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Business Bhutan | Sherab Dorji | March 11, 2024

Partnership sought through issuance of bonds

The Druk Green Power Corporation (DGPC) is currently exploring partnership with Bhutanese living abroad through issuance of Renewable Energy Bond to mobilize funds for both equity and debt financing running into billions of Ngultrums while planning for the development of hydropower and solar resources.

“To take forward some of the hydro and solar projects, strategic partnerships is considered as a viable option to raise funds,” an official from DGPC said.

On why the bond is being issued only to Bhutanese living abroad, the official said that the Renewable Energy Bond is aimed at raising funds in convertible currency as the investments in hydropower and solar energy mostly tend to be in Indian Rupees and in hard currency.

“Domestic bonds would be useful to raise Ngultrum financing only,” the official said, adding that, in future domestic bonds could also be considered if required.

The official shared that there is a lot of interest generated amongst Bhutanese living abroad to avail this opportunity to invest in the Renewable Energy Bond.

By getting this unique opportunity to fund Bhutan’s renewable energy sector, it is felt that the Bhutanese living abroad will feel a sense of participation and contributing to nation building and their future.

“It will be started small but if successful, similar opportunities will be provided in future,” the official said.

Speaking about the country importing power from India to meet the deficit in the winter months due to very low river discharges, he said that the availability of power from the Indian energy exchanges is not very dependable as India’s own demand is increasing with the tremendous economic growth that India is experiencing.

In addition, the official said that even the rates for power import vary in 15-minutes blocks on a daily basis. “Therefore, there is not only an uncertainty in terms of availability but also in terms of variation in tariffs on a daily basis,” the official said.

To all this hassles and to meet Bhutan’s current demand for electricity and prepare for future growth prospects, the DGPC official said that huge investments are being planned in the energy sector especially in developing the immense hydropower resources that are further planned to be supplemented by some solar power.

The official also shared that the variation in river discharges are also getting more acute with climate change and global warming with the monsoons getting erratic and with the Himalayas having not seen any regular snowfall for a number of years.

To this, the official said that hydro solar hybrids are seen as a plausible solution to the high variation in hydropower generation due to the season nature of river discharges.

Similarly, to take forward the development of hydro resources, the construction of a number of small hydropower projects has been started, according to the corporation.

“Investments in small hydro projects will be continued as this provides an excellent opportunity for the power sector to develop its human resources and to help grow capabilities of Bhutanese contractors,” the official said.

The official added that the corporation has also planned to start the construction of a few large hydropower projects within 2024-2025.

For instance, in harnessing the solar resources, the construction of the 17 MW utility solar farms has been started at Sephu in Wangduephodrang. There are further plans for developing rooftop as well as more utility scale solar power considering the excellent weather conditions in the non-monsoon months.

The official said that even the guidelines in terms of coupon rates and tenures are being worked out in consultation with the relevant Government entities.

“Hydropower and now with solar is the cornerstone of Bhutan’s economy,” the official expressed. The official further said that without access to reliable and affordable electricity supply, the aspirations for Bhutan’s socio-economic development would be difficult to achieve.

Six DGPC female employees and four from BPC along with women from South Asian countries attended the capstone seminar and graduation ceremony for the WePOWER-SAR100 women from March 4 to 8, 2024. The seminar was held at the regional knowledge hub at Yunus Centre, AIT, Thailand.

WePOWER-SAR100 is a technical training and leadership development program for women in the power and energy sector in the South Asian Region (SAR). The program is part of the South Asia Regional Infrastructure Connectivity (SARIC) initiative’s Large Systems Training Program spearheaded by the World Bank, funded by the Australian Department of Foreign Affairs and Trade (DFAT) through Palladium International. Participants were selected competitively from Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.

The WePOWER-SAR100 program emerged from discussions during the WePOWER-SAR100 regional meeting in Bangkok in December 2022, hosted by the World Bank. The WePOWER-SAR100 program team works with national training partners such as BPC, Bangladesh Power Management Institute, National Power Training Institute of India, State Electric Company of Maldives, Nepal Electricity Authority, WAPDA Staff College of Pakistan, and Ceylon Electricity Board of Sri Lanka.

