 – 1,000,000 400,000
Permanent Account 1,000,001 – above 1,000,000
Number, team composition
and sub-contractor details, if The proponent shall pay royalty from the project based on either
any. Annual Capacity (NPR 100 per kW up to 15 years and NPR 1000
per kW after 15 years) or Annual Energy Royalty (2 % of average
tariff per kWh generated up to 15 years and 10 % of average tariff
per kWh generated after 15 years)
1
USD = 116.08 NPR
4.6 POWER PURCHASE AGREEMENT OF PROJECTS UNDER 1 MW
BASED ON LOCAL GOVERNMENT OPERATION ACT 2017
Nepal Electricity Authority (NEA) is the sole
buyer of electricity and the Power Purchase
Agreement will be done between NEA and
Independent Power Producer (IPP) up to 25
MW.
For Government of Nepal (GoN) developed

projects, the government entity, pursuant to
section 35 of Electricity Act, can develop
project by concluding agreement. Although
the Electricity Act is not specific regarding the
scope and rights of the executing entity, the
GoN conducts a competitive bidding project
and approval of the contractor for
development and operation of projects. The
proponent will apply the PPA to the buyer, i.e.
the NEA, along with the following documents
- survey license,
- Feasibility Study Report with Power
evacuation Study Report
- company documents,
- No Obligation Certificates,
- Letter of intent from the bank
- IEE or EIA report
- Charges based on ERC Act Section 20
and ERC Rules point 17
The buyer, i.e. the NEA, will conduct a

technical study to conduct detailed analysis
on design, geology, hydrology environmental
issues, electrical layouts, power and energy
and project cost.
Based on the Schedule 2 and 3 of the

Electricity Regulatory Commission, the
buyer, i.e. the NEA, will submit the
application to ERC. After receiving consent
from ERC, the PPA is signed between the
buyer and the proponent with applicable
Power Purchase Rate updated by the ERC
and NEA Board Decisions. The PPA will be
for 30 years of date of commissioning of the
project.
1
USD = 116.08 NPR
4.7 SURVEY LICENSE OF PROJECTS UNDER 3 MW BASED ON DRAFT
ELECTRICITY ACT 2020 (INSIDE THE SAME LOCAL GOVERNMENT)
The incoming Electricity Act (draft
of 2020) and the published Nepal
Planning Commission Directive of
2019 has authorized local
governments for projects up to 3
MW installed capacity. According
to Section 4 Arrangement Related
to License of draft Electricity Act
2020, no person shall be entitled
for any process related electricity
project development and
operation without obtaining
license under this Act.
For Government of Nepal (GoN)

developed projects, license is not
required for local, provincial, or
federal government.

with the economic, environmental
technical, business capacity,
experience and other documents
based on the format prescribed in
Schedules in Electricity
Regulation that will be finalized
after the approval of the Electricity
Act.
Any project receiving prior

approval needs to get a technical
clearance from the Ministry
through DoED to validate the Based on Section 5 Arrangement related to Electricity
source and avoid duplication of Development, the captive generation and co-generation do not
licenses. Additionally, any sub- require any permits or license for production. The captive
national governments, whether generation is defined as any generation in industriy,
provincial or local, without an commercial operation, institution, firm or company with at least
energy law and associated permit 51 % of self-consumption while co-generation is defined as
guideline will continue to follow the generation with both thermal and electric generation capability.
existing process of DoED.
Any excess generation from captive or co-generation can be
The license will be granted for 2 sold to any entity holding distribution or supply/sale license.
years.
Details on guidelines, fees, forms and formats regarding
additional changes in the Electricity Act (draft 2020) will be
finalized in the new Electricty Rule.
1
USD = 116.08 NPR
4.8 CONSTRUCTION LICENSE OF PROJECTS UNDER 3 MW BASED ON
DRAFT ELECTRICITY ACT 2020 (INSIDE THE SAME LOCAL
GOVERNMENT)
The incoming Electricity Act (draft of
2020) and the published Nepal
2019 has authorized local
governments for projects up to 3 MW
installed capacity. According to
Section 4 Arrangement Related to
License of draft Electricity Act 2020,
no person shall be entitled for any
process related electricity project
development and operation without
obtaining license under this Act.

