One of the major hydropower pledges the government underscored in its manifesto was to expedite the identified projects to ensure power generation of 10,000 MW by 2020. The target however, was slashed by half few years ago and so not achievable.
The completion of Punatshangchu I & II and Mandgdechu hydropower projects would add about another 3000MW by 2021. In 2015, four more joint venture (JV) projects were identified and approved by the government of India – 600MW Kholongchu, 570MW Wangchu, 770 MW Chamkharchu and the 180MW Bunakha.
But the fate of JV projects is mired in the issue that surfaces from guidelines the Indian government issued on cross border trade of electricity (CBTE) at the end of 2016.
The Druk Green power Corporation (DGPC), as a public sector unit from Bhutan is supposed to partner with similar firms in India to develop the JV projects.
DGPC’s annual report, 2017 stated that it has become extremely challenging to plan the investment and the way forward due to pronounced uncertainties after the issuance of CBTE guidelines.
“The CBTE, as it is today, restricts the access into regional energy market and jeopardises the project for existing and future hydropower projects,” the report stated. The DGPC is of the view that Bhutan needs to better understand the implications of new regulations and market conditions.
CBTE, in particular, the DGPC’s report stated has affected the JV projects. “Till there is clarity on these issues and concerns, there are uncertainties,” it stated adding that DGPC’s planned projects are now put in abeyance, for instance the Kholongchhu project. “The clearance of concession agreement is pending as bilateral discussions between Bhutan and India on concerns relating to certain guidelines on the CBTE could possibly impact long term commercial viability of the project.”
The CBTE guideline that India issued on December 5 states that companies fully owned by the government of concerned countries, those that are funded by India and those having 51 percent equity investment of Indian public and private companies can export power to the Indian market after obtaining a one-time approval from the designated authority in India. JV meant a 50-50 ownership between the two public sector undertakings of the two countries.
The guideline also states that any other participating entity shall be eligible to participate in cross border trade of electricity after obtaining approval of the designated authority on a case-to-case basis. There is a provision which states that cross border trade of electricity can be extended to other categories of contracts based on review by Ministry of Power in consultation with Central Electricity Regulatory Commission of India.
However, Lyonchhen Tshering Tobgay said that the GoI has assured the government to take into consideration all the concerns on the CBTE and that it would be resolved soon. Sources said that the GoI has already formed a committee to review the CBTE to address the issues.
While the generation target remains unachievable, the Prime Minister has asked the private sector to come up with proposals to take up the construction of major hydropower projects.
Encouraging the private sector’s participation in the construction of hydropower projects is one of the pledges People’s Democratic Party has highlighted in its manifesto.
Lyonchhen said that the private sector’s participation in hydropower has so far been limited to ancillary works like road construction. However, he said the construction Development Corporation Limited (CDCL) has made a breakthrough. The DHI owned company is now undertaking subcontracts from Hindustan Construction Company (HCC) and working on drift tunnels for Nyera Amari. “CDCL took over where HCC failed and they made huge progress,” Lyonchhen said.
Private sector, Lyonchhen said has perhaps not felt the need to participate in hydro construction although they are experienced enough. This he said could be because there is so much work at hand, for instance the East-West highway and GC road blacktopping.
Another pledge was to encourage FDI in hydropower sector. On this, the Prime Minister said that Bhutan Hydropower Services Limited (BHSL), Bhutan Automation and Engineering Services Limited and a consulting firm has been formed as a subsidiary of DGPC with foreign partners.
Earlier, Lyonchhen said hydro runner had to be sent to India for repair involving huge transportation cost. “But now we are building it in Bhutan and developing runners for export,” he said.
As for Bhutan Automation and Engineering Limited, he said it is involved in developing control systems in Chukha. “Now we have the ability to develop our own control system,” he said adding that the first one will be for Kurichu and that the company also got the task to develop control system for Punatshangchhu I and II.
During Lyonchhen’s trip to Europe, an agreement with an European energy company, Bernard in Belgium has been signed to partner with DGPC to start consulting firm. Andritdz Hydro, an Austrian based company is the partner of Bhutan Automation and Engineering Services, GE France with the partner of BHSL.
Lyonchhen also said that it is equally important to develop the whole ecosystem in hydropower development and that this is what the government did. In addition, these companies have created local jobs and facilitated transfer of skills and knowledge.
The PDP government pledged to expand the existing training capacity to generate employment and reduce dependence on non-Bhutanese workers in the hydropower sector.
Commissioning the wind power plant is also on their manifesto, which could be spelled a success. Another pledge to provide free electricity for rural households with basic energy needs also stands fulfilled.
One of the pledges to review the domestic electricity tarriff also stands justfied with the formulation of guideline on domestic electricity tariff determination.
He also added that discussion on Dorjilung project has been under discussion with GoI and Bangladesh. “We’ve made small but steady progress.”