This is a translation from the Nepali of an article that first appeared in Nepal magazine on 11 July 2010. Dipak Gyawali is member of the panel of experts reviewing the Mekong River Commission’s Basin Development Plan and vice-chair of the technical committee of the UN’s World Water Assessment Programme. He was Nepal’s Minister for Water Resources during 2002-03.
Many Nepalis would be shocked to hear that Bhutan will face load- shedding from the coming winter. The citizens of Nepal have, after all, been told for decades that Bhutan has done a great job of developing hydroelectricity, that it has earned significant money by exporting electricity to India, and thus it has been able to achieve the highest per capita income in Southasia. Conversely, Nepal has been ridiculed for wallowing in ‘empty nationalism’ and stirring ‘needless’ controversies over the Mahakali Treaty of 1996 (for water sharing on the Mahakali River) as well as hydropower projects such as the West Seti, both of which involve export of electricity to India.The socialist and communist leaders of Nepal, seemingly suffering from a sense of moral and intellectual inferiority, have been unable to give a fitting reply from the standpoint of their ideologies. Such a reply would need to point out that it is questionable whether a development path that requires relinquishing defence and foreign policy to a foreign power is beneficial for the country in the long term. Party intellectuals advising politicians and political parties who only see revenue inflow and ignore vital diplomatic and strategic issues are in truth unwittingly pleading to be colonised. Nepal’s chronic load-shedding problem should then come as no surprise when these ‘Brahmins behind the throne’ fail to see the political economy hidden behind the load-shedding that is imminent in Bhutan.
At first glance, Bhutan certainly appears to have achieved better hydropower development than its Himalayan neighbour. Three times smaller in landmass and with a population one-fiftieth of Nepal’s, the current generating capacity of Bhutan (at 1488 megawatts) is twice that of Nepal. The Punatsangchhu-I hydro plant, under construction with a 60 percent grant and 40 percent soft loan from India, will add another 1020 MW by 2016. Such cheap development capital means that Bhutanese consumers pay a mere INR 1.30 per unit of electricity, allowing them to cook food and heat homes with electricity. Currently, about 70 percent of the 123,000 households in Bhutan have access to electricity, and by 2013 the entire country is expected to be electrified.
In comparison to Nepal, these would be considered significant achievements. And so, one may well ask, if these are the facts, why is the Bhutanese model wrong? And, incidentally, how is it that the country is on the threshold of load-shedding? Though Bhutan has twice the electricity-generation capacity of Nepal, around 80 percent of its electricity is exported to India, leaving only about 300 MW for consumption in Bhutan. Of this, only 80 MW is for domestic use, while the rest goes to southern Bhutan to be consumed by various Indian- owned industries, such as cement factories, lured here by the availability of cheap electricity. Subsidised electricity has led to booming demand, which grew by 19 percent from 2007 to 2008, increasing a further 27 percent in 2009 and 54 percent in 2010. As a result, Bhutan will be compelled to reduce its consumption by around 25 MW via load-shedding this coming dry season, worsening as demand continues to escalate till 2016, when Punatsangchhu-I comes online.
Innovative hydrocrats
This five-year load-shedding scenario is a planning failure born of a faulty political economy. But Bhutan’s supply problems are mild, unlike Nepal’s chronic power crisis precipitated by its unstable politics. While no magic wand can make electricity shortages disappear, Bhutan has already begun to take appropriate corrective measures. Importing electricity from India remains an option, but it is an expensive one, as Thimphu will have to import power at almost twice the rate at which it exports. India, despite its close friendship with Bhutan, cannot provide cheap power to its smaller neighbour due to its own 10,000 MW electricity shortage in the grid of North India, a fact not understood by today’s Nepali politicians.
The search for demand-side management options has led to other alternatives to Bhutan’s load-shedding problem: biogas for cooking and solar panels to heat water to reduce power consumption during peak hours every day. Economic incentives are being looked at to encourage industries to develop their own captive hydropower. Another option would be to build ‘pump storage’ schemes below existing power plants, which would pump water up to reservoirs during the night for use during next day’s peak time. Bhutan has also put forth the idea of an ‘energy bank’, whereby it would store surplus power generated during the rainy season in India, dipping into this ‘account’ in the dry months. Such a system of ‘energy barter’ would be far cheaper for Bhutan than direct purchase, and Thimphu is already in negotiations on this issue with New Delhi. Nepal’s Water and Energy Commission likewise initiated a policy of energy barter in 1992, but the mirage of the Mahakali and political infighting has left such innovative thinking in limbo.
Exploring new power policies beyond the straitjacket imposed by hegemonic Indian plans, Bhutan’s hydrocrats have initiated medium- sized plants more suited to Bhutan’s economy. The 126 MW Dagachu and the 208 MW Nikhachu schemes are being developed using a public-private partnership model supported by the Kyoto Protocol’s Clean Development Mechanism, which has come about in the wake of international concerns over global climate change. Recent changes in water policy require all power exporters to give 15 percent of their energy free to the Bhutanese grid as royalty. Such changes demonstrate the evolving Bhutanese understanding that an export-oriented policy alone does not strengthen a country’s energy security. Yet while there is immense potential to develop small- and medium-sized hydropower schemes, agreements with India preclude this option on cost grounds. Consequently, rather than ending load-shedding in two years, Bhutan has been compelled to wait until 2016 to achieve this goal.
As in Nepal, vagaries of the weather possibly related to climate change have led to severe winter droughts in recent years, and Bhutan’s rivers have been drying out significantly from January to May. Since the country only has ‘run-of-the-river’ hydropower plants, without monsoon water stored in reservoirs, they do not produce more than a third of their installed capacity in the dry season. If reservoirs are built that store the monsoon flow, more power can be generated in the dry season when the capacity of run-of-river plants has drastically reduced production. But, as is also the case in Nepal, Bhutan has limited locations on which small- and medium-storage hydropower plants can be built, and the locations that do exist might not be economically viable due to rapid reservoir sedimentation. Also, large reservoirs permanently flood fertile and populated valleys, and Thimphu seems reluctant to go this route. The feasibility study of the 4000 MW Sunkhosh is now complete, but Bhutanese officials do not seem interested to push it. During a recent four-day stay in Thimphu, this writer heard a uniform refrain from many officials: We cannot be confrontationists like you Nepalis – but inundation projects are our last priority, to be done only if the pressure from India becomes too strong to resist.
Slow, small but sure
A multipurpose hydroelectric storage project is similar to a factory that produces multiple goods. If the costs incurred in the construction of the factory, including the loan and interest repayment, are included in the price of just a single item, it will yield little profit, and could even fail to sell in a competitive market. Furthermore, if other goods produced are then distributed free of cost, there is likely to be disagreement and infighting between the various consumers. Besides electricity, storage dams provide flood control, irrigation, fisheries, navigation and tourism, from which different economic actors benefit in varying degrees. As Nepal (and India) has not built any significant multipurpose project, its policymakers have no idea how these benefits can be allocated in an equitable manner, nor how the political, economic, social and environmental issues need sorting out.