News

Kuensel | Dechen Dolkar | July 25, 2024

After a lull caused by delays in completing two mega hydropower projects – Punatshangchhu-I and Punatshangchhu-II – and the deferral of the Kholongchhu hydropower project, the government is back to pursuing the country’s hydropower dream.

The government plans to kick start construction of 10 large hydropower projects in the 13th Plan. And if everything pans out as planned, Bhutan will generate more than 10,000MW of electricity once these large hydropower projects are commissioned.

Over the next five years, the government plans to increase the installed capacity of hydropower generation by 3,119MW, bringing the total installed capacity to approximately 5,500MW. For this initiative, the government has allocated a budget of Nu 527 billion, outside the 13th Plan.

The 10 large hydropower projects include 404MW Nyera Amari, 600MW Kholongchu, 1,125MW Dorjilung, 180MW Bunakha, 900MW Wangchhu, 363MW Khomachhu, 170MW Dangchhu, 770MW Chamkharchhu-I, 2,585MW/4,060MW Sankosh, and 2,800MW Kuri-Gongri.

Of these 10 new hydropower projects planned in the 13th Plan, the 1,125MW Dorjilung and 180MW Bunakha storage scheme projects will be executed first.

According to the Druk Green Power Corporation (DGPC), the Detailed Project Reports (DPR) for the Dorjilung and Bunakha projects are currently being updated. The modality of these projects will be discussed soon.

The national budget report for Financial Year 2024-25 states that for the 1,125MW Dorjilung hydropower project, the World Bank has been requested to lead the financing consortium. This project is expected to start by October next year and be completed by October 2031.

For the 180MW Bunakha hydropower project, the Asian Development Bank (ADB) has been requested to lead the financing consortium. This project is expected to start by February 2026 and be completed by February 2032.

A DGPC official said that DPRs of some of the planned hydropower projects are in various stages of development. “Some DPRs are being undertaken, some are being updated, and others are under review,” he said.

According to the budget report for FY 2024-25, Kholongchhu hydropower project will be executed by September this year, Nyera Amari by October 2026, Wangchhu by April 2027, Chamkharchhu by October 2026, and Sankosh by December 2026.

Currently, the DGPC is working with several overseas financial institutions and strategic partners, exploring various financing options for the hydropower projects. “When the DPR is ready, the modality of each project will be discussed with strategic partners,” the DGPC official said.

In the 13th Plan, Nu 1.5 billion has been allocated for the power sector.

The government has also prioritised the completion of the 1,200MW Punatsangchhu-I and 1,020MW Punatsangchhu-II hydropower projects.

While the Punatsangchhu-II hydropower project is expected to be operational by August this year, the Technical Coordination Committee will meet in New Delhi, India next month to take a final call on the construction of the dam on the right side of the Punatshangchhu-I dam site.

Kuensel | Dechen Dolkar | July 23, 2024

The first phase of three small hydropower projects—comprising 32MW Yungichhu in Lhuntse, 54MW Burgangchhu in Nangkor, and 18MW Suchhu in Sangbaykha, Haa—is set to be commissioned by the first half of next year.

Druk Green Power Corporation (DGPC) has announced that the 18MW Suchhu project will be completed within the next two to three months. The 32MW Yungichhu and 54MW Burgangchhu projects are expected to be completed by the first half of next year.

Together, these three projects will contribute a total of 104MW and are expected to generate 494 million units (MU) of energy annually. With operations planned until the fiscal year 2025, the total cost for these projects is estimated at approximately Nu 9.2 billion.

Three local contractors—Construction Development Corporation Limited, Rigsar Construction Pvt Ltd., and Vajra Construction Companies—were involved in the first phase of the construction.

A DGPC official said that these construction companies were selected through a bidding process to handle the tunnelling and underground works. Phase II of the hydropower projects includes the 90MW Jomori, 54MW Gamri, 26MW Druk Bindu I & II, and 25MW Begana, with an estimated cost of around Nu 20 billion.

The DGPC official mentioned that for the second phase, due to the increased size and complexity of the projects, contractors would have to bid for these larger projects.

However, for smaller projects like the 25MW Begana and 26MW Druk Bindu, new contractors are being invited to participate.

“For the second phase, around eight new contractors have expressed interest and will go through a bidding process, with only two being selected for the construction of the two projects,” said an official.

The official also said that for the third phase, new contractors would be invited to participate in the project construction, to build the capacity of Bhutanese contractors for larger projects.