federal government.

the economic, environmental
Schedules in Electricity Regulation
that will be finalized after the approval
of the Electricity Act.
Any project receiving prior approval Based on Section 5 Arrangement related to Electricity
needs to get a technical clearance Development, the captive generation and co-generation do
from the Ministry through DoED to not require any permits or license for production. The captive
validate the source and avoid generation is defined as any generation in industriy,
duplication of licenses. Additionally, commercial operation, institution, firm or company with at least
any sub-national governments, 51 % of self-consumption while co-generation is defined as
whether provincial or local, without an generation with both thermal and electric generation
energy law and associated permit capability.
guideline will continue to follow the
existing process of DoED. Any excess generation from captive or co-generation can be
sold to any entity holding distribution or supply/sale license.
The construction license will be
issued in 120 days after receiving the Details on guidelines, fees, royalties, forms and formats
complete documents. regarding additional changes in the Electricity Act (draft 2020)
will be finalized in the new Electricty Rule.
1
USD = 116.08 NPR
BASED ON DRAFT ELECTRICITY ACT 2020 (INSIDE THE SAME LOCAL
GOVERNMENT)
Based on the Section 6 Arrangement
Related to National Transmission Grid and
Load Dissemination, the GoN through its
Rajpatra will define any electrical
transmission line or network as the
National Transmission Line. The operator
of the National Transmission Line will be
responsible for giving open access to
Licensee for the use of the national
transmission line at a defined transmission
charge (or wheeling charge).
Although the incoming Act delegates the

work related to coordination and
facilitation of connecting all the generators
to the national transmission line, it does
not provide clarity over the criteria and its
jurisdiction as 'a buyer' as in the prevailing
Act.
The proponent is expected to apply the

PPA to the buyer, i.e. the National
Transmission Line, along with the
documents mentioned in Chapter II. The
buyer is expected to conduct assessment
based on analysis mentioned in Chapter II.
Based on the ERC Bylaws 2019, the

Commission will approve the Power
Purchase Rate based on the following
criteria:
- Total project cost, source of funds,
payment process, grants,
depreciations, return of equity,
expenditures, repair and maintenance,
operating costs, tax, service charges
etc
- Additional capitalization, loan to equity
ratio
- And any relevant GoN's policy and
regulation
The PPA will be granted for 40 years for

hydropower projects and 25 years for non-
hydro power projects.
1
USD = 116.08 NPR
4.10 SURVEY LICENSE OF PROJECTS UNDER 3 MW BASED DRAFT
ELECTRICITY ACT 2020 (BETWEEN DIFFERENT LOCAL
GOVERNMENTS)
According to Chapter 4.11. Gaa of
the draft Electricity Act, provincial
governments are authorised to
issue license in projects with
water source connecting two or
more than two local governments.
According to Section 4
Arrangement Related to License
of draft Electricity Act 2020, no
person shall be entitled for any
development and operation
without obtaining license under
this Act.

Act.

approval needs to get a technical
clearance from the Ministry
through DoED to validate the
source and avoid duplication of
licenses. Additionally, any sub- Based on Section 5 Arrangement related to Electricity
national governments, whether Development, the captive generation and co-generation do not
provincial or local, without an require any permits or license for production. The captive
energy law and associated permit generation is defined as any generation in industriy,
guideline will continue to follow commercial operation, institution, firm or company with at least
the existing process of DoED. 51 % of self-consumption while co-generation is defined as
generation with both thermal and electric generation capability.
The license will be granted for 2 Any excess generation from captive or co-generation can be
years. sold to any entity holding distribution or supply/sale license.

1
USD = 116.08 NPR
ELECTRICITY ACT 2020 (BETWEEN DIFFERENT LOCAL
GOVERNMENTS)
According to Chapter 4.11. Ga of the
draft Electricity Act, provincial
governments are authorised to issue
license in projects with water source
connecting two or more than two local
governments.

federal government.

