Seven broad thematic programmes, mainly on power infrastructure and institutional capacity building, are outlined for the 9FYP. Hydropower investment (implementation of major projects as industries for revenue generation) is considered outside the plan. Skills development and training programmes related to the power sector are included in the National Human Resources Development Programme, being formulated by the Royal Civil Service Commission.

The Power Generation Programme (Nu 180 million)

Domestic electricity consumption growth rate has been 9.53 per cent per annum over the last five years. A growth rate of 7-15 per cent (on average 12 per cent) is forecasted over the 9FYP period. To cope with this growth rate, generation supply capacity of 10 MW firm power has to be added annually in the local supply system. This means that at least 75 MW peaking capacity has to be added in the system to meet internal incremental demand within the next five years. So the investment plan for power generation / supply infrastructure has to cover costs of additional 50 MW firm power during the 9FYP. A share of the budget can be invested as Government Equity input in Mangdechu and/or Punatsangchu projects (about 10 per cent of total project cost) and a small portion (about 2 per cent) for construction of 3 isolated micro/mini hydro plants in remote areas during the 9FYP.

Feasibility studies of Gasa (150 kW), Sengor (50 kW), Tang (400 kW) and Sakten (200 kW) microhydro sites have been conducted during the 8FYP for rural electrification of about 642 remote rural households. Main parts of the Mangdechu and Punatsangchu projects will be reflected outside the 9FYP as part of the economic development programme. Equity budget provision can be invested initially to build up basic infrastructure such as approach/access roads, bridges as well as construction power required for the implementation of the incoming mega projects.

The Power Transmission Grid Programme (Nu 1,910 million)

To utilize the power generated by the Chukha, Kurichu, Basochu and Tala projects and to extend the grid supply to meet the bulk power demand of Dzongkhags and major industries, and to increase the reliability of supply, it is necessary to extend the power transmission grid network. Based on the demand forecast, it is proposed to build the Tintibi-Trongsa/Bumthang transmission grid and the Basochu-Tsirang/Dagana-Gelephu transmission network, to extend transmission lines and substations to industrial estates, as being proposed by the Department of Industries during the 9FYP as part of the mega projects under construction. The Basochu-Semtokha line with transmission substation, and the Malbasse 400/220 kV substation with associated Tala power lines will also be built. Investments are estimated at Nu 1910 million for this Programme. Based on the prioritised proposals submitted by the Dzongkhags, it is proposed to extend grid power supply to Gasa Dzongkhag (Nu 36.667 million) and other important Dungkhag headquarters like Bhangtar and Lhamoizingkha (Nu 63.333 million).

After the commissioning of the Tala system and its integration with the Chukha system, the Basochu system, and the integration of Kurichu with the western grid, the system complexity will increase, proper coordination and scheduling of events for optimum generation, transmission and utilization of energy will be required. It is proposed to create a National Load Dispatch Centre at Gedu or another suitable location for economic load dispatch and coordination of power generation and transmission activities (availability, load forecast, frequency control) among the generating companies (Tala, Chukha, Basochu, Kurichu), BPC (for in-country transmission and distribution) and the Eastern Regional Electricity Board (Calcutta) and maybe the northern grid of India too. This establishment will consist mainly of dedicated real time data communication network laid in fibre-optic cables including a SCADA, Information Receipt & Processing Centre manned by a few engineers to coordinate the power system. This Centre may be affiliated with the Druk Hydro Power Corporation in the beginning. When it is formed, the Bhutan Power Trading Corporation can take over the function. The suitable budget provision has been made accordingly.

The Power Distribution Programme (Nu 1,800 million)

During the 9FYP, utility functions shall be segregated from the regular functions of the Department of Power. Electricity supply and sales functions shall be corporatized and handled by a separate autonomous corporate agency, BPC, responsible for micro/mini hydropower generation, transmission and distribution of electricity, and for electricity business in Bhutan. This corporate body shall be incorporated in the Company’s Act and the Electricity Act of Bhutan. The corporation shall buy electricity from generating companies, and also generate electricity from isolated mini/micro hydropower stations for distribution and sales to the consumers. Bhutan Electricity Authority will be created under the Electricity Act 2001 as the regulating agency of the Government to ensure that electricity business is carried out in a safe and sustainable manner. Activities in the following areas shall be carried out within the Power Distribution Programme during the 9FYP period:

(i) Rural electrification
(ii) Urban electricity extension services in Phuntsholing

The budget for the 9FYP shall be made available by the Government to enable BPC to carry out the above activities besides its regular functions.