The eight-month programme aims to equip mid-career women engineering professionals for leadership roles in the emerging energy integration and energy space. The curriculum is designed to build the technical capacity of participants to manage operations of
regionally integrated power systems with high renewable energy penetration, understand the role of power markets in regional integration and scaling up renewable energy and aid gender awareness and mitigate unconscious bias. Successful participants receive a 15-credit equivalent professional credential from the Energy Development: Systems, Management, and Technology programme at AIT.

Kuensel | Chencho Dema | February 24, 2024

Wangdue—In honour of the brave individuals who sacrificed their lives during the construction of the Punatsangchhu-II Hydroelectric Project Authority (PHPA-II), Rajesh Kumar Chandel, the managing director, opened his remarks at the reservoir filling ceremony on February 21, coinciding with the King’s birth anniversary.

The successful completion of the reservoir filling for the 1,020 MW Punatsangchhu-II Hydroelectric Project Authority (PHPA-II) marks a significant milestone, bringing the project closer to its commissioning phase. 

Over five months, the Punatshangchu will gradually fill the reservoir, symbolising the project’s advancement toward completion.

Once the dam is fully impounded, it will store approximately 7 million cubic metres of water for power generation, a noteworthy achievement for the nation.

Rajesh Kumar Chandel expressed gratitude, stating, “We have come this far due to the dedication of numerous unsung heroes who have labored tirelessly over the past decade. Many lives have been lost, and countless workers have been injured or disabled during the construction. Today, we honor their contributions to this monumental project.”

Despite the project’s initial commissioning target of 2017, unforeseen geological challenges, flash floods, and the Covid-19 pandemic led to schedule delays and cost overruns, including the discovery of a major shear zone at the dam foundation.

Chandel highlighted the collapse of the downstream surge gallery (DSG) as a significant challenge that once threatened the project’s feasibility.

However, with appropriate engineering solutions, the project has persevered toward completion.

Various dignitaries including Prime Minister Tshering Tobgay, Minister for Energy and Natural Resources Gyem Tshering, Minister of Health Tandin Wangchuk, Members of Parliament, and Ambassador of India to Bhutan Sudhakar Dalela attended the event.

The PHPA-II is a joint project between the governments of Bhutan and India. The foundation stone was laid by the then Prime Minister of Bhutan and the External Affairs Minister of India in 2010.

Ambassador Sudhakar Dalela expressed confidence in meeting project timelines and emphasised the longstanding cooperation between Bhutan and India in the hydropower sector, which has significantly contributed to Bhutan’s economic growth.

As of January 31, the project has achieved an overall physical progress of 96.83 percent, with major components nearing completion.

The project aims to commission all six generating units by the end of 2024, with a focus on completing major civil works by June 2024.

Chandel expressed confidence in surpassing the scheduled commissioning dates for the first two units, emphasising the team’s dedication to the mission.

He affirmed: “I assure everyone present that the project will be ready to serve the nation in a matter of months. Our team is united in this mission.”

The project has incurred expenses of Nu 83 billion (B) to date.

Kuensel | Dechen Dolkar | February 20, 2024

The Druk Green Power Corporation (DGPC) continues to face challenges in kickstarting the construction of the 600MW Kholongchhu Hydropower Project due to hurdles in securing financing.

Since the closure of the joint venture for the project over a year ago, DGPC has taken full ownership of Kholongchhu Hydro Energy Ltd, the entity responsible for constructing, operating, and maintaining the project.

DGPC’s plan entails structuring the project financing with a debt-equity ratio of 70:30, aiming to secure 70 percent of debt financing from the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), both renowned Indian government-backed financial institutions specialising in the energy sector investments.

The remaining 30 percent equity will be raised through capital markets.

However, mobilising financing for such a large-scale project is proving to be a complex and time-consuming process, as acknowledged by senior management.

