State Of Bhutan’s Hydropower Egg Basket
Obviously, Bhutan’s hydropower story is all about the egg and the basket. According to our Economic Affairs Minister, Bhutan has no other eggs, other than the hydropower egg. So, let us take time off to examine how sound our egg is and how capacious is the basket that we hope to put our eggs in. But before I start to crunch the numbers, let me remind you of what Mr. John H. Gerstle, C.E., MNIF, one of the consultants who worked on Bhutan’s First Hydro-power Master Plan, had recommended.
In my work with RGOB, I strongly encouraged the early determination of those rivers and river basins to be designated for hydro-power development, and those to be preserved for environmental, social, cultural, tourism, recreational and other objectives.
Similarly, it was recommended that hydro-power development be concentrated in a small number of river basins, to limit the extent of the impacts and the expense of new infrastructure development required for projects far away from each other. It was expected that such a concentration of hydropower development along some rivers would enable other rivers to be conserved and protected.
These recommendations were made in the reports of the first Bhutan Hydropower System Master Plan so that the consideration could be done at an early stage, before significant investments and commitments would make such decisions more difficult.
NOTE: Contrary to what was recommended, we now have hydropower projects in 4 of our 5 major river basins.
We spend hundreds of thousands of dollars to engage consultants to prepare master plans and project reports – and then go and throw it under the bus, or completely ignore them.
Coming back to the matter under discussion, the general perception is that India is an all-encompassing infinite basket for our hydropower eggs. Few are aware that for the last three years, that basket has been overflowing with all sorts of eggs - thermal, nuclear, hydro, solar, wind, geothermal, biomass, etc.
Some facts about our hydropower egg basket:
India has, for the past three years, been electricity surplus, so much so that early this year, West Bengal Power Minister has threatened to carry coal to Newcastle – he wants to export 1,000 MW of electricity to Bhutan, among other regional countries! India has declared itself net electricity exporter, exporting more than what it imported from Bhutan. Now let us look at some other numbers.
India has a projected peak demand of 173,000 MW. As opposed to that, as of May, 2017, India boasts of an installed capacity of 330,000 MW.
Additional 90,000 MW is in the pipeline.
The Indian story has been that hydro-power’s contribution to the overall electricity generation has been declining steadily. From a high of 45.69% in 1966, the hydroelectricity now contributes merely 13.5% of India’s total electricity generation, as of May, 2017.
A total of 34 planned hydropower projects totaling 23,000 MW remain stalled, because of uncertainties caused by changing market forces and shift in technology, including dangers posed by global warming and climate change.
India no longer recognizes electricity production as critical to its economic advancement. This is because firstly, electricity production is not a big employer and, secondly, it has seen surplus production in excess of its demand, for the past three years.
India is pushing to achieve 100 GW of solar electricity by the year 2022.
Production cost of solar energy in India is set to fall below those of coal (thermal) levels - Nu.2.90 per unit as opposed to current cost of Nu.3.20 for coal.
Power plants in many of the Indian States have resorted to curtailing generation, because of excess supply beyond their needs.
In a single year, the bid for solar power fell from Nu.4.34 to Nu. 2.62 – a drop of 40%. Power companies in India are now offering to charge only Nu.2.62 per kilowatt-hour of electricity generated from solar panels.
Indian States of Odisha and Utter Pradesh have cancelled their bids for 7 Gw and 3.8 Gw power plants, as a result of installed capacity far exceeding demand.
Gujarat has already shelved their ultra-mega plan for 4,000 MW coal power project, on grounds of excess generation.
Caused by falling solar power prices, and excess generation, close to 13 Gw of coal power projects have been cancelled across various Indian States. 34,000 MW of planned production has been scrapped.
Do you see it now? While India is cancelling most of its planned generation, Bhutan is aggressively pushing for more hydropower projects. Is it stupidity? Is it lunacy? Or is it personal greed? To what can you attribute this madness?
Soon our glacial-fed rivers may cease to be qualified as renewable resources, because global warming and climate change grossly hinder their rate of renewal. India is seeing two times the generation they need.
PHEP I & II are monumental disasters, as enterprises of profit. And yet, we say hydro-power is our only egg. As I have said before, it is not the hydropower projects that I am against – it is the manner in which they are done. If we cannot do a good job of it, let us shelve them!
In conclusion, let me leave you with what the World Bank has to say about our only egg:
Bhutan’s hydro-power projects have largely been perceived risk-free, and thus rapid hydro-power investment through heavy borrowing has not caused much concern until recently. Yet available information suggests that the sector’s financial performance has been deteriorating since 2007. The net profit (before tax) per unit of electricity sold has fallen sharply since 2007, driven by rising costs and declining revenue. The sector’s regular contribution to the budget has also declined for the past 10 years, from 6-8 percent of GDP during the early 2000s to 2.7 percent in 2011/12, notwithstanding the significantly increased electricity generation capacity. All this indicates that the sector’s “high commercial profitability” cannot be taken for granted. Should the hydropower sector’s financial performance continue to deteriorate, Bhutan’s solvency could be threatened. Although debt service costs are being borne by DGPC at present, after all, the hydropower debt is the government’s liabilities. The source of the performance deterioration has to be identified, and, remedial actions taken soon to avoid debt service difficulties.
Economic Policy and Debt Department The World Bank
The World Bank is already worried about our capacity to remain solvent – meaning they think we are likely to go bankrupt!
Credits: Some figures quoted in this post have been derived from the Magazine "ENERGY Towards Sustainability, Justice and Equity" edited by Soumya Dutta.