To achieve the mission target, keeping in view the vision 2020 of 100 per cent electrification, it is planned to electrify 15,000 households in 20 Dzongkhags through extensive rural electrification programmes estimated at a cost of Nu 1500 million through grid extension or isolated micro hydropower development. Besides, sub-transmission and distribution activities will be carried out to extend and upgrade the existing urban electric power supply infrastructure in Phuentsholing, where urgent need is felt. The existing power supply infrastructure of Phuentsholing from 1965 needs rehabilitation. A tentative budget of Nu 300 million (US$ 6 million) is proposed under this scheme. The Operations and Maintenance Division, in consultation with the concerned electricity supply section, will prepare detailed programmes for implementation.

To achieve the RE targets, it will be absolutely necessary to contract out rural electrification. While about 30 per cent could be undertaken by BPC, around 70 per cent will have to be contracted to private parties. This will allow simultaneous execution of the works, and will enable acceleration of the RE programme. This will mean a deviation from the conventional method, where only the Department of Power and the communities in question are involved. This new approach being proposed will also help the private sector to grow and increase employment opportunities.

The Power Transmission and Power Distribution Programmes will be implemented by BPC. The Government will provide the total budget outlay for the Programmes as a capital investment to BPC on work-order basis.

A budget of Nu 1,500 million (around US$2,000 or Nu one lakh per household) is proposed for the RE programme. Detailed household and village site surveys in each proposed geog will be done in consultation with the Dzongkhags for implementation of the programme. Donor/Lending agencies may ask for further techno-economic and social studies of schemes before funds are sanctioned and approved. This extensive programme will require active participation of the end-users as well as the implementing agencies. Since the plan is very ambitious, private sector participation shall be necessary to augment the existing institutional capacity of the implementing agencies.

Institutional Capacity Building Programme (Nu 375 million)

The present functions of the Department of Power will be unbundled, and the Bhutan Electricity Authority, BPC and the Department of Energy/Power will be created in the 9FYP period. A new Ministry for Energy and Water Resources is also expected to be formed. Corporatization plan for BPC is ready, and this corporation will start functioning from July 2002.

Under the Programme, techno-economic feasibility studies, water and energy resource plans, update of power master plan (NORAD), RE master plan, policy guidelines, electricity rules, technical standards and codes shall be developed. It is proposed to carry out feasibility studies of two or three major hydropower projects (the Diglai project across Bumthagchu in Zhemgang, the Rothpashong/Kholongchu in the east, and/or the Punatsangchu phase II) during the 9FYP. A budget of Nu 375 million is proposed under this Programme. The Programme is aimed at institutional capacity building in technical, financial, legal and managerial aspects of the sector.

The Alternate Energy Programme (Nu 200 million)

An integrated approach planning for optimal and sustainable use of available energy resources, based on short term, medium term and long term demand forecasts is necessary as energy is an important input for the economic development of the country. The electricity sector is attached with high importance today because of its obvious impact on the economy. However, import of fossil fuels, the transport sector's high reliance of fossil fuels and the sustainable yield of biomass to meet primary energy needs of the rural population are also important issues. The affect of global warning due to release of greenhouse gases from fossil fuel and biomass combustion are issues of concern, too. Energy efficiency improvement is an appropriate stepping-stone. Energy efficiency standards concerning technology and process have to be chosen taking the above concerns into consideration.

Under the Alternate Energy Programme, biomass, solar and other alternative energy programmes or projects, including management, technology and energy efficiency sub-programmes, shall be carried out. An integrated Energy Master Plan is expected to be developed under the Programme. Solar water heaters, solar dryers, solar lighting, and improved efficiency biomass stoves will be demonstrated. Private sector shall be encouraged to participate to enhance the energy efficiency programme. Consumers' and traders' awareness campaigns can be launched to promote clean energy and utilization of efficient energy technologies and cost savings. Studies can be carried out to find out possibilities for replacement of polluting (global warming) energy by renewable, clean, environment-friendly energy resources and conversion technologies, and pilot projects can be launched. For example, pilot project to demonstrate electric buses or fuel cell technology can be introduced in and around the capital and Phuentsholing to study the possibility of reducing fossil fuel consumption.

