Annual report emphasizes hydroelectric power’s importance to Bhutan

An annual report released this week by the Royal Monetary Authority of Bhutan underscores the economic importance of hydroelectric power to the Himalayan country.

Hydropower — identified recently as one of the country’s “Five Jewels” — was Bhutan’s largest export through the past fiscal year, accounting for 32.4% of the country’s total exports and 8% of its gross domestic product. The report also showed Bhutan’s economy should grow by a rate of about 10.2% should work construction on and commissioning of existing hydro projects continue as schedule.

“Bhutan’s fast-flowing rivers have been tapped to build run-of-river hydropower plants that have in turn driven economic growth and greatly boosted progress in meeting many of the country’s socio-economic development objectives,” the Royal Monetary Authority (RMA) said. “The tapping of hydropower in Bhutan has also been a story of successful bilateral cooperation and energy trade between Bhutan and her most steadfast development partner, India.”

Bhutan’s relationship with India has led to the development of an intergovernmental model, through which the governments establish an authority that receives 100% of its financing from India for the construction of projects. These projects will then be handed over to Druk Green Power Corp. Ltd. — a wholly-owned entity of the Bhutan government — upon their completion.

The 1,200-MW Punatsangchhu 1, 1,020-MW Punatsangchhu 2 and 720-MW Mangdechhu are all already under construction as a result of this model, while the 2,640-MW Kuri-Gongri, 2,560-MW Sankosh and 540-MW Amochhu are in development.

Meanwhile, a number of 50/50 joint ventures split between Druk Green Power and a number of Indian partners are also on deck. Included are the 180-MW Bunakha, 570-MW Wangchhu, 600-MW Kholongchhu and 770-MW Chamkharchu 1, which will be developed with partners including NHPC Ltd., Satluj Jal Bidyut Nigam Ltd., Tehri Hydro Development Corp. Ltd. and the National Thermal Power Corp.

Under terms of these joint ventures, royalties would be paid to Bhutan at a rate of 12% for 12 years, then 18% after throughout a 30-year concession period. The projects will be developed with a 70:30 debt-equity ratio in which the government of India and Druk each underwrite a 15% share. However, DGPC’s portion would come in the form of an Indian grant.

Bhutan, via DGPC, has also undertaken the development of a number of hydropower projects on its own as well, with plants including the 93-MW Tsibjalumchhu, 100-MW Gamri, 126-MW Dagachhu, 208-MW Nikachhu, and 473-MW Nyera Amari 1 and 2.

A trilateral, US$1.25 billion deal that includes Bhutan, Bangladesh and India is also in the works. If all the country’s proposals come to fruition, RMA said the anticipated boom will create at least 6,500 jobs between 2015 and 2020.

“The focus on hydropower has been broadened to include not just efforts to accelerate construction of new hydropower plants, but also to enhance the overall capacity in hydropower development,” the authority said.

The government said Bhutan has an estimated 24,000 MW of economically feasible hydroelectric potential, though just 1,600 MW — or about 7% — of that has been developed.

Bhutan has committed to cultivating its hydro potential in an environmentally responsible way, and is in fact a contributor to the government’s “Gross National Happiness” index.

“This traditional reverence for nature has delivered us into the 20th Century with our environment still richly intact,” former head of state Jingme Singye Wangchuck said. “We wish to continue living in harmony with nature and to pass on this heritage to our future generations.”

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Michael Harris formerly was Editor for HydroWorld.com.

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