Bhutan stands to gain from energy purchase from India
The beautiful mountain kingdom of Bhutan has expressed faith in its neighbour India to fulfil its power shortfalls during times of need.
In the past, this arrangement existed only as and when exigencies occurred. However, with the signing of a maximum 400 MW deal between the Power Trading Corporation of India (PTC) and the Druk Green Power Corporation (DGPC) in January 2022, Bhutan has been importing electricity to meet its requirement during dry season.
The need to import electricity has arisen as the gap between demand and supply has narrowed over time, DCGP managing director Dasho Chhewang Rinzin said, adding the problem is further aggravated as no power increase has occurred on the supply side.
While the demand for domestic consumption has surpassed 450 MW, Bhutan is producing only 400 MW during lean season. The short-term suspension of Tala hydropower facility for repair has led to a greater demand for electricity.
To meet this widening abyss of demand and supply, Bhutan has gone ahead with India’s Day Ahead Power Exchange. Just like a stock exchange, a bid for power purchase is made a day ahead of time. The payment is made once the bid is validated.
Extensive consultations have resulted in an excellent deal for Bhutan, which can meet its energy demand by purchasing power via the day-ahead market. This is also a win-win situation because participation in the power market also allows Bhutanese hydropower facilities to make purchases at lower exchange rates.
Through this arrangement, Bhutan has the advantage of being able to adjust imports on a daily basis. Imports from the exchange provide a more flexible option in the absence of the ability to properly estimate domestic demand.
Aside from energy exchange, Bhutan has looked into energy banking, which involves exchanging electricity for electricity. Bhutan had even negotiated on a draught agreement with its Indian counterpart, but it never materialised because Bhutan is a net exporter of electricity, the DGPC managing director said.
Rinzin said purchases are normally done during low tariff times in the exchange to minimise considerable fluctuation in the price of electricity and to maintain low import tariffs. This is accomplished by increasing generation to satisfy local demand and storing water in minor reservoirs when exchange rates are lower.
The Druk Green Power Corporation expects Bhutan to import power for a few years. As of today, there are three major issues facing Bhutan in its fight to overcome supply issues during the lean months. These are:
- Permanent Solution: Increasing the output of its hydropower generation capacity.
- Marketing Option: To be able to market additional production of electricity.
- Storage Facilities: Storage plants and alternate storage sources such as hydrogen fuel are being examined.
For at least a few years, Bhutan will have to rely on India to meet its domestic lean period demand. The DCGP managing director said that it is the best feasible alternative for Bhutan. We need to do a lot more in anticipating demand & supply and implementing grid discipline with the generator, transmission organisation, and consumers, Rinzin added.
Dr Abhijeet Chauhn is a recipient of ‘Media Fellowship’ from the NTPC School of Business, under the ‘Think-Tank Project’ funded by USAID for the SARI/EI project, currently being implemented by IRADe.