Exploring higher returns from hydropower sale

Energy Market: Energy from Basochu, which has so far been used only for domestic supply, could be sold in the Indian energy market, with the department of energy and the Druk green power corporation studying the possibilities.

This comes at a time, when the government is under stress to look for long-term solutions to the Rupee shortage.  The 60-megawatt (MW) Basochu project in Wangdue was built with Austrian assistance, and its energy was to be used only for domestic consumption.

“We’re hopeful that, although the plant supplies only 60MW of electricity, it can fetch around Rs 1.5B annually, by selling energy in the Indian market,” the director general of the department of energy, Yeshi Wangdi, said. “The idea was conceived only a week ago, and further study needs to be done, for which the DGPC has been chosen, then there are a lot of legal matters to be resolved, like Bhutan should also be a member of the Indian energy market.”

In India as well, the energy market is yet to be fully developed.  Like in any market, the idea is to trade energy, just like shares and stocks, in the secondary capital market.

Only around 15 percent of the total volume of energy in India is traded in the energy exchange market, which is very minimal, according to a DoE official.  But the market is reportedly picking up fast, where buyers and sellers of energy will fix their own prices.

Some countries regulate these markets to protect consumer rights and prevent the creation of an oligopoly.

Selling energy in these markets will ensure a much higher price energy, officials say.

While other hydropower projects, built with the assistance of the Indian government, are based on pre-planned arrangements and fixed tariffs, energy from Basochu, built under Austrian assistance, can be sold to private companies in India.

While diverting Basochu’s energy to the market, domestic needs can be supplied from other existing plants, such as Tala.  DoE officials said that the grids are already in place, and that only the delivery points will have to be identified, while selling to the Indian market.

Based on the market requirements, it will determine what amount of energy to be diverted from Basochu.

Similarly, the government is also planning to sell 30 percent energy of the joint venture projects in the Indian exchange market.

While 70 percent of the energy of the JV projects is based on the power purchase agreements between the two countries, Bhutan has the choice to decide how and where to sell the remaining 30 percent of the energy.

DGPC’s managing director Dasho Chewang Rinzin said the possibility is that the 30 percent energy will be sold in the energy exchange market in India, since it will fetch higher returns.

Bhutan has the decision over 30 percent, since it owns 49 percent of the project’s equity, while the remaining 70 percent is to ensure there is continuous supply of earnings from sale to Indian government, so that loan repayment is possible, said another DoE official.

By Nidup Gyeltshen