The estimated cost for completing the project stands at slightly over Nu 54 billion.

Negotiations with PFC/REC for debt financing, which were initiated by the former joint venture partners, are still underway.

Dasho Chhewang Rinzin, the managing director of DGPC, is optimistic that with continued negotiations and support from both governments, construction could resume by the end of the year.

Following the exit of SJVNL from the joint venture, Kholongchhu Hydro Energy Ltd (KHyE) has been restructured into a smaller unit primarily focused on safeguarding existing infrastructure assets.

This unit also aims to address outstanding payment issues with contractors and complete remaining infrastructure works such as roads and residential/non-residential colonies.

Although major contracts for critical components like the head race tunnel, dam, and power house have been temporarily suspended, they have not been terminated, indicating the intention to restart construction upon achieving financial closure.

DGPC and KHyE are actively engaged in discussions with PFC and REC to secure debt financing for the project, while both the Bhutanese and Indian governments are keen to see the project progress.

With the closure of the joint venture, DGPC, now the sole shareholder, is expected to mobilise 30 percent equity component.

Negotiations with PFC/REC for 70 percent debt financing are anticipated to conclude in the near future.

A workshop on “power market” was held in Thimphu on February 16, 2024, in collaboration with the Indian Energy Exchange. Participants from DGPC, Bhutan Power System Operator, and Electricity Regulatory Authority of Bhutan attended the workshop.

Kuensel | Thukten Zangpo | February 5, 2024

… power generation falls 2 percent in 2023

The country’s hydropower generation last year saw a decline of 2 percent compared to the previous year.

In terms of sales, export sales saw a decline of 26.7 percent mainly because of the increase in the domestic demand for domestic electricity sales, recording an increase of 98 percent last year.

The overall generation was recorded at 10, 534.81 million units (MU) of electricity last year, a decrease of 218.09 MU from 10, 749.63MU in 2022, according to the figures from the Druk Green Power Corporation (DGPC).

The electricity sales for both export and domestic also saw a decline from Nu 25.37 billion last year from Nu 27.07 billion in 2022.

The plants under DGPC—Tala, Kurichhu, Chhukha, and Basochhu generated 6,945.61MU, and the Mangdechhu hydropower plant (MHP) and Dagachhu projects added 3,145.05MU and 444.15MU respectively.

DGPC’s Managing Director, Dasho Chhewang Rinzin said that despite the shutdown of the Tala hydropower plant for repair and maintenance from January to March 2022, the generation from DGPC’s plants last year decreased by 275.58 MU mainly because of poor hydrology.

For the MHP, he added that generation saw an increase by 60.09 MU last year compared to the previous year although there was a major outage with Unit III, which resulted in less generation in 2022. “Otherwise, hydrology in 2022 was better than 2023.”

At the same time, generation from Dagachhu projects saw a decrease of 2.6 MU compared to 2022.

Considering that the export tariffs are higher than the domestic generation tariffs, there is an overall decreasing trend in revenues accrued to DGPC and the power plants.

In figures, the export sales in 2022 reported at Nu 22.6 billion saw a decrease to Nu 16.64 billion. However, the domestic sales increased to Nu 8.73 billion in 2023 from Nu 4.41 billion last year.

DGPC’s power plants saw export earnings worth Nu 5.38 billion and Nu 6.2 billion from domestic sales.

MHP’s export revenue was Nu 10.03 billion domestic sales were Nu 2.53 billion, Dagachhu’s export revenue was Nu 1.22 billion and domestic sales at Nu 11.76 million.

For the 2023-2024 lean season, the projected demand is 1,517 MU and the projected landed tariff for this season is expected to be in the range of Nu 4.12 per kilowatt-hour (kWh) to Nu 6.48 per kWh.

In December last year, Bhutan purchased 254.82 gigawatt hours of electricity. It is expected that electricity imports will increase in the fiscal year 2023-24 because of the increasing trend of domestic demand compared to the past.

