Bhutan’s Energy Partnership with India: Lighting Up the Winter Months

Construction of the Dagachhu Hydropower Plant. The Green Power Development Project aims to provide regional clean power trade and renewable energy access for the poor.

Bhutan is gearing up to import electricity from its neighboring giant, India, for an extended period of approximately five months, commencing from December this year and lasting until April next year. The anticipated surge in imports is driven by the growing domestic demand for power, which has been steadily increasing over the past years.

Traditionally, the Druk Green Power Corporation (DGPC) imported electricity for a period of only three months. However, due to heightened demand, DGPC was compelled to import electricity for four months during the previous year. From December 2022 to March 2023, the DGPC imported a total of 367.17 million units of electricity, incurring a cost of approximately Nu 1.75 billion.

A recent study conducted by the Department of Energy, Bhutan Power Corporation, Bhutan Power System Operator, and DGPC has identified the necessity to import energy for five months during the 2023-2024 period. This requirement is attributed to an expected substantial increase in domestic demand, notably from high-voltage consumers coming online.

A senior official from the power sector elaborated that during these five months, Bhutan anticipates importing over 1,500 million units of electricity. The official added, “Depending on the price of electricity on the Indian Energy Exchanges, the cost of import is estimated to exceed INR 6 billion.”

Throughout this five-month period, electricity imports are projected to peak at times, reaching over 800 MW. Bhutan’s hydropower projects experience seasonality, with maximum generation occurring during the monsoon months from May to October. Conversely, generation significantly drops during the dry winter months from November to April, with February being the leanest month.

Presently, during the lean period, generation capacity hovers around 400 to 450 MW, while peak demand has surpassed 750 MW and is still on the rise. Power officials have indicated that this trend of needing to import power during the winter months is expected to persist for at least the next seven to eight years.

While the import rates are higher than the export rates, Bhutan can strategically plan to mitigate the significant import bill by generating more energy. This can be achieved by releasing water from reserves during the lean period. Notably, the demand for electricity drops in winter in India, affecting market prices. However, the per-unit import rate remains higher than the export rate, with Bhutan having imported electricity last winter at Nu 8.35 per unit.

Power officials have clarified that export tariffs are based on long-term Power Purchase Agreements (PPAs), while imports are carried out through the Indian energy spot markets. With the energy markets in India showing signs of evolution, there is optimism for more competitive energy import prices in the future.

In addition to these developments, Bhutan anticipates an increase in generation capacity with the commissioning of the 118 MW Nikachhu project, expected to be operational by the end of December 2023. However, officials have noted that the firm power capacity addition from the Nikachhu project during the winter months will be 23 MW, and the Punatsangchhu II project will contribute another 164 MW.

Although the firm power generation from these projects will help alleviate the import burden, Bhutan’s winter energy deficit will persist and necessitate supplementary imports.

To address this ongoing challenge, Bhutan’s energy sector is actively diversifying its energy supply options. Solar power is emerging as a cost-effective solution to supplement some of the winter deficits, with plans in motion to install approximately 500 MW of solar generation capacity over the next few years.

As Bhutan continues to grapple with its winter electricity shortfall, it remains committed to exploring innovative solutions to ensure a steady and reliable power supply for its citizens.

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