The estimated cost for constructing the first and second phases of these small hydropower projects is more than Nu 30 billion.

The official said DGPC was seeking loans from both domestic and international financial institutions. As equity, DGPC is utilising its small reserves.

The official also mentioned that for the second phase, bids have been received, and DGPC will place an order by August for civil works. Construction work is expected to start by October, except for Begana, as the clearance process is taking more time.

DGPC is also preparing Detailed Project Report for the third phase, which includes 33MW Parochhu, 85MW Gamri II, 24MW Yurmochhu, 33MW Sherichhu, and 64MW Jigmechhu.

An official said that depending on the progress of the second phase, DGPC would initiate the third phase. The fourth phase includes the 170MW Dangchhu, 363MW Komachhu, and 237MW Jonthang projects.

The Bhutanese | July 20, 2024

After years of negotiations the Technical Coordination Committee (TCC) are agreed on building the dam for the 1,200 MW Punatsangchu I project.

Both sides have also agreed that along with the dam, protection measures for the troubled right bank will also be constructed at the same time as the dam.

The studies had found that the rock on the right bank or the Right Hill Side (RHS) was fractured in several places after bore drillings.

They will now propose and go ahead with protection methods and measures for the right bank.

Till date there was no detailed projection measures for the right bank.

One of the major rectification measures that is expected is a protection wall on the right bank along with various other measures.

The mitigation measures on the right-bank side will go into whether the muck overhead needs to be removed or not, concreting the right bank and other measures.

A source said that PHPA Authority meeting is likely to take place this month where the dam is expected to be given a go ahead based on the proposal of the TCC along with the necessary protection methods and measures for the right bank.

This also makes it clear that the Bhutanese side dropped its demand for a barrage in exchange for thorough rectification measures on the right bank.

The agreement at the TCC level between the two sides now clears the way for the project to go ahead as the dam was the final component that was left. 

A major concern for the Bhutanese side was the long-term safety of the dam and this is why there was initially no agreement between both the sides, and the Bhutanese side only budged after major mitigation measures are being agreed to.

Last year, Bhutan and India agreed to drill multiple rock samples into the right bank area to check for its stability to see if a dam is feasible or not.

The rocks showed fractures along the whole right bank in lots of places where boreholes have been done.

On the Bhutanese side the main focus was on the need for a thorough mitigation and right bank stability before the dam could even be brought up.

In 2008 the then PHPA MD R.N Khazanchi proposed to change the original dam site to generate more power which was agreed to by the then cabinet.

Some studies showed weaknesses on the right bank but instead of exploring it the project consultants decided to go ahead with the construction.

The first slide was in 2013 and rectification measures were done but it failed in 2016 and more rectification measures were done but it again failed in 2019.

This is when detailed studies were called for and done with the Bhutanese side proposing a barrage and the Indian side saying a dam can be done.

Now the main thing ahead is to see how comprehensive the rectification measures are.

Kuensel | Thukten Zangpo | July 20, 2024

With 97 percent of the 1,020MW Punatsangchhu-II Hydroelectric Project Authority (PHPA-II) completed, the plant is likely to begin operations by August 15 this year.

“If everything goes according to plan, we aim to commission two units within August and the remaining four units by the end of this year,” according to officials from the Ministry of Energy and Natural Resources.

There are six units, each with a capacity of 170 MW. Commissioning two units by August would have the capacity of 340 MW.

Once commissioned (six units), PHPA-II will generate 4,357 million units of electricity annually.

A ministry official said that the project faced many challenges related to construction, leading to significant delays. The delay, he said,  was compounded by the outbreak of Covid-19 which hampered the progress by almost two years.

“After easing of lockdown measures in the country, the pace of construction has increased significantly. The physical progress of the project has reached 97 percent,” he said.

The construction of PHPA-II began in 2010 and was supposed to be completed in 2017. However, a massive landslide struck the powerhouse in 2016.

As for revenue generation, a ministry official said that the tariff discussion with the government of India was underway.

The cost of completion is expected to be Nu 94.46 billion. The official said that the financial progress of the project as of now was around 90 percentPHPA-II was constructed with the financial modality of 30 percent grant and 70 percent loan from the Government of India.

As of March this year, hydro-debt stood at Nu 167.5 billion, 64.1 percent of the total external debt (Nu 261.12 billion).