Besides the above mentioned projects, if additional funding can be secured through grant assistance for investment in infrastructure, projects to support renewable and environment-friendly energy technologies for rural development and to promote socio-economic development activities, would be welcome and be included under the Alternate Energy Programme during the 9FYP. Therefore, the limited budget provision is subject to revision depending upon the availability of funds during implementation. Feasibility studies and project documents will justify such extension of the Programme.

Private Sector Participatory Programme in Hydropower Development (Nu 35 million)

To increase the capacity of the hydropower sector to undertake the various stages of implementation from planning, design, and construction, to operations and maintenance, private sector participation is felt necessary as the existing institutional capacity of the Department of Power and its associates is limited.

To enhance the institutional capacity of the private sector for various development activities, a separate programme is planned during the 9FYP.

In the past, the private sector has been involved mainly in the supplies of electrical construction materials (trading) and transport of goods. Lately, construction contracts are being awarded for the building of power projects' infrastructure such as buildings, roads, and water supply. Very recently, works have been awarded for the construction of power plants (civil works in Basochu and Kellungchu Hydel). To date, staff of the Department of Power has installed most power distribution, e.g. rural electrification. In the 9FYP, implementation capacity has to be doubled to achieve the planned target of electrifying 15,000 households in 5 years. Private construction companies would have to be employed to ensure timely implementation. Therefore, the power sector seriously encourages real participation of the private sector during the 9FYP by creating enabling environments for cooperation.

A study will be carried out under technical assistance financing from ADB to identify possible areas for private sector participation, to formulate guidelines, rules and regulations and terms of reference for private sector engagement. Conceptually, it is felt that the private sector can be actively involved in the following activities during the 9FYP:

(i) Rural electrification (execution);

(ii) Options for privatization of the Central Maintenance Section, Begna and its small transformer manufacturing unit;

(iii) Participation in hydropower plant development (build, own and operate (BOO), and build, own, operate and transfer (BOOT) schemes as IPP's;

(iv) Study options for and feasibility of power distribution services for community operations (e.g. city corporation to monitor utility services in town), and private sector participation in billing and collection;

(v) Entrepreneurial skills development and training of community electricians, wiremen and linemen for self-employment in internal wiring, repair and line construction/maintenance contracts.

Major economic development projects and programmes outside the plan

Tala hydroelectric project of 1,020 MW capacity, construction of which started under the 8FYP, will be completed and commissioned in the 9FYP period. Most of the electromechanical plant and equipment will be installed during the second half of the 9FYP. The project is anticipated to be commissioned in 2004 or 2005. After commissioning, it is expected to generate more than 4,924 MU per annum.

The total costs of the project are estimated at around Nu 43 billion. The project is being financed by the Government of India (60 per cent grant and 40 per cent loan at 9 per cent interest rate, payable in 12 years).

Basochu Lower Stage of 40 MW installed capacity estimated at capital cost of 553 million ATS (Nu 1659 million) is expected to start in the beginning of the year 2002 and complete in the year 2004. It will generate 186 MU per annum when completed, and augment supply in the western system. Project costs of 430 million ATS are financed by the Government of Austria at 2.786 per cent interest rate payable in 20 years (5 years grace and 15 years repayment). In addition, 123 million ATS is required for financing the construction of 35 km's 220 kV line between Rurichu and Semtokha, and a 70 MVA, 11/220 kV switchyard at Rurichu.

It is tentatively planned to invest in the construction of Mangdechu hydroelectric project, 360/600 MW, in the Trongsa Dzongkhag, and in the Punatsangchu project of 870/1000 MW in Wangduephodrang as the major economic development activities for export of electricity under the 9FYP. As part of an equity investment based on principles of cost and risk sharing, it is planned to invest at least 10 per cent of the project cost from the Government's side as equity input mainly for the pre-construction activities such as project access roads, construction power, and other. These two mega projects can be completed during the 10th Five Year Plan period, if implementation begins under the 9FYP.

It is anticipated that expenditures of at least 60 per cent of the project costs will be spent during the 9FYP for Mangedchu Project and 40 per cent for Punatsangchu. During the 9FYP, 50 per cent and 30 per cent external financing in the form of grant and a loan are required for investments in Mangdechu and Punatsangchu, respectively.