Any project receiving prior approval

needs to get a technical clearance
from the Ministry through DoED to
validate the source and avoid
duplication of licenses. Additionally,
any sub-national governments,
whether provincial or local, without an
energy law and associated permit
existing process of DoED. Based on Section 5 Arrangement related to Electricity
Development, the captive generation and co-generation do not
The construction license will be require any permits or license for production. The captive
issued in 120 days after receiving the generation is defined as any generation in industriy,
complete documents. commercial operation, institution, firm or company with at least
51 % of self-consumption while co-generation is defined as
generation with both thermal and electric generation capability.
Any excess generation from captive or co-generation can be

Details on guidelines, fees, royalties, forms and formats

regarding additional changes in the Electricity Act (draft 2020)
will be finalized in the new Electricty Rule.
1
USD = 116.08 NPR
BASED DRAFT ELECTRICITY ACT 2020 (BETWEEN DIFFERENT LOCAL
GOVERNMENTS)
Based on the Section 6 Arrangement
Related to National Transmission Grid and
Load Dissemination, the GoN through its
Rajpatra will define any electrical
transmission line or network as the
National Transmission Line. The operator
of the National Transmission Line will be
responsible for giving open access to
Although the incoming Act delegates the

work related to coordination and facilitation
of connecting all the generators to the
national transmission line, it does not
provide clarity over the criteria and its
jurisdiction as 'a buyer' as in the prevailing
Act.
The proponent is expected to apply the

PPA to the buyer, i.e. the National
Transmission Line, along with the
documents mentioned in Chapter II. The
buyer is expected to conduct assessment
based on analysis mentioned in Chapter II.

Commission will approve the Power
Purchase Rate based on the following
criteria:
payment process, grants,
depreciations, return of equity,
expenditures, repair and maintenance,
operating costs, tax, service charges
etc
ratio
regulation
1
USD = 116.08 NPR
ELECTRICITY ACT 2020 (BETWEEN DIFFERENT PROVINCIAL
GOVERNMENTS)
According to Chapter 4.11. Na of
the draft Electricity Act, the ministry
at the federal level is authorised to
issue license in any projects other
than Ka, Kha, Gaa and Ghaa. This
also includes the project with water
source connecting two or more than
two provincial governments.
Arrangement Related to License of
draft Electricity Act 2020, no person
shall be entitled for any process
related electricity project
development and operation without
obtaining license under this Act.

that will be finalized after the
approval of the Electricity Act.
As the project is directly dealt by the

Ministry at the federal level, DoED
assess for technical clearance and
conducts other technical,
economic, environmental, and
other assessment based on Based on Section 5 Arrangement related to Electricity
DoED's own guideline and process. Development, the captive generation and co-generation do
A new guideline specific to this not require any permits or license for production. The
case may be developed after the captive generation is defined as any generation in industriy,
commercial operation, institution, firm or company with at
approval of Electricity Act followed
by the Electricity Rule. least 51 % of self-consumption while co-generation is
defined as generation with both thermal and electric
The license will be granted for 2 generation capability. Any excess generation from captive
years. or co-generation can be sold to any entity holding
distribution or supply/sale license.

1
USD = 116.08 NPR
4.14 CONSTRUCTION LICENSE OF PROJECTS UNDER 3 MW BASED
DRAFT ELECTRICITY ACT 2020 (BETWEEN DIFFERENT PROVINCIAL
GOVERNMENTS)
the draft Electricity Act, the
ministry at the federal level is
authorised to issue license in any
projects other than Ka, Kha, Gaa
and Ghaa. This also includes the
project with water source
connecting two or more than two
provincial governments.
Arrangement Related to License of
draft Electricity Act 2020, no
this Act.

that will be finalized after the
approval of the Electricity Act.
As the project is directly dealt by

the Ministry at the federal level,
DoED assess for technical Based on Section 5 Arrangement related to Electricity
clearance and conducts other Development, the captive generation and co-generation do not
technical, economic, require any permits or license for production. The captive
environmental, and other generation is defined as any generation in industriy, commercial
assessment based on DoED's own operation, institution, firm or company with at least 51 % of self-
guideline and process. A new consumption while co-generation is defined as generation with
guideline specific to this case may both thermal and electric generation capability. Any excess
be developed after the approval of generation from captive or co-generation can be sold to any entity
Electricity Act followed by the holding distribution or supply/sale license.
Electricity Rule.
The construction license will be additional changes in the Electricity Act (draft 2020) will be
issued in 120 days after receiving finalized in the new Electricty Rule.
the complete documents.
1
USD = 116.08 NPR
BASED DRAFT ELECTRICITY ACT 2020 (BETWEEN DIFFERENT
PROVINCIAL GOVERNMENTS)
Based on the Section 6 Arrangement Related
to National Transmission Grid and Load
Dissemination, the GoN through its Rajpatra
will define any electrical transmission line or
network as the National Transmission Line.
The operator of the National Transmission
Line will be responsible for giving open access
to Licensee for the use of the national
Although the incoming Act delegates the work

