Prosperity Through Power
Bhutan is a mountainous country with extremely high altitudes and irregular terrain, varying in elevation by several thousand feet within a short distance. With perennial and fast flowing rivers and a fair climate, the country has enormous potential for harnessing hydro-electric power. The exploitation of this renewable source of electricity production at comparatively cheaper rates has greatly contributed to the uplift of the economic profile of Bhutan which set up mega hydropower projects in the early 1980s with technical
and financial assistance from India. Bhutan has a potential for production of 30,000 MW of electricity from its rivers, out of which the feasibility for production of 23670 MW has already been ascertained. Presently, Bhutan is producing 1500 MW electricity during the summer. Nearly 70 percent of it is exported to India while the domestic consumption is in the vicinity of 250 MW.
Resources generated from the export of hydropower to India have been utilized to finance schemes and projects relating to socio-economic development of the country and attaining increased self-reliance. There is, however, a downside to this situation. The low level of water in the rivers during dry winter results in a steep fall in the power and the country becomes a marginal net importer of energy. To make up for this deficiency, the Bhutanese government began exploring alternative energy sources such as solar, wind and bio-gas.
Solar energy in Bhutan has received direct investments from a number of domestic and international sources. In 2010, the Asian Development Bank made a grant of over US$ 21 million for electrification of rural homes, aiming to provide power both on ongrid and off-grid bases. The Bhutan Power Corporation provided solar electrification training to villagers of the rural eastern areas. Solar powered lighting is also available to many nomads living within the protected areas of Bhutan. A five year trial program (2011-2015) is running side by side to produce bio-gas from cow dung. Similarly in 2010 wind mill programs were implemented to investigate the feasibility of using wind energy to alleviate hydropower shortages during dry winter season.
Bhutan was one of the poorest countries of the world prior to 1960, with no industrial base and paved roads. It was a closed society relying mostly on agriculture with primitive farming practices. Its exports included cardamom, gypsum, timber, cement, fruit, precious stones and spices before it started producing and exporting hydropower. Bhutan ended its isolation in 1960 to begin its journey towards modernization through economic planning prepared and supported by India. By 2002, it had a network of 3285 kms of roads while it also established railway links with India in 2005. However, there is no railway network within Bhutan.
Bhutan launched its first mega hydroelectric project known as the Chuka Hydropower Project with a production capacity of 336 MW in 1986 with financial assistance from India. It was followed by the Kurichu Hydropower Plant (60 MW) in 2001-2002. The Tala Hydropower Project, with a 1020 MW capacity, was commissioned in 2007 and proved to be a game changer as it gave a tremendous lift to the Bhutanese economy. Another mega project named Punatsangchhu with a 1200 MW production capacity was initiated in 2008 and is scheduled to become operative in 2015. At present, Bhutan has 27 hydropower stations, including four major power plants, 12 mini-hydro units and 10 micro plants. Seven projects were initiated early this year.
Most of the hydropower projects are run-of-the river installations and are regarded as cost-effective and environment friendly. Hydropower now forms the backbone of Bhutanese economy. Besides being affordable and a clean renewable source of energy for domestic consumption, it is the biggest source of government revenues. In 2011, 60 percent of rural households had electricity as compared to 20 percent in 2003. Nearly 2500 people use solar power. The country does not possess natural petroleum or natural gas reserves but it has 1.3 million tons of coal reserves. However, only 1000 tones are mined per year for domestic consumption.
In South Asia, Bhutan is the only country with surplus power generating prowess and a hydropower sector that contributes to 40 percent of government revenue, 45 percent of export earnings and 25 percent of GDP, as per statistics compiled in 2009. In view of the huge potential for hydropower production in the country and the consequent extensive scope of electrification to improve living conditions of the rural population, the government has introduced far-reaching institutional reforms to attract investment for exportoriented hydropower projects and to provide cheap electricity to the rural population.
The exponential boost that hydropower has given to the GDP can be gauged from the fact that in 1970 the GDP of Bhutan was in the vicinity of $0.62 billion which jumped to $1.9 billion in 2012. Similarly, its per capita GDP increased from $212 in 1970 to $2505 in 2012. Bhutan’s economy, though one of the smallest in the world, has grown at a rapid pace. It recorded a growth rate of 8 percent in 2005, 14 percent in 2006 and 22.4 percent in 2007 when the Tala Hydro Project was commissioned. Its per capita income was $2420 in 2012.
Bhutan is in the midst of launching three new hydropower projects with a view to generate an additional 10,000 MW electricity to be exported to India. As Bhutan does not have enough internal human resources, infrastructure and financial strength to propel their construction on its own, the government is contemplating to work on a two-pronged strategy. The projects would be either built on the basis of inter-governmental loans or as joint ventures.
According to this plan, the government of India will install power plants of capacity between 7000 to 8000 MW while the rest 2000 to 3000 MW would be generated through joint ventures between the Indian Public Sector and the DGPC as partners. The Indian partners would provide equity of 70 percent and the DGPC would contribute 30 percent, which again would be provided by India as a grant to the government of Bhutan.
No doubt the completion of the power production facilities, envisaged to produce an additional 10,000 MW of electricity within the next six years, will be an arduous undertaking but their completion on time would give an exponential boost to the economy of Bhutan. The plan actually envisages a nearly seven times increase in the power production of the country by 2020. Once it is achieved, it is likely to raise the export earnings by the same margin with all the accompanying trickle-down effects on the overall economic profile of the country and the economic situation of its citizens. India, which needs electricity to propel the wheels of its industry, would also be better off after this development. In fact, this is going to be a win-win situation for both countries.