What power Hydropower

Bhutanese generally do not save, they spend more than they earn. They even borrow to spend. So national-debt-is-not-my-concern attitude of politicians, bureaucrats, private individuals alike is not really shocking. Is there any other way, other than hydropower, to service mounting Nu 120 billion credit that is on upward spiral? Which sectors have potential to service $2.0 billion equivalent loan: agriculture, manufacturing/industry and/or tourism? Credit, by itself, is not so much of a concern, if the country has capacity to make the most of the loan and service it. For us, it’s a huge “if”!

As per the Financial Times, Japan is the most indebted nation in the world with gross debt to GDP ratio of 245%. The figure is mind-boggling but the public still maintain calm. The Japanese government holds large amount of assets, therefore the net debt to GDP ratio goes down to 132%. And then Bank of Japan holds a large amount of Japanese government bonds which, in principle, can be held forever without having to worry about how it is going to repay. Then the net debt relative to GDP ratio goes even further down to 80%. Some have calculated as low as 41%.

Looking at our current standing on assets that can be beneficially traded/harnessed, we have no choice except to harness our hydropower. It is already almost like staking the futures of our children/grandchildren on hydropower. The arguments on “eggs in a basket” are redundant. We can only talk about our ability to smartly harness hydropower and move ahead securely. Yes, securely! Let us not make hydropower an issue for political gamble. Please, people of Bhutan and the region deserve better and we have to have high ability because the hydropower, in my view, is a high risk investment. I do not buy “cost plus” paradigm with the Government of India as risk covers, certainly not on account of the following.

First, can anyone (including experts from both countries intensely involved in power sector) tell us capacity factors of the Bhutanese run-of-the-river mega power plants down the line, say in 10, 15, 20 years from now, considering water-flow variations, seasonal as well as year to year, technological shortfall then and other human factors? The way we import power at the moment from India in winter gives us impression that the capacity factors of our power plants are low even now. The capacity factor risks can be mitigated to an extent by optimizing the sizes and types of hydropower plants. Why are we going ahead with mega run-of-the-river power projects with high capacity factor risks? Isn’t smaller run-of-the-river and reservoir power projects combination with high capacity factors the better option? In terms of energy storage, power plant efficiency and energy security, this combination is by far the better option. Shouldn’t capacity factor be one of the major considerations along with geotechnical, hydrological and environmental factors? What is the assurance that the run-of-the-river mega power plants will not be redundant in say 10, 15, 20 years when we consider snow and glacier melt runoff by then?

Second, we need to think ourselves as an open energy market player considering the regional (even global) power grid development. Then will our power be competitive in an open energy market considering that the energy profile of the world, including that of renewable energy in India, changes at a rapid pace? We better be aware of the open market forces in energy sector and prepare for the challenges. For instance, hydraulic fracturing (“fracking”) and horizontal drilling seem to be breaking the power of the OPEC to keep the oil price high. The brent crude is trading at $50/barrel from the high of $145/barrel in August 2008. Goldman Sachs says $20/barrel in future is a possibility.

Third, there are huge efforts for paradigm shift in urban energy systems with  distributed energy generators, also called energy servers, producing clean reliable, affordable electricity at site. Some even talk about grid electricity as fading trend in the new energy world. Will our power plants feeding the grids remain relevant through their economic life? Many power systems claim they generate electricity cheaper than the power companies for two main reasons. Firstly, their unmatched efficiency in converting fuel (e.g. fuel cell) to electricity, meaning systems producing significantly more electricity for the same fuel costs. Secondly, the ability to generate fuel at site eliminates the need for costly transmission and distribution infrastructure both physical and organizational. So much so that the savings typically are calculated to provide a 3-5 year payback on the initial capital investment on energy servers.

Fourth, we have to be absolutely sure about our hydropower policy and strategy, and transform the economic development pattern to resource, more specifically water-resource, based model. This may involve massive reforms including redirecting investments and entrepreneurs, and reforming, streamlining and cutting the civil service to size.  The civil service needs to be free from cronyism and corruption, and has to have strength to face, not hide, the reality on ground. Are we prepared to transform,  cut and clean? The pseudo-fanaticism piggy-backed on “cost plus” principle is bound to fall flat.

Fifth, key to above lies on the abilities of our current and future workforce that need to be highly educated and dynamic to take up the challenges posed by the massive economic shift. There is no denying that the quality of our workforce is the weakest link in the development process. The IQ level of our school children are low (anyone can verify this). Are we ready to reform education sector based on meritocracy as fundamental ideology and principle in the education system? The education system has to aim to identify and groom bright young students for positions of leadership. Leadership in energy is not an easy option. Children need to be taught manners, honesty, respect and responsibility. We may need to go beyond to teach softer skills such as collaboration, critical thinking and creativity. Critical factors for developing creativity in school include: (i) creating in the classroom an environment that support creative thinking and work; and (ii) teaching creativity skills and strategies explicitly and assessing in the context of academic learning. Misplaced priorities in education do not produce leaders of international level. Nationalism has its own place and should evolve through deeper sense of respect, knowledge and substance, not through parroting of catchphrases. The practices incubate superficiality, obliterates creativity, and let go public interest.

We either tighten our belts and work hard to take the hydropower issues head on or float on “cost plus” paradigm and bask on self-liquidation delight letting the open market forces squeeze in future the best out of us. The choice is with us!