India and its neighbours, Bhutan and Nepal, are actively engaged in harnessing and utilising the hydropower resources of the region to meet the rising electricity demand. The profile of power demand in these countries complements the domestic seasonal variation in power generation; besides, the proximity of hydroelectric plants (HEPs) to major demand centres offers several benefits.
A look at the cross-border hydro development initiatives being implemented in Bhutan and Nepal…
Bhutan exports 70-75 per cent of its total electricity generation to India. In 2022, it sold electricity worth $374 million to India. A total of 1.6 billion units (BUs) were sold from March to November 2022. India typically buys electricity from Bhutan in the monsoon season when the dams are at full capacity. Meanwhile, Bhutan procures electricity from India during the summer season when its HEPs are operating below capacity owing to limited water flow. In January 2022, Bhutan started trading in the Indian day-ahead market, importing a maximum of 400 MW during the lean season. Also, in December 2022, Bhutan, through Druk Green Power, signed an agreement with PTC India Limited to buy around 600 MW of electricity during the winter months.
India has a long history of developing, maintaining and engaging in cross-border electricity trade with Bhutan. It has financed and developed four major projects, aggregating 2,136 MW, in Bhutan. These projects have a total energy supply of 11,861 MUs and have been developed under Indo-Bhutan energy cooperation agreements. The four projects are the Chukha HEP, Kurichu HEP, Tala HEP and Mangdechhu HEP. The Chukha HEP has an installed capacity of 336 MW and a design generation capacity of 1,800 MUs. The Kurichu HEP has an installed capacity of 60 MW and a design generation capacity of 399 MUs. The Tala HEP has an installed capacity of 1,020 MW and a design generation capacity of 3,962 MUs, while the Mangdechhu HEP has an installed capacity of 720 MW and a design generation capacity of 5,700 MUs.
India and Bhutan are also engaged in the construction of three other projects with an aggregate capacity of 2,820 MW – the Punatsangchhu-1 HEP (1,200 MW), Punatsangchhu-2 HEP (1,020 MW) and Kholongchhu HEP (600 MW). Punatsangchhu-1 HEP will have an annual electricity generation capacity of 5,700 MUs and will cost around Rs 97.35 billion. It is scheduled for commissioning in March 2025. The Punatsangchhu-2 HEP will have an annual generation capacity of 4,357 MUs and is scheduled for completion in October 2024. Its construction is estimated to cost around Rs 72.9 billion. The Kholonghchhu HEP, with a total capacity of 600 MW, is expected to be commissioned in 2026. It is being set up as a joint venture (JV) with SJVN Limited owning around 50 per cent and Druk Green Power Corporation Limited owning the remaining.
Besides these, detailed project reports (DPRs) have been prepared and cleared by the Central Electricity Authority/Central Water Commission for four HEPs aggregating 4,105 MW of capacity. The projects are the Bunakha HEP, Wangchhu HEP, Chamkharchhu-I (Digala) HEP and Sankosh HEP. An implementation agreement has been signed between the Government of India and the Royal Government of Bhutan for these projects. The India and Bhutan governments are also preparing the DPR for the Kuri Gongri HEP, which has an envisaged capacity of 2,640 MW.
India and Bhutan have installed 15 transmission lines, including 10 lines of 400 kV for bulk export. Furthermore, 10 projects have been selected by the Government of India and the Royal Government of Bhutan for the development of 10,000 MW of capacity by 2020 under the framework agreement signed between the two countries. With the completion of 10,000 MW of projects, excluding PPP/IPP projects, around 2,200 MUs of energy would be available for sale in India by 2020 and 8,000 MUs by 2026.
Nepal currently has around 2,190 MW of hydropower capacity and the potential to develop another 42,000-83,000 MW. India has cooperated with Nepal for the development of 51 MW of capacity and provides around 70 MUs of electricity free of cost from the Tanakpur HEP as per the provisions of the Mahakali treaty.
The Nepal Electricity Authority (NEA) has been exporting up to 364 MW of power from six hydropower projects to India in the day-ahead market of the Indian Energy Exchange. The NEA started selling surplus monsoon electricity through competition in the day-ahead market in June 2022. Nepal earned around Rs 4.5 billion from electricity sale to India till August 2022. According to the NEA, between May 2022 and August 2022, over 780 MUs of electricity was sold in the Indian market, earning it about Rs 7.2 billion.
India is also interested in investing in laying transmission lines in order to improve cross-border trade with Nepal and access to supply during the monsoon months as well as to overcome the shortfall and load issues caused by the coal deficit. India has already laid the 400 kV Dhalkebar-Muzaffarpur line through which 1,000 MW of electricity can be traded. A second transmission line between India and Nepal – the 400 kV New Butwal-Gorakhpur line – is being planned. Last year, the Nepalese government granted approval for equity investment in the Indian portion of the cross-border transmission line, which will be implemented by a JV company with 50:50 equity participation by the NEA and Power Grid Corporation of India Limited.
Meanwhile, Indian players are investing actively in Nepal. SJVN Limited is setting up the 900 MW Arun-III HEP on a build-own-operate-transfer basis in Nepal for a period of 30 years. As per the MoU signed with Nepal, SJVN will provide 21.9 per cent of power from the run-of-the-river project to Nepal without any charge and pay 7.5 per cent of the total income as royalty to the Nepalese government. The project was originally scheduled for commissioning in 2020-21; however, it is now likely to be commissioned in 2023-24 owing to Covid-led delays. In addition, in May 2022, SJVN and the NEA signed an MoU for the construction of the 490 MW Arun-IV HEP.
Further, a consortium comprising the GMR Group and the Italian-Thai Development Project Company of Thailand is implementing the 300 MW Upper Karnali HEP. GMR Energy will provide 12 per cent free power to Nepal and pay 27 per cent free equity to the Nepalese government. The project, entailing an estimated cost of Rs 87.5 billion, is expected to generate 3,466 MUs of power annually. The consortium is also developing the 600 MW Upper Marsyangdi HEP in Nepal. Located in Lamjung and Manang districts, the project is being developed by Himtal Hydropower Company Private Limited, a Nepalese subsidiary of GMR Energy.
The NEA has recently sought approval from the Indian authorities to export 40-50 MW of electricity to Bangladesh through the existing transmission infrastructure, as decided by Bangladesh and Nepal in August 2022.
The Indian government is taking a number of initiatives to develop and co-finance HEPs in Bhutan and Nepal. Si-multaneously, it is focusing on developing cross-border transmission infrastructure and opening up the electricity markets for trade in order to give a thrust to cross-border HEP development.