From October 11 to November 16 last year, Basochhu exported 40.27 MU of electricity worth Nu 230.94 million after the deduction of fees, charges, and trading margin at the tariff rate of Nu 5.73 per kWh.

Moving forward

Bhutan’s energy demand could grow by over 400 percent by 2030 if the country’s energy demand peaks, the Department of Hydropower Systems forecasts.

To meet the growing domestic demand and to ensure Bhutan’s energy security, the power sector is considering prioritising reservoir and pumped storage projects in future, a move away from the current run-of-rivers projects, according to the DGPC.

There is also an emphasis on diversifying investments into other renewables, especially solar in the short term. “Solar hydro hybrids are a viable solution for energy security with the falling costs of solar,” it added.

The Department of Energy targets to generate 500 megawatts of electricity from the share of renewable energy in the next five years.

On January 18 this year, one of the units of the Nikachhu hydropower plants was connected to the national grid of two units with 59 megawatts each. The project is expected to generate a revenue of Nu 1.6 billion annually.

At the same time, the start of Punatsangchhu-II plant by the end of this year could contribute to Bhutan’s economy.

Hydropower, a key contributor to growth, was estimated to experience a temporary decline of negative 0.1 percent in 2023 before rebounding to 8.9 percent in 2024, driven by the commissioning of Punatsangchhu-II and Nikachhu hydro-projects, according to the Royal Monetary Authority.

Several small hydropower projects, which are presently under construction, are expected to be commissioned between 2024 and 2025.

According to the DGPC, the generation pattern is mainly dependent on the hydrology and forecasts are that, at least in the foreseeable future, there will not be many changes in the inflow patterns.

However, with climate change, it is projected that in the long term, the winters may be drier while the monsoons will be more intense and shorter.

Kuensel | Dechen Dolkar | February 3, 2024

… country imports power worth Nu 2.53 billion

Bhutan earned Nu 230.94 million exporting surplus power from Basochhu plant for two months. 

The Basochhu hydropower plant began exporting its surplus power to the Indian Energy Exchange (IEX) from October 13, last year until November end.  

The Bashochhu plant successfully exported 40.27 million units (MU) of surplus energy.

The highest rate earned from the sale of Basochhu power in the Indian Power Exchange at Nu 10 per unit. The overall sale was made at the landed tariff of Nu. 5.73 per kWh.

The export will continue until May this year. However, from December 2023 to April 2024, there will be no export from Basochhu as Bhutan will have a deficit and will be importing from the IEX during this period.

The exchange operates similarly to a stock market for electricity, with both buyers and sellers.

The Market Clearing Price (MCP) is determined for the day ahead in 15-minute blocks based on prices bid into the market. As a result, tariffs could defer for every 15-minute block based on real-time supply and demand situations in the energy market. There is a market-clearing price cap of INR 10 a unit.

The country started importing energy from India in December. During the lean season, the country imported 591.96 MU of energy from IEX at a total cost of Nu 2.53 billion from December 1, 2023 to January 31, 2024.

According to the officials from Druk Green Power Corporation, there will be an increase in imports during the 2023-2024 period due to the increasing trend of domestic demand compared to the past.

The official said that for the 2023-2024 lean season, the projected demand is 1,517MU and the projected landed tariff for this season is expected to be in the range of Nu 4.12/kWh to Nu 6.48/kWh.

The total purchase for December 2023 was 254.82GWh.

The Bhutanese | February 3, 2024

Nu 3 bn lesser than in 2022 but Nikachu and PII to improve generation in 2024

In what is bad news for the government treasury, poor hydrology has ensured that 2023 has seen the lowest ever power and revenue generation since 2019.

In 2023 a total of Nu 25.115 bn in power was generated compared to Nu 28 bn in 2022, 28.22 bn in 2021 and Nu 30 bn in 2020.