related to coordination and facilitation of
connecting all the generators to the national
transmission line, it does not provide clarity
over the criteria and its jurisdiction as 'a buyer'
as in the prevailing Act.
The proponent is expected to apply the PPA to

the buyer, i.e. the National Transmission Line,
along with the documents mentioned in
Chapter II. The buyer is expected to conduct
assessment based on analysis mentioned in
Chapter II.

Commission will approve the Power Purchase
Rate based on the following criteria:
payment process, grants, depreciations,
return of equity, expenditures, repair and
maintenance, operating costs, tax, service
charges etc
ratio
regulation

1
USD = 116.08 NPR
4.16 SURVEY LICENSE OF PROJECTS FROM 3 - 20 MW BASED DRAFT
ELECTRICITY ACT 2020 (INSIDE THE SAME PROVINCIAL
GOVERNMENT)
2019 has authorized provincial
governments for projects from 3 to
20 MW installed capacity.
this Act.

federal government.

Act.

approval needs to get a technical Based on Section 5 Arrangement related to Electricity
clearance from the Ministry Development, the captive generation and co-generation do
through DoED to validate the not require any permits or license for production. The captive
source and avoid duplication of generation is defined as any generation in industriy,
licenses. Additionally, any sub- commercial operation, institution, firm or company with at
national governments, whether least 51 % of self-consumption while co-generation is defined
provincial or local, without an as generation with both thermal and electric generation
energy law and associated permit capability.
existing process of DoED. Any excess generation from captive or co-generation can be
The license will be granted for 2
years. Details on guidelines, fees, royalties, forms and formats
regarding additional changes in the Electricity Act (draft
2020) will be finalized in the new Electricty Rule.
1
USD = 116.08 NPR
4.17 CONSTRUCTION LICENSE OF PROJECTS FROM 3 - 20 MW BASED
DRAFT ELECTRICITY ACT 2020 (INSIDE THE SAME PROVINCIAL
GOVERNMENT)
2019 has authorized provincial
governments for projects from 3 to
20 MW installed capacity.
this Act.

federal government.

Act.
Any project receiving prior Based on Section 5 Arrangement related to Electricity

approval needs to get a technical Development, the captive generation and co-generation do
clearance from the Ministry not require any permits or license for production. The captive
through DoED to validate the generation is defined as any generation in industriy,
source and avoid duplication of commercial operation, institution, firm or company with at
licenses. Additionally, any sub- least 51 % of self-consumption while co-generation is defined
national governments, whether as generation with both thermal and electric generation
provincial or local, without an capability. Any excess generation from captive or co-
energy law and associated permit generation can be sold to any entity holding distribution or
guideline will continue to follow the supply/sale license.
existing process of DoED.
issued in 120 days after receiving finalized in the new Electricty Rule
1
USD = 116.08 NPR
4.18 POWER PURCHASE AGREEMENT OF PROJECTS FROM 3 - 20 MW
BASED DRAFT ELECTRICITY ACT 2020 (INSIDE THE SAME PROVINCIAL
GOVERNMENT)
Based on the Section 6 Arrangement Related to
National Transmission Grid and Load
Dissemination, the GoN through its Rajpatra will
define any electrical transmission line or
network as the National Transmission Line. The
operator of the National Transmission Line will
be responsible for giving open access to

transmission line, it does not provide clarity over
the criteria and its jurisdiction as 'a buyer' as in
the prevailing Act.
The proponent is expected to apply the PPA to

the buyer, i.e. the National Transmission Line,
along with the documents mentioned in Chapter
II. The buyer is expected to conduct
Chapter II.