According to the finance ministry, the hydropower debt is considered low risk as debt servicing for hydropower loans from India starts only a year after the commissioning of the projects, which ensures revenue inflow before debt servicing starts.

Electricity export tariff is calculated based on the projects’ overall cost, including the projected debt servicing cost, which ensures that the revenue from the sale of electricity provides adequate cushion for debt servicing.

All hydropower projects are insured and reinsured against natural risks. The uninsured debt pertains to hydrological risks.

According to the finance ministry, hydropower projects are deemed commercially viable, with a secured export market in India. Moreover, 91.1 percent of the hydro debt is denominated in INR, which does not pose any exchange rate risks due to the currency peg.

An induction programme for DGPC’s 200 new employees was held in Thimphu on July 18, 2024. Dasho MD along with the management team attended the opening session.

A typical induction of new employees include briefings on DGPC’s structural and functional objectives presented by the department head. DGPC provides an overview of the company to the inductees on organisational culture and values, and compliances and policies.

Kuensel | Editorial | July 10, 2024

Hydropower is one of Bhutan’s strategic national resources and a key driver of the country’s economy. In fact, the hydropower sector has been the main source of government revenue ever since the commissioning of the Chukha Hydropower Project in 1986. The successful execution of Tala Hydropower Project in 2007 transformed Bhutan into a hydro-electricity powerhouse and net exporter of electricity. These two hydropower projects were crucial in funding our development.

Despite the early successes, Bhutan’s hydropower ambitions have faced major setbacks. In 2009, the newly elected democratic government set an ambitious target to achieve 10,000 MW of electricity by 2020 – one third of the estimated total hydropower potential of 36,900 MW.

Nearly two decades later, our total installed hydropower generation capacity stands at 2326 MW – falling significantly short of the ambitious target. We have failed quite miserably to achieve the ambitious target. Not just that, some of the mega hydropower projects that were kickstarted as part of this ambitious plan have suffered unprecedented delays and cost overruns.

A classic example of this is Punatsangchu-I Hydropower Project. Executed under a mutually beneficial bilateral agreement with India in July 2007, the Puna-I project commenced construction in November 2008. The project suffered serious setbacks when a major slide occurred on the right-bank of the dam construction site, leading to an indefinite deferral.

This landmark project, which has taken 16 years and still counting, has turned into a massive national liability. The initial project cost of Nu 35 billion has ballooned to a staggering Nu 100 billion.

Over the years, three governments have come and gone, and we are now on the fourth, yet the project is far from complete. In fact, the unforeseen geological challenges – which caused the delays and cost overruns – should have been identified and addressed during the pre-feasibility study phase. There has been a total lack of accountability.

Notwithstanding this, during the recently concluded Parliament session, the Prime Minister announced the current government’s ambitious plan to increase hydropower generation capacity by 3,119 MW over the next five years, which will take our total installed capacity to 5,500 MW. To achieve this, the government has allocated a budget of Nu 527 billion outside of the 13th Plan.

Given the scale of these hydropower projects, both in terms of budget and timeline, it is crucial that we do not repeat the same mistakes from the Puna-I project. We must learn from our mistakes and realign our hydropower strategy to ensure that we achieve the targets without any delays or cost escalations.

With economic diversification, domestic demand for electricity will inevitably increase. This necessitates scaling up our hydropower generation capacity to meet domestic needs and produce competitively priced electricity for export.

In this context, new investments in the hydropower sector are imperative. This is especially crucial for the visionary Gelephu Mindfulness City (GMC), where hydropower will be vital for its development and realisation.

The stakes couldn’t be higher. There is no room for mistakes this time.

Kuensel | Dechen Dolkar | July 4, 2024

The final call will be made during the last Committee meeting in New Delhi, India next month

After 11 years, 34 Technical Coordination Committee (TCC) meetings, numerous geo-technical studies, and cost escalation running into billions, the stalled dam construction for the 1,200MW Punatsangchhu-I hydropower project might finally resume after the TCC meets for the last time in New Delhi, India next month to make the final call.

The PHPA-I dam construction was stopped after a major slide occurred on the right-bank of the site, leading to an indefinite deferral. After experts carried out several rounds of geo-technical studies, two possible solutions were floated – to either build a dam or barrage – to salvage the mega hydropower project.

During the deliberation of the Public Accounts Committee (PAC) review report at the joint sitting yesterday, the Minister for Energy and Natural Resources, Gem Tshering, said that a final decision could not be reached at last month’s TCC meeting in Delhi.

