--- title: "Steps to build a hydro project and sell to NEA" subject: "Power Plant Design" chapter: 3 key: "semester_8/power_plant_design:hydro-project-steps-nea" source: https://www.bctengineer.com/q/semester_8/power_plant_design/hydro-project-steps-nea site: BCT Engineering --- # Steps to build a hydro project and sell to NEA Power Plant Design · Chapter 3: Hydro Power Plant Design - Asked in: 2081 Shrawan, 6 marks; 2079 Shrawan, 6 marks; 2078 Kartik, 6 marks; 2075 Bhadra, 4 marks (asked 4 times) - Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14 - Page: https://www.bctengineer.com/q/semester_8/power_plant_design/hydro-project-steps-nea - Whole chapter: https://www.bctengineer.com/md/semester_8/power_plant_design/chapter-3 ## Question Assume that you have identified a suitable hydropower site for electricity generation. Discuss the steps/stages how would you proceed to own, build that project and finally sell power to Nepal Electricity Authority. ## Short answer Obtain a survey licence from DoED, complete feasibility and EIA studies, sign a PPA with NEA, then get a generation licence. Arrange financial closure, construct, commission, and start commercial operation to sell power to NEA under the PPA for the licence period. ## Answer To develop a hydropower project in Nepal as an Independent Power Producer (IPP), one must obtain licences from the **Department of Electricity Development (DoED)** under the **Electricity Act 2049 (1992)** and Electricity Regulation 2050, sign a **Power Purchase Agreement (PPA)** with **NEA**, and then finance, build and operate the plant. #### Steps / stages 1. **Site identification and desk study:** Check maps, hydrology data and existing licences to confirm the site is free. 2. **Company registration:** Register a company at the Office of the Company Registrar (needed to hold licences). 3. **Survey licence:** Apply to DoED for a survey licence (valid up to about 5 years) with a pre-feasibility report and fee. For large projects (above 200 MW) the Investment Board Nepal (IBN) is the approving body. 4. **Feasibility study:** Hydrological, topographical, geological and sediment studies; optimise design discharge (e.g. Q40–Q45), head, installed capacity, layout; cost estimate and financial analysis. 5. **Environmental study:** IEE or EIA as per the Environment Protection Act 2076 and Rules, with public hearing and approval from the concerned ministry. 6. **Grid connection:** Apply to NEA for a connection agreement; NEA does a grid impact/connection study and fixes the substation and voltage of connection. 7. **Power Purchase Agreement (PPA):** Sign the PPA with NEA (Power Trade Department) at the posted rates (separate wet- and dry-season rates per kWh with limited annual escalation), fixing the required commercial operation date (RCOD). 8. **Generation licence:** Apply to DoED with the feasibility report, EIA/IEE approval, PPA and connection agreement; the licence is normally for up to 35 years, after which the project is handed to the government. 9. **Financial closure:** Arrange debt (banks, typically 70%) and equity (promoters, about 30%); later issue shares to the public and to project-affected locals (IPO). 10. **Land and permits:** Land acquisition, forest clearance, permits for explosives, roads. 11. **Construction:** Tendering and contracts for civil, hydro-mechanical and electro-mechanical works and the transmission line to the NEA substation. 12. **Testing and commissioning:** Wet tests, synchronisation and protection tests witnessed by NEA. 13. **Commercial operation (COD):** Start selling energy to NEA as per the PPA; pay royalty to the government (shared with provinces and local levels). 14. **Operation and maintenance** for the licence period, then transfer. ```text Site -> Survey licence -> Feasibility + EIA -> Connection agreement -> PPA (NEA) -> Generation licence -> Financial closure -> Construction -> COD -> Sell to NEA ``` ## Check yourself The answer's key points as multiple-choice questions, with the correct option and why. 1. Which body issues survey and generation licences for an IPP hydropower project in Nepal (up to 200 MW)? A. Department of Electricity Development (DoED) B. Nepal Rastra Bank C. Department of Roads D. Office of the Company Registrar Answer: A. DoED issues licences under the Electricity Act 2049; the company registrar only registers the company. (Key point: Licensing authority) 2. Which order is correct? A. Generation licence, survey licence, PPA B. Survey licence, feasibility and EIA, connection agreement, PPA, generation licence C. PPA, site identification, survey licence D. Construction, PPA, survey licence Answer: B. Feasibility, EIA/IEE and the connection agreement lead to the PPA, which is needed with other documents for the generation licence. (Key point: Order of stages) 3. The PPA with NEA fixes: A. Wet and dry season rates per kWh with limited escalation, and the RCOD B. Only the land price C. The turbine type D. The depth of the tailrace Answer: A. The PPA sets tariff rates and the required commercial operation date. (Key point: PPA) 4. Typical project financing is about: A. 100% equity B. 70% debt and 30% equity C. 30% debt and 70% equity D. 100% government grant Answer: B. Financial closure usually has about 70% debt and 30% equity. (Key point: Financing) 5. After the generation licence period (normally up to 35 years), the project: A. Is handed to the government B. Is closed down C. Is sold to NEA at market value D. Continues forever with no change Answer: A. The plant is transferred to the government after the licence. (Key point: Licence period) ## Related in Power Plant Design - [Hydropower site selection factors](https://www.bctengineer.com/question.md?key=semester_8%2Fpower_plant_design%3Asite-selection-discharge-factors) — Power Plant Design, chapter 3 - [Nepal electricity demand, supply and trend](https://www.bctengineer.com/question.md?key=semester_8%2Fpower_plant_design%3Anepal-demand-supply-trend) — Power Plant Design, chapter 1 - [Nepal generation and consumption trends](https://www.bctengineer.com/question.md?key=semester_8%2Fpower_plant_design%3Anepal-generation-trend-5-years) — Power Plant Design, chapter 1 - [Electricity in Nepal's total energy need](https://www.bctengineer.com/question.md?key=semester_8%2Fpower_plant_design%3Anepal-electricity-total-energy) — Power Plant Design, chapter 1 - [Hydropower versus solar PV in Nepal](https://www.bctengineer.com/question.md?key=semester_8%2Fpower_plant_design%3Ahydro-vs-solar-pv-nepal) — Power Plant Design, chapter 1 - [Development of hydropower in Nepal](https://www.bctengineer.com/question.md?key=semester_8%2Fpower_plant_design%3Ahydro-development-nepal) — Power Plant Design, chapter 1 ## Related in other subjects - [Case study: Nepal Electricity Authority / Telecom](https://www.bctengineer.com/question.md?key=semester_7%2Forganization_and_management%3Acase-study-nea-nt) — Organization and Management, chapter 9 - [Stages of hydropower project study](https://www.bctengineer.com/question.md?key=semester_6%2Fhydro_power%3Ahydropower-study-stages) — Hydro Power, chapter 3, asked 3× - [Quarterly progress report: hydro-electricity supply centre (memo)](https://www.bctengineer.com/question.md?key=semester_5%2Fcommunication_english%3Aquarterly-progress-report-hydro-supply-memo) — Communication English, chapter 7 - [Study stages for 10 MW remote project](https://www.bctengineer.com/question.md?key=semester_7%2Fhydropower_engineering%3Asmall-10mw-study-stages) — Hydropower Engineering, chapter 2