- Total project cost, source of funds, payment
process, grants, depreciations, return of
equity, expenditures, repair and
charges etc
- Additional capitalization, loan to equity ratio
regulation

hydropower projects and 25 years for non-hydro
power projects.
1
USD = 116.08 NPR
4.19 SURVEY LICENSE OF PROJECTS FROM 3 - 20 MW BASED DRAFT
ELECTRICITY ACT 2020 (BETWEEN DIFFERENT PROVINCIAL
GOVERNMENTS)
According to Chapter 4.11. Na of the
draft Electricity Act, the Ministry at the
federal level is authorised to issue
license in any projects other than Ka,
Kha, Gaa and Ghaa. This also
includes the project with water source
According to Section 4 Arrangement

Related to License of draft Electricity
Act 2020, no person shall be entitled
for any process related electricity
project development and operation
without obtaining license under this
Act.

Based on Section 5 Arrangement related to

As the project is directly dealt by the
Electricity Development, the captive generation
Ministry at the federal level, DoED
assess for technical clearance andand co-generation do not require any permits or
license for production. The captive generation is
conducts other technical, economic,
defined as any generation in industriy, commercial
environmental, and other assessment
based on DoED's own guideline and operation, institution, firm or company with at least
51 % of self-consumption while co-generation is
process. A new guideline specific to
defined as generation with both thermal and
this case may be developed after the
electric generation capability. Any excess
approval of Electricity Act followed by
the Electricity Rule. generation from captive or co-generation can be
sold to any entity holding distribution or supply/sale
The license will be granted for 2 license.
years.
Details on guidelines, fees, forms and formats
regarding additional changes in the Electricity Act
(draft 2020) will be finalized in the new Electricty
Rule.
1
USD = 116.08 NPR
4.20 CONSTRUCTION LICENSE OF PROJECTS FROM 3 - 20 MW BASED
DRAFT ELECTRICITY ACT 2020 (BETWEEN DIFFERENT PROVINCIAL
GOVERNMENTS)
the draft Electricity Act, the
ministry at the federal level is
authorised to issue license in any
projects other than Ka, Kha, Gaa
and Ghaa. This also includes the
project with water source
this Act.

Act.
As the project is directly dealt by

the Ministry at the federal level, Based on Section 5 Arrangement related to Electricity
DoED assess for technical Development, the captive generation and co-generation do
clearance and conducts other not require any permits or license for production. The captive
technical, economic, generation is defined as any generation in industriy,
environmental, and other commercial operation, institution, firm or company with at
assessment based on DoED's least 51 % of self-consumption while co-generation is defined
own guideline and process. A new as generation with both thermal and electric generation
guideline specific to this case may capability. Any excess generation from captive or co-
be developed after the approval of generation can be sold to any entity holding distribution or
Electricity Act followed by the supply/sale license.
Electricity Rule.
issued in 120 days after receiving finalized in the new Electricty Rule.
1
USD = 116.08 NPR
4.21 POWER PURCHASE AGREEMENT OF PROJECTS FROM 3 - 20 MW
BASED DRAFT ELECTRICITY ACT 2020 (BETWEEN DIFFERENT
PROVINCIAL GOVERNMENTS)
Based on the Section 6 Arrangement Related
to National Transmission Grid and Load
Dissemination, the GoN through its Rajpatra
will define any electrical transmission line or
network as the National Transmission Line.
The operator of the National Transmission
Line will be responsible for giving open access
to Licensee for the use of the national

transmission line, it does not provide clarity
over the criteria and its jurisdiction as 'a buyer'
as in the prevailing Act.
The proponent is expected to apply the PPA

to the buyer, i.e. the National Transmission
Line, along with the documents mentioned in
Chapter II. The buyer is expected to conduct
Chapter II.

payment process, grants, depreciations,
return of equity, expenditures, repair and
charges etc
ratio
regulation

