South Asia’s considerable hydropower potential is concentrated in the Himalayan region, spanning Nepal, Bhutan and India’s northernmost states: Arunachal Pradesh, Sikkim, Uttarakhand, and Himachal Pradesh. Tapping the vast hydropower resources of Nepal and Bhutan, in particular, will be critical in order to meet the region’s rapidly growing demand in a cost-effective and environmentally sustainable manner.
In particular, Indian demand for clean and affordable electricity will be a major driver for hydropower development across South Asia. Much of the new hydropower capacity in Nepal and Bhutan will be built with a view to export electricity to meet growing demand for electricity in northern India, offsetting greenhouse-gas emissions by reducing the proportion of coal-burning stations in the electricity portfolio. The Indian prime minister, Narendra Modi, made landmark visits to both Bhutan and Nepal in 2014, cementing India’s bilateral energy agreements with these countries.
Bhutan boasts a very high hydropower potential, estimated at around 30,000 MW, of which 23,760 MW has been identified as economically feasible. A total of 1,615 MW of hydropower capacity has been installed in the country to date.
Bhutan’s domestic demand for electricity is relatively low, but power exports to India are already an important source of revenue; hydropower contributes over 27 per cent of government revenue and 14 per cent of Bhutan’s GDP. India’s investment in Bhutan’s programme of hydropower development is also contributing to economic growth and development on both sides of the border.
Bhutan already exports a large amount of power to India. In the fiscal year 2013–14, the annual net power transfer from Bhutan to India was 4,992 GWh, a figure which is likely to grow as further hydropower development takes place in Bhutan. The government’s National Transmission Master Plan has projected 11,000 MW of power transfer capacity between the two countries by 2020, and identifies the necessary projects to improve interconnection infrastructure. The Bhutanese government envisions 10,000 MW of installed hydropower capacity in the country by 2020, which it will develop in close collaboration with the Indian government and private sector.
There are five major hydropower projects currently operational in Bhutan, all of which are run-of-river schemes: Tala (1,020 MW), Chhukha (336 MW), Dagacchu (126 MW), Basochhu (64 MW) and Kurichu (60 MW). The Dagachhu run-of-river scheme, which began commercial operation in 2015, is a milestone project in many ways.
The project is the first in Bhutan to export power exclusively to India; Tata Power has signed a power purchase agreement for 25 years, and will export all electricity generated at the site to India. Dagachhu was also the first cross-border project registered under the UN Clean Development Mechanism (CDM).
Dagachhu also marks the first public– private partnership in infrastructure investment in Bhutan. Druk Green Power Corporation, the state-owned utility, owns 59 per cent equity in the project, Tata Power Company of India owns 26 per cent, and the remaining 15 per cent is held by the Pension and Provident Fund of Bhutan. The Asian Development Bank supported the project with a USD 80 million loan; the total project cost was around USD 200 million.
Nepal is also expected to become a net exporter to the Indian market, but Nepal currently suffers energy shortages and frequent blackouts. For example, the shortfall in electricity supply to meet domestic load requirements was about 410 MW in late 2013, when peak demand reached 1,202 MW. This led to blackouts of up to 14 hours a day.
Nonetheless, Nepal is blessed with significant hydropower resources. Nepal’s theoretical hydropower potential has been estimated to be around 84,000 MW, of which 43,000 MW has been identified as economically viable. Currently, Nepal’s installed hydropower capacity is 753 MW.
Although Nepal suffers from regular energy shortages, the available hydropower resources could provide a large surplus if strategically developed with a view to foster regional energy trade. Therefore, Nepal will follow a similar path to Bhutan, with the view of becoming a net exporter to the Indian market, as well as Bangladesh.
The first large-capacity interconnection between India and Nepal (1,000 MW) was completed in February 2016, and is now importing 80 MW at 132 kV. The Nepal Electricity Authority (NEA) plans to charge the capacity of the line to 220 kV in the next five to six months, and the line is expected to be charged at its full capacity of 400 kV by September 2017. The project is being supported by the World Bank, which has committed USD 138 million in financing.
2015 saw Nepal connect over 45 MW of hydropower to the national grid, including the Mai Khola hydropower (22 MW), Nau Gad Khola (8.5 MW), Upper Hugdi Khola (5MW), Andhi Khola (4.3 MW; capacity addition), Jiri Khola (2.4 MW), Upper Puwa 1 (3 MW) and Belkhu Khola (0.5 MW). This project will provide relief from load-shedding in the eastern region of the country.
The Nepal Electricity Authority (NEA) is also developing the 7 MW Mai cascade hydropower project, which is nearing completion. The Mai Khola plant will discharge into the intake of the Mai cascade hydropower project, which ultimately discharges back into the Mai Khola River.
A further seven projects in Nepal are scheduled to be completed in the first half of 2016. Many of these projects were expected to come online in 2015, but were delayed due to the April–May earthquakes in the country. The delays were further exacerbated due to the border blockade and Madhesi movement, which is limiting much-needed fuel to complete construction works.
The projects expected to be completed are: Upper Marsyangdi (50 MW), Chameliya (32 MW), Upper Made (19 MW), Kulekhani III (14 MW), Hewa Khola (14 MW), Thapa Khola (11 MW) and the Pikhuwa Khola (2 MW).
In February 2016, Nepal’s government declared 2016–26 the “national energy crisis reduction and electricity development decade”, with ambitious targets to end the current power shortages within three years and to spearhead further development in the hydropower sector.
This country profile is featured in the 2017 Hydropower Status Report. You can download the full report here.
This profile was last updated in May 2016.