Lyonpo said that the final decision will be made at the TCC meeting scheduled this month, which will be the final meeting of the Committee.

“For now, the decision is to construct the dam with appropriate stabilisation and mitigation measures,” Lyonpo said.

“If we can reach a final decision this month, work on the dam construction will commence from August this year.”

Both international and Bhutanese experts identified deep-seated fractures and a shear zone on the right bank of the dam site. Initially, the Indian counterparts did not accept the presence of these fractures but they now acknowledged it, added Lyonpo.

The Chairperson of the PAC, Eminent Member Phuntsho Rapten, said that PHPA-I powerhouse is nearing completion. However, even after its completion, it cannot be used for several years due to the delay in the completion of the dam and other associated issues.

He also expressed concerns about expected cost overruns due to the preservation and maintenance of the powerhouse and the potential additional expenses arising from the expiry of the defect liability period of the electro-mechanical components.

The PAC’s recommendation to the government also included the need to expedite the policy decision on the construction of dam or barrage options for Punatshangchhu-I project.

PAC also emphasised the need to ensure that the underground powerhouse and the erected electro-mechanical equipment do not pose challenges during testing and commissioning.

The National Council member from Paro, Ugyen Tshering, said that the PHPA-I issue has persisted for 11 years, resulting in an annual revenue loss of Nu 5.5 billion and interest accumulation amounting to Nu 5 billion, which is a substantial loss for the country.

“ Hydropower projects typically take around six to seven years to complete, and it is now high time to make a decision for PHPA-I,” he said.

Member of Parliament from Nubi Tangsibji constituency, Tashi Dorji, pointed out that the Mangdechhu project was completed in seven years and benefited the country significantly. He urged the Prime Minister to take responsibility for completing the PHPA-I project.

The joint sitting adopted the PAC’s recommendations in entirety with 65 ‘Yes’ votes and one ‘No’ vote, out of 66 Members present and voting. The government will have to submit an Action Taken Report on the recommendations adopted during the winter session.

The Punatsangchhu-I project is executed under a mutual beneficial bilateral agreement signed between the government and the Government of India in July 2007. The construction works on the hydro project kicked off in November 2008.

The cost overrun for Puntshangchhu-I has reached a whopping Nu100 billion from the initial project cost of Nu 35 billion. So far, the project has spent around Nu 86 billion.

The government of Bhutan hired a third independent foreign company, Stucky, to review the dam site and they recommended a barrage. The Bhutanese side is advocating for the construction of a barrage, while the Indian side is pushing for the construction of a dam.

The cost of constructing the barrage is estimated to be between Nu 16 and Nu 18 billion.

Kuensel | Yangyel Lhaden | June 27, 2024

To diversify energy and complement hydropower energy with alternative renewable energy, the Department of Energy (DoE) has identified around 266 government buildings to install eight megawatt-peak (MWp) rooftop grid-tied solar panels.

The project is funded under the Asian Development Bank sub-project one.

Under the same project, the DoE is also currently studying the feasibility of scaling up distributed rooftop solar projects of more than 50 MWp across public institutions in the country.

The project is expected to reduce dependency on hydropower for energy, as the share of alternative renewable energy in total energy consumption remains below one percent, according to the Bhutan Energy Data Directory (BEDD) 2022.

The country’s main energy source, hydropower, depends on the run-off-water scheme While the country exports electricity to India during the winter, it imports electricity at a higher cost during lean seasons.

In the six months from December 2023 to May 13, 2024, the country imported electricity worth Nu 6.07 billion, an increase from the same period the previous year, when it imported electricity worth Nu 1.75 billion.

Moreover, the country’s hydroelectricity export has been decreasing over the years. In 2021, Bhutan exported electricity worth Nu 24.2 billion. It decreased to Nu 22.47 billion in 2022. Last year, the export further decreased to Nu 16.67 billion.

A demonstration project of 11.7-kilowatt (kW) solar panels installed on the campus of the Ministry of Energy and Natural Resources (MoENR), which supplies energy to a building, has demonstrated the immense potential of solar energy in complementing hydropower.

The energy generated from solar panels on the campus is fed into the national grid so that solar and hydropower energy can complement each other when one source is in short supply.

Since its installation in 2021 until May 26 of last year, it has generated 19,753 kW-hours (kwH) of energy.