1
USD = 116.08 NPR
5 Specific recommendations to address in the policy
review
The above sections provide guidelines to developers and public entity implementing electricity
development projects or in the authoritative position for regulating the implementation. Specific
gaps are also highlighted in the flowchart for improving the clarity, either in the existing
document or the document to follow, i.e. Electricity Rules. Hence, this section summaries the
gaps and questions for any policy level analysis to follow this assessment, i.e. given below:
Size and Up to 100kW (Electricity Act 2049 and Electricity Rules 2050)
related
documents
Survey ▪ Timeline not there?
▪ Will be good to put why no?
▪ Does proponent consult with buyers in all? Maybe not necessarily?
▪ Approved directive and draft directive (ERC, DoED, EA) are not clear about less
than 100 kW permits? If it is with the intention to regulate less, than this should
be clearly mentioned in all these documents?
▪ Is DWRC completely defunct?
▪ The ERC Bylaws state that the PPR will be approved by local authority for > 100
kW? Will this be inline with the tariff policy?
▪ The forms and formats need to be changed according to the change in authority
Mandates/process if the government one to develop their own project?
Construction ▪ Before LG forwards to DOED the application, do they crosscheck with
proponents? What is the process? If so what and who does it?
▪ If application rejected, can they appeal? Should there be or are there key points
for rejection? Dos/donts?
▪ Valid for two years (mention Permits)
What will be the provision for provincial NEA?
Power ▪ Mention NEA as buyer – federal/provincial NEA if so what would be internal
Purchase process of NEA?
Agreement ▪ If application request dismissed, can they reapply?
▪ Schedule 3 for RE- which technologies? Is it specified?
What will be the provision for provincial NEA?
Size and Up to 1 MW (Local Government Operation Act 2017 and DoED 1 MW draft
related Directive)
documents
Survey ▪ Will this be still valid as the LGOA 2017 mandates 1 MW to LG, or will this be
changed before/after the EA 2020 approval? How much impact will it have, esp.
in permits, environmental studies, tariff regulation/policy, etc?
▪ LG only receives the application and forwards it to DoED where most of the
assessment is conducted. Later LG issues license once DoED approves it. Can
this be transferred to LG? What necessary conditions/capacity is expected at the
LG for this to happen?
▪ Will there be range of project (<100 kW, 100-1000 kW, etc.) with different
screening requirements for environmental, social safeguards, etc.
▪ The directive of DoED (draft) for 1 MW mentions EIA but only IEE should be
applicable for 1-5 MW?
▪ Mandates/process if the government one to develop their own project?
Mandates/process if the government one to develop their own project?
Construction ▪ Except for survey, the construction application is processed by DoED? Will there
be role of LG in this?
▪ As WB is mandating ESIA/ESMP for under 1 MW, will this be recognized by the
GoN or will be treated separately?
1
USD = 116.08 NPR
Power ▪ What are the provisions for provincial NEA? Can they develop a different
Purchase directive with different PPR/A provisions?
Agreement ▪ The ERC bylaws mention PPR/A through competition for >1MW project, does
that mean <1MW project will not compete? As AEPC had provisioned for BAT to
compete, does it no longer qualify?
▪ Will the PPR criteria such as TPC, source of funds, depreciations, working
expenses, tax, service charges, etc all valid for also < 1MW projects?
▪ Will there be role of LG/PG on this?
Size and Up to < 3MW (Draft Electricity Act- same LG)

