…price is expected to increase further with demand increasing in India

Dechen Dolkar

At Nu 8.35 per unit, Electricity rich Bhutan is paying the highest ever price for electricity imported from India during winter when our power generated is not enough to meet domestic demand.

The new price is double the price of last winter’s import.  Bhutan imported electricity at around Nu 4.50 per unit. It was learned that the average daily market clearing price (MCP) at the Indian Energy Exchange (IEX) reached as high as INR 8.99 per unit on February 28.

Bhutan was however able to maintain the landed cost of electricity below the IEX MCP through flexi-generation from its hydropower power plants which enabled Bhutan to avoid the import of power during the peak hours in India.

Bhutan has received the approval of the Government of India’s designated authority to import electricity from Indian power exchanges from January 1 to April 30, this year.

How is the price fixed?

Electricity is purchased from the Day Ahead Market (DAM) of the Indian Energy Exchange (IEX) through a competitive bidding process.

In the exchange, the prices are determined through a day-ahead double-sided auction from both buyers and sellers for every 15-minute time block.

The import prices depend on the time of the day and the demand-supply scenario for that 15-minute block period.

Prices are lower during off-peak hours and reach the highest allowable bid price of Nu 12 per kWh during peak hours.

According to the import record of electricity between January 1 and February 2 this year, Bhutan purchased 208.41 MU of electricity from IEX.  Considering the purchase price at the IEX and the associated fees and charges, the total import cost for January to February was Nu 984.1M. 

Import projections

It is projected that Bhutan will need to continue to import electricity till the mid of April by which time the total import volume could hit 500MU.

The import volume and duration will however depend on the domestic demand and hydropower generation trends over the period. For now, the Central Electricity Regulatory Commission of the Government of India (CERC) has put a purchase price ceiling of Nu 12 per kWh at the exchange.

It was learnt that since the last two weeks, the prices in the market have remained continuously high with the average daily IEX prices remaining above Nu 8 per kWh.

Officials said that efforts are being made to keep prices of imported electricity low by restricting the purchase of power from the IEX during the off-peak hours when IEX rates are lower through the flexi-operation of the domestic hydropower plants.

The increasing energy import volumes at landed import tariffs that are much higher than the export tariffs rate of Nu 2.23 per unit for Kurichhu and Tala, Nu 2.55 per unit for Chukha, and Nu 4.12 per unit for Mangdechhu.

It not only impacts domestic electricity tariffs but also drains the country of Indian Rupees.

According to sources, the situation during the coming winter months is expected to only worsen. Bhutan will have to start looking for some short-term quick fixes while looking for a long-term solution to this otherwise worsening situation.

“Bhutan had hoped to bank on the access to the Indian energy markets but the prices are very high. In the immediate short term, investments in other renewables like solar and planning for hydro solar hybrid systems may help mitigate the situation,” an official said.

In the long term, Bhutan will need to prioritise and accelerate investments in a mix of run-of-the-river, reservoir, and pumped storage hydropower schemes intermixed with solar to ensure its energy security.