Hydropower is the mainstay of the Bhutanese economy, but how is the country moving ahead in its development? Is the present method of constructing hydropower projects conducive to economic development? Does it make sense for Bhutan to build 10,000 megawatts of hydropower by 2020, as some have suggested?
These were some of the questions that came up during the three-day conference on Energy, economy and environment which was held in the capital city of Thimphu on 29 to 31 October. More fundamental issues were raised as well: Can Bhutan become a leader in hydropower development in south Asia? Is hydropower in Bhutan sustainable, granted given the pressing concerns about climate change and glacial retreat?
The conference was organized by QED, a private research and consultancy firm, and sponsored by Friedrich Naumann Stiftung, a German based NGO, along with the Bhutan Ecological Society and Bhutan Foundation. The World Bank, the World Wildlife Fund, and other international and national organizations provided support.
The goal of the conference was to correct the perception that Bhutan has passively stood by, observing changes while other countries develop hydropower projects within its territory. And indeed the three days of the conference were marked by lively debate and open discussion, and a reconsideration of Bhutan’s passivity.
The importance of hydropower was universally acknowledged. The sector earns about US$160M annually through sale of electricity to India, a country that chronically faces acute shortages of power. This amount constitutes about 27 percent of GDP, and is the key contributor of foreign currency. No other economic activity offers the possibility of reaching this scale. The market for hydropower may grow further. Speakers at the conference raised the issue of trading energy in the entire south Asian region and the need for a regional energy grid.
— QED Group (@QEDBhutan) October 30, 2014
Moreover, hydropower is by far the least expensive source of renewable energy; this concern is important, because Bhutan has set carbon neutrality as a goal. . A kilowatt-hour of wind power costs about 10 times as much to produce as hydropower, and solar power averages about 15 times as much. Although hydropower takes up a major share of the Bhutanese economy, there is today no private sector participation in it. Though some participants at the conference pressed for private sector participation in the hydropower sector, many claimed that it did not economically make sense for a private individual or firm to develop hydropower projects, because of the high initial costs of projects Instead, the state sector will continue to lead. Dasho Chhewang Rinzin, the managing director of Druk Green Power Corporation, Bhutan’s electricity generation company, said that the country is soon poised to take the task of building hydropower projects upon itself, with limited assistance from outside. However, concerns were also raised about the “Dutch disease”—the shrinkage of other economic sectors in a country which centers its economy on one natural resource. A number of participants expressed their worries for Bhutan if it places all its economic eggs in the hydropower basket, weakening other sectors that could contribute to development as well.
In addition, some participants saw challenges to the hydropower sector in the form of glacier retreat and glacial lake outburst floods (GLOFs). Gordon Johnson, Regional Practice Leader for Environment and Energy in Asia and the Pacific at the United Nations Development Programme raised the issue that the volume of water that has its source from the Himalayan range would become lesser with climate change, thus affecting the hydropower sector. However, another participant, a technical expert from the World Wildlife Fund, stated that almost 90 percent of the water that flows into Bhutanese rives comes from monsoon rainfall, so that reduction of glacier meltwater poised no real threat to the hydropower system in Bhutan. Although these environmental issues were seen as serious, the discussion during the forum mostly focused on economic aspects of energy development, with environmental issues receiving less attention. One participant summarized the conference as moving towards the conclusions that Bhutan must now move forward from its “comfort zone,” in which it relies on other countries to develop hydropower projects. Though some economic concerns, and to a lesser extent environmental concerns, were raised, there was strong agreement that Bhutan should soon be a leader in hydropower development not just in the country but also in the world. In the words of Dasho Chhewang Rinzin, “Bhutan has to invest heavily in the hydropower sector, because no other options are viable.” Discussions of these topics will continue in the future.
For more information on Bhutan’s strong demand for electricity, see GlacierHub’s recent story.