related
documents
Survey ▪ The size increased from 1 MW to 3 MW, but in the existing mandate, >1MW
project gets processed through DoED? With 3 MW, does this mean than LG
processes all <3 MW project? How is this capacity transferred?
▪ The project ranges within 3 MW are not defined so all ranges are treated
equally? Eg. 100 kW and 2 MW project needs to fulfil most of the requirements?
▪ The requirement of technical clearance for projects under 3 MW, can LG do this
by their own, will this capacity be transferred to LG?
▪ Will the technical clearance look only hydro, how will hydro-solar, solar-solar and
others be checked?
▪ If rejected, can they reapply?
▪ DOED conduct assessment on behalf of PG – at a cost? How long?
▪ Does DOED have to give no objection for PGs to issue license as they will not
be having the experts, at least initially?
Construction ▪ Proponent applies from LG and gets notified from LG on the application?
Can LGs manage all the information exchanges for projects up to 3 MW?
Power ▪ Similar to above as the ERC bylaws and ERC directive came under effect
Purchase 2019
Agreement
Size and Up to < 3MW (Draft Electricity Act- different LG and/or different PG)
related
documents
Survey ▪ Different LG- rights transferred to PG, and different PG- rights transferred to FG,
how will LG/PG be positioned during this process, esp- water rights, land, local
rules, etc?
▪ Whose norms, standards, guidelines, policies etc will be valid? Who will oversee
the overlaps?
▪ Does project exceed 3MW-> DOED process (But is it still not under the realm of
PGs this scale to 20MW?)
Construction ▪ Different LG- rights transferred to PG, and different PG- rights transferred to FG,
how will LG/PG be positioned during this process, esp- water rights, land, local
rules, etc?
▪ Whose norms, standards, guidelines, policies etc will be valid? Who will oversee
the overlaps?
▪ Timeline bit confusing- mention 120 days upfront but below in consultation takes
1 year??
Power ▪ For PPA 100kW-1MW- Is this a flat total of 100k? pl mention (Yes)
Purchase
Agreement
1
USD = 116.08 NPR
Size and 3-20MW
related (Draft Electricity Act - same PG)
documents
Survey ▪ Similar to < 3MW but for different range 3- 20 MW
▪ To MoEWRI through DOED.. this is bit unclear (also for same in others).. DOED
does technical assessment and submits to MoEWRI or does it go to MoEWRI ->
DOED. What does MoEWRI check?
▪ DOED – docs to be submitted (what are they?)
Construction ▪ Has comments been received -> No > Issues licence (This seems not quite
right?) I think public comments are mandatory as per IEE/EIAs?
Power ▪ Same as above

Purchase
Agreement
Size and 3-20MW

related (Draft Electricity Act - different PG)
documents
Survey ▪ Everything is processed by DoED with no role of PG/LG
Construction ▪ Everything is processed by DoED with no role of PG/LG
Power ▪ Same as above
Purchase
Agreement
1
USD = 116.08 NPR

NREP Electricity Project Licensing in Nepal Mar 2021

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NREP Electricity Project Licensing in Nepal Mar 2021

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N E P A L R E N E WA B LE E N E R GY P R OGR A MME

Electricity Project Licensing in Nepal- Expected

Submitted: March 2021

Expected changes in the mandates of Electricity Act and

1st Version submitted to UKAID: March 2021

DoED Department of Electricity Development

DWRC District Water Resources Committee

ESIA Environmental and Social Impact Assessment

ESMP Environmental and Social Management Plan

EIA Environmental Impact Assessment

ERC Electricity Regulatory Commission

GoN Government of Nepal

IEE Initial Environmental Examination

IPP Independent Power Purchaser

LGOA Local Government Operation Act

MoPID Ministry of Physical Infrastructure Development

NREP Nepal Renewable Energy Programme

NPC National Planning Commission

NEA Nepal Electricity Authority

NPR Nepali Rupees

NEA Nepal Electricity Authority

PPR Power Purchase Rate

PPA Power Purchase Agreement

S.N. Content Sub Sections Reference

According to Water Resources Act 2049 (1992),

The proponent independently distributes and fixes

In process, the proponent applies for survey permit

Before commencing the work, the proponent

Based on the new Electricity

ERC approves the PPR based on

The charges for ERC is as per the

The proponent shall apply along with

The current changes and potential applicability in terms of

The proponent shall apply along

For Government of Nepal (GoN) developed

The buyer, i.e. the NEA, will conduct a

Based on the Schedule 2 and 3 of the

For Government of Nepal (GoN)

The proponent shall apply along

Any project receiving prior

For Government of Nepal (GoN)

The proponent shall apply along with

Although the incoming Act delegates the

The proponent is expected to apply the

Based on the ERC Bylaws 2019, the

The PPA will be granted for 40 years for

The proponent shall apply along

Any project receiving prior

Details on guidelines, fees, forms and formats regarding

For Government of Nepal (GoN)

The proponent shall apply along with

Any project receiving prior approval

Any excess generation from captive or co-generation can be

Details on guidelines, fees, royalties, forms and formats

Although the incoming Act delegates the

The proponent is expected to apply the

Based on the ERC Bylaws 2019, the

The proponent shall apply along

As the project is directly dealt by the