Contents

The energy sector is thus strongly poised to continue leading and boosting growth in the future economic scenario and will greatly enhance the prospects of promoting higher living standards and reducing poverty levels in the country. These projections are realistically based on and anchored by the Indo-Bhutan agreement on the long term cooperation in the field of hydropower development signed by the two governments in July 2006. Under this umbrella agreement that is valid for sixty years, India will import a minimum of 5,000 MW of electricity from Bhutan by 2020. Taking into consideration domestic consumption, the country to develop hydropower capacity of around 10,000 MW which would require the capacity addition of another 8,500 MW. This would require an annual capacity addition rate of around 800 MW. At this rate of capacity addition it is envisaged that the country will have tapped around 42% of its technically feasible hydropower resources by 2020. To reach these capacity addition targets, several hydropower projects have been planned for implementation over the Tenth and Eleventh Five Year Plans which are listed herewith:

Hydropower Projects Scheduled for Construction in the Tenth and Eleventh Plan Periods

Opportunities and Challenges

Accelerating hydropower development for electricity exports will continue to be the major strategic opportunity for the country in view of its large unexploited potential for hydropower and the seemingly infinite demand for power in Northern India, where chronic shortages are likely to rise even further. Bhutan currently supplies only a very small amount of what India requires and could easily absorb all that the country could produce over the next twenty years. As the production cost of hydropower in Bhutan is also among the cheapest in the world, this makes it a high return and extremely feasible investment for both countries. However, the fuller exploitation of the hydropower potential is constrained by the extremely high up-front investments and funding required for its development. In Bhutan’s case this has been so far largely mitigated due to the favourable financing mechanisms between India and Bhutan. 

The country’s extremely strong environmental conservation policies have affected the pace of implementing energy projects due to the lengthy procedures such as environment impact assessments and securing road clearances. The lack of coordination among various government agencies and accompanying delays in securing sectoral clearances have also impeded the implementation of energy programs resulting in loss of time and cost escalations. Despite the delays, addressing genuine environmental concerns are necessary in view of the fact that the protection of the country’s main watersheds will in the long term determine the sustainability of the hydropower projects. The key challenge will thus be to develop hydropower projects in an environmentally friendly and sustainable manner and doing it efficiently and in a cost effective manner. Another constraint pertains to the potential environmental hazard of a glacial lake outburst floods as a consequence of global warming. This could influence the long term viability of certain hydropower projects that are on rivers fed by glacial lakes. 

With the planned hydropower projects for the Tenth Plan, many of which lie in the interior parts of the country, the present width and capacity of the highways, roads and bridges could prove a bottleneck for the efficient transportation of large hydropower plant equipments and construction material to these hydropower project sites. The facilitation of accelerated development of hydropower will therefore require new roads to be constructed, existing highways and roads to be resurfaced, realigned and widened and bridges built to accommodate 70 tonne trucks. This expansion of strategic infrastructure to facilitate the program for accelerated hydropower development will need to be addressed on a high priority basis.

Rural electrification presents a special opportunity to improve the livelihoods and living standards in the rural areas of the country. As such the Royal Government has attached priority to achieving the goal of electricity for all by 2013 and the Tenth Plan target of providing electricity access to 100% of rural households. However this is likely to be seriously challenged by resource and accessibility constraints. Other critical challenges in the energy sector relate to the managing effectively the demand and supply of electricity, meeting
domestic demand at subsidized rates against the compulsion to increase exports for revenue generation and the seasonal variation of electricity generation due to hydrological flows.

Policy and Strategies

The overall objective of the Energy Sector for the Tenth Plan is the sustainable development and efficient use of energy resources for socioeconomic development. This will be achieved through accelerated hydro-power development to provide environmentally clean, safe, reliable, equitable and affordable access to energy. The latter is expected to contribute towards economic growth and self-reliance and improved quality of life and income-earning opportunities of the poor.

The specific strategies to achieve the above objective are:
• Accelerated development of additional mega hydro-power plants;
• Development of small, mini and micro-hydels where on-grid connectivity is difficult;
• Expansion of rural electrification; and
• Identification and utilization of alternative sources of energy.

Targets for the Energy Sector

The major targets for the Energy sector are reflected in the box below. These targets include enhancing the sectors contribution to GDP and national revenue and expanding electrification coverage and the total installed hydropower capacity.
• Increase average GDP contribution from the energy sector to over 15% over entire plan period
• Enhance revenue contribution from the hydropower sector to about 36% of the national revenue
• Provision of Electricity to all by 2013
• Provision of Grid Electricity to all Dzongkhag Head Quarters by 2013
• Expand hydropower installed capacity to 1602 MW by 2013

Financial Outlay for the Energy Sector

The indicative total capital outlay for the energy sector is Nu. 4,986.105 million.