On average the solar panels have generated 897.8 units of energy in a month which is enough to power eight rural residential consumers, 10 highlander consumers, and three urban consumers in a month, considering the average monthly energy consumption per consumer data from Bhutan Power Corporation (BPC).

According to BPC data, 128,111 rural residential consumers consume on average 104.9 units of energy, 1,478 highlander consumers use 91.34 units, and 62,145 urban consumers use 244.2 units of energy in a month.

Taking into account the tariff rate set by BPC, the MoENR office had the potential to save Nu 79,583 over a span of twenty-two months by using solar panels.

The energy department is also working on to provide solar system to 304 households in three districts of Dagana, Lhuntse, and Pemagatshel.

“Currently, the contractor is in process of designing the solar system for the project,” an energy department official said.

This project worth USD three million is part of the Alternative Renewable Energy Pilot Project, funded by the Japan Fund for Prosperous and Resilient Asia and the Pacific, which is being administered by the Asian Development Bank.

“ In the second phase of the project we are planning to explore additional 200 solar systems under prosumer initiative,” the official said.

Prosumer refers to policies that encourage consumer of electricity to also become producers of electricity. It is a revenue-generation system where the users can sell the surplus electricity as well.

The 304 households, on average, consume 1,004 KwH energy in a year and pay Nu 88 per month and Nu 1,051 per year. The three Kw solar system is expected to generate 3925.63 KwH in a year. The rural households get 100 units of electricity free.

Kuensel | Yangyel Lhaden | June 26, 2024

The Dagachhu Hydropower Project, between 2015 and 2023, generated about 700,000 tonnes of carbon emission credits—tradeable emissions—earning more than Nu 7.77 million, according to Gem Tshering, minister for energy and natural resources.

This information was shared by the minister during the question-and-answer session in the National Assembly yesterday.

The question was raised by Naiten Wangchuk, MP for Mongar constituency, who inquired about the potential for carbon market trade and the progress of trades from registered hydropower projects under the Clean Development Mechanism (CDM).

The carbon market is a system that allows for the buying and selling of carbon credits to regulate and reduce greenhouse gas emissions.

Naiten Wangchuk highlighted Bhutan’s potential in carbon trading, noting the country’s reputation as carbon negative with a sequestration capacity of 8.5 million tons of carbon dioxide—ten times more than the national carbon dioxide emissions.

Dagachhu is one of the three registered CDM projects under the Kyoto Protocol. The other two hydropower projects are Mangdechhu and Punatsangchhu.

Bhutan adopted the Kyoto Protocol in 1997 and the Paris Agreement in 2015, both international treaties committing to the reduction of greenhouse gases to combat climate change.

The CDM, outlined in Article 12 of the Kyoto Protocol, permits countries with emission-reduction commitments to implement emission-reduction projects in developing countries.

Naiten Wangchuk also inquired about the revenue generation from Punatsangchhu projects, plans to register new renewable energy projects under Article 6.4, and the potential revenue from upcoming projects.

Article 6.4 of the Paris Agreement enables countries to voluntarily cooperate in implementing their climate actions and facilitates the use of international carbon markets to achieve emission reductions.

Gem Tshering said that due to the status of the Punatsangchhu Hydropower Project, it could not participate in the carbon trade market so far. “Although Bhutan is part of the Paris Agreement and the Kyoto Protocol for carbon trading, both have not been fully operational. This is why Druk Holding Investment (DHI) is venturing into carbon trading.”

The DHI is working with Singapore for Bhutan to enter into the carbon market.

“In the 13th and 14th plans, 5,413 megawatts (MW) of hydropower, 2,526 MW of solar energy, and 28 MW of wind energy are planned to be constructed,” Naiten Wangchuk said. “The existing registered renewable energy projects and future projects that are in the pipeline could potentially generate a good amount of revenue from carbon trading if pursued with vigor under the Article 6.4.”

BBS | June 25, 2024

During the question hour session in the National Assembly today, Energy and Natural Resources Minister Gem Tshering said that the Dagachu hydropower project has traded close to 800,000 Certified Emission Reduction, CER credits. He was responding to Mongar Constituency’s MP Naiten Wangchuk’s question on the government’s progress on carbon trading.

CERs are carbon credits earned by emission-reduction projects in developing countries equivalent to one tonne of carbon dioxide. These credits can be sold to industrialised countries to meet their emission reduction targets.