| Policy
Policy shift In June this year the Nepalese energy sector was said
to have been ‘rocketed’ by a shift in government policy that critics believe had the potential to derail Nepal’s hydropower ambitions.
Fundamentally changing the risk dynamics for run- of-river projects, and shifting the risk of low demand or transmission congestion to private power producers, the government announced that PPAs for run-of-river hydropower projects will now be executed under the Take and Pay model. This would mean the country’s sole electricity buyer, the Nepal Electricity Authority (NEA), will only pay for the electricity it actually purchases, and is in stark contrast to the previously followed Take or Pay model, which guaranteed payment for contracted amounts of electricity – regardless of actual consumption. The Take or Pay model has been described as historically being key to attracting private investment in Nepal’s hydropower sector. This new policy move sparked great concern among energy developers, investors, and financial institutions. They warned although it may appear fiscally prudent for NEA in the short term, it could have long-term consequences for Nepal’s energy economy.
Without the certainty of the Take or Pay model it was feared banks wouldn’t finance projects and over 350 schemes, equating to more than 17,000 MW of upcoming hydropower, could be at risk. There are also knock on implications of project delays leading to job losses and threatening national energy goals. Critics also pointed to structural flaws in the Nepalese power market. As the NEA is the only buyer and there are no alternate buyers or power exchanges, they say the Take and Pay policy becomes one-sided and unjust, killing the concept of a level playing field. With growing backlash from industry groups, banks, and experts, the government was asked to reconsider
and reverse the policy. Then on 23 June, the Minister for Energy, Water Resources and Irrigation announced it will be amended. It was recommended reverting to the ‘take-or-pay’ model for small hydropower plants with a capacity of up to 10MW and for run-of-river projects that have guaranteed domestic consumption or export agreements.
Australian pumped storage Although there is a huge appetite for pumped storage
across Australia, very few projects have achieved final investment decision (FID). Indeed many pumped storage projects are in the pre-FID/feasibility stage awaiting further clarification on government support. And as the International Hydropower Association warns, the industry has invested heavily in pumped storage feasibility studies for projects that won’t necessarily go ahead, discouraging potential investors even further.
“Australia’s current market design won’t deliver
LDES required with arbitrage alone,” IHA President Malcolm Turnbull acknowledged. “The energy market is not designed to reward investment in reliability and storage, and high up-front capital costs for long-lasting infrastructure. It’s not a choice between batteries and pumped hydro, we need both, but we need to act now.” Infrastructure projects take time. Turnbull says
the government and industry need to drive a step change in the delivery pace of pumped hydro projects, including more streamlined permitting. In Australia specifically, there is a clear need for the introduction of a co-ordinated national policy framework, supported by a national hydropower roadmap to incentivise pumped storage and hydropower investments. The federal government is also urged to consider
reviewing existing policy and market support mechanisms for PSH and hydropower, adjusting or unifying them to actualise a ‘fit for-purpose’
www.waterpowermagazine.com | November 2025 | 37
Above: Snowy Hydro’s Tumut 3 power station in New South Wales in Australia
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45