In 2023 the highest revenue was generated by the 720 MW Mangdechu at Nu 12.560 bn due to its higher tariff, followed by the 1020 MW Tala project at 5.962 bn, 336 MW Chukha at 4.582 bn, 126 MW Dagachu at 1.219 bn, 64 mw Basochu at 600.76 mn, 60 MW Kurichu at 532.30 mn, and finally mini hydro projects and solar at Nu 26.31 mn.

However, not everything produced is revenue as loan repayments have to be made of around 5 bn plus and then there are Operation and Maintenance costs which means the final actual revenue is around Nu 17.3 bn.

The domestic consumption of power is going up and 2023 is the highest ever.

For the first time, the power generated by Tala, Chukha, Basochu and Kurichu has seen higher internal consumption at 53% with only 47% being exported. This also makes sense as the tariff for these projects are lower.

The higher tariff Mangdechu saw 77.45% of its power being exported while 22.55% was consumed internally. This is also the highest ever domestic consumption for this project.

The hydropower generation figures should improve with the commissioning of the 118 MW Nikachu project and the 1020 MW Punatsangchu II project.

In Nikachu the main Contract Package of Civil and Hydro-Mechanical Works was awarded to Hindustan Construction Company on April 20, 2016. Commissioning is in progress and commissioning of one of the Units (Unit 2) was declared on January 25, 2024. There were delays encountered due to poor geology in the head race tunnel section and also due to Covid pandemic. The energy sale started from 00.00 hrs. of January 25, 2024.

The cost of the project so far is Nu 15.68 bn and it was financed through DGPC’s own funds and loans from the ADB and loan from an Indian bank.

Nikachu is expected to generate Nu 1.505 bn in revenue in a year which after loan deduction would be Nu 527.64 mn.

The Nikachu tariff is starting at Nu 3.30 per unit and will reach Nu 6.10 by 2040.

The electro mechanical equipment is from Voith Hydro, India and so it is a semi-automated plant.

The 1020 MW P II project’s official date to start commissioning its units are October 2024 but the project is aiming to commission its first two units of 340 MW by July or August 2024 and then one unit per month with full commission by December 2024.

P II is trying to hurry the works to take advantage of power generation in monsoon. It has 6 units of 170 MW each.

The P II management said that overall only 4 percent of the works is left with the dam complete, HRT tunnel complete and only 8% of civil works left in the powerhouse and 14% in the electromechanical equipment works.

The project cost Nu 94.45 bn.

Meanwhile drilling of rock samples are going on at the P I right bank area. In the first phase 7 samples will be drilled of 200 meters length with 6 samples in the second phase and some more if required in the third phase.

Then geologists and experts of both countries will study these rock samples to see of the dam can be built at the current location or not.

The Economic Times, India | Bikash Singh | January 25, 2024

Synopsis: Bilateral energy trade between India and its neighbors is a key building block of the integrated regional energy market. India and Bhutan have excellent relations and India has for decades assisted Bhutan in developing its hydropower. This mutually beneficial relationship is now being further strengthened.

PTC India Limited, provider of power trading solutions in India announced commencement of power supply from Nikachhu Hydroelectric Project, Bhutan to Assam under Long Term PPA.

PTC executed the PPA with Bhutan and PSA with Distribution Company of Assam (APDCL) in 2014.

Dr. Rajib K. Mishra, CMD PTC mentioned that considering the long term perspective of uninterrupted, reliable vis-à-vis cheaper power supply to cater the rapidly growing demand in the state, Assam Power Distribution Co. Ltd. (APDCL) executed this PPA. This 118 MW (2×59 MW) hydro project has provision to supply power during peak hours also which will be very helpful to meet peaking hours demand of the State. Bilateral energy trade between India and its neighbors is a key building block of the integrated regional energy market. India and Bhutan have excellent relations and India has for decades assisted Bhutan in developing its hydropower. This mutually beneficial relationship is now being further strengthened.

Kuensel | January 19, 2024

In one of the final milestones, the first generating unit of Nikachhu Hydropower Project was synchronised to the national electricity grid on yesterday. The testing and commissioning of both the generating units of 59MW each are expected to be completed within the next two weeks.