Meta Data
Draft: 
No
Revision of previous policy?: 
No
Draft Year: 
2008
Effective Start Year: 
2008
Scope: 
National
Document Type: 
Overarching Policy
Economic Sector: 
Energy, Power
Energy Types: 
Power, Renewable, Hydropower
Issued by: 
Department of Hydropower & Power Systems, Ministry of Economic Affairs
Overall Summary: 
The hydropower policy provides the framework and guidelines for accelerated hydropower development. It covers elaborations of keen topics such as institutional arrangements of hydro power sector, project investment issues, fiscal incentives, regulatory aspects, environmental requirements.
Access
Energy access priorities: 
d) Ensure domestic electricity supply security and reliability.
Renewable Energy
RE targets: 
The country shall strive to generate 20 MW by 2020 through a mix of RE technologies as follows: a) Solar- 5 MW b) Wind- 5 MW c) Biomass- 5 MW d) Others- 5 MW.
RE capital subsidy, grant, or rebate: 
A rebate by way of reduction of one percent in the Royalty Energy for every year of earlier completion or prorated thereof shall be given as incentive for early completion. The rebate shall be applicable for the first five years from the date of commercial operation. Likewise delay in completion will also entail penalty by way of increase of one percent in the Royalty Energy for every year of delay or prorated thereof, for first five years from the commercial operation date.
RE reductions in taxes: 
The Developer will be exempted from payment of corporate income tax for a period of ten ( 10) years from the commercial operation date of the hydropower plant. This exemption shall not apply to projects that have been directly awarded without any bidding process
Environment
Energy environmental priorities: 
Ensure that the hydropower development is in accordance with the sustainable development policy of the Royal Government, keeping in view the fragile mountain ecosystem of the country.--- The Royal Government shall ensure that hydropower development, generation and transmission are in line with the environmental legislations of the Kingdom of Bhutan.
Decarbonization strategy: 
By facilitating accelerated hydropower development, the RGoB is promoting a form of renewable energy generation which does not produce waste products that contribute to air pollution, acid rain, and greenhouse gases. Export of such energy across borders would displace or reduce the energy generation from sources which contribute to global warming and environmental damages.
Green finance: 
A part of the Renewable Energy Development Fund will also be utilized for environmental services rendered in the form of hydropower upstream catchment protection and for renewable energy initiatives.
Land use change for energy production purposes: 
The RGoB shall acquire private land as per the Land Act 2007, required to construct the hydropower project , the cost of which shall be charged to the project through an annual lease rent. All land required for the project shall be leased to the Developer during the Concession period. The RGoB shall acquire private land as per the Land Act 2007, required to construct the hydropower project , the cost of which shall be charged to the project through an annual lease rent. All land required for the project shall be leased to the Developer during the Concession period.---[...] [T]he RGoB shall provide free electricity of 10,000 kWh per annum for every acre of land (or prorated thereof) acquired for the Project from the Royalty Energy after the Project comes into commercial operation till the end of the initial CA. The land owner may either avail free electricity or cash in lieu thereof at the export rates from the project. Such benefits will continue beyond the concession period .
Energy-water nexus: 
The Royal Government shall ensure that hydropower development, generation and transmission are in line with the environmental legislations of the Kingdom of Bhutan. Initial pre-feasibility study for environmental aspects shall be carried out by the concerned Roy Government of Bhutan (RGoB) agencies. In order to utilize water resources in a sustainable manner for hydropower generation, it is important to protect water catchment areas by promoting sustainable agricultural/land use practices and nature conservation works.
Pricing
Renewable energy subsidies: 
The Developer will be exempted from payment of corporate income tax for a period of ten ( 10) years from the commercial operation date of the hydropower plant. This exemption shall not apply to projects that have been directly awarded without any bidding process
Energy taxation: 
b) Enhance the revenue contribution to the Royal Government.
Energy Supply and Infrastructure
Infrastructure development priorities: 
The Royal Government shall continue to develop hydropower projects on its own or through existing bilateral arrangements and simultaneously look for private sector and public private partnership to contribute to hydropower development.
Trade
Bi- and multi-lateral energy agreements: 
As part of the Framework Agreement entered between the Royal Government of Bhutan and the Government of India for cooperation in the field of hydropower sector, Government of India has agreed to a minimum import of 5,000 MW of electricity from Bhutan by the year 2020.
Investment
Financial incentives for energy infrastructure: 
A part of the Up-front Premium received from the Developers shall be allocated to a Renewable Energy Development Fund. The RGoB will use the Fund for project development activities including preparation of project profiles and reports , site investigation and studies, processing of clearances, acquisition of land, promotion of projects , and facilitation for accelerated development of hydropower resources.--- The Developer will be exempted from payment of corporate income tax for a period of ten ( 10) years from the commercial operation date of the hydropower plant. This exemption shall not apply to projects that have been directly awarded without any bidding process
Tax and duty exemptions for energy equipment: 
The project developer will be exempted from payment of all import duties and Bhutan sales taxes on import of plant and equipment as direct input to the project during the construction period. No sales tax or duty shall be levied on the export of electricity.
Local content requirement: 
Investments in Medium Hydropower Projects shall have a minimum of 26% equity held by Bhutanese nationals and/or Bhutanese companies having 100% ownership by Bhutanese nationals. No single foreign investor can enter into Joint Ventures beyond five projects.--- Investments in Large Hydropower Projects are open for joint ventures with Bhutanese companies or 100% foreign investments. The equity participation by any single foreign investor including Bhutanese FDI companies shall be limited to three large projects with total installed capacity not exceeding 2000 MW.
Investment climate development: 
Mobilize funds and attract investments for accelerated hydropower development; ---Hydropower shall be developed through domestic and foreign investments. Foreign investors shall be encouraged to develop projects through joint ventures with Bhutanese investors . For medium size hydropower projects, the maximum limit for FDI shall be seventy four percent (74%) of the equity. For large and mega size hydropower projects, one hundred percent (100%) foreign equity participation is permitted . Other aspects of FDI shall be based on the prevailing Foreign Direct Investment Policy and Foreign Direct Investment Rules and Regulations.--- Investments in Large Hydropower Projects are open for joint ventures with Bhutanese companies or 100% foreign investments. The equity participation by any single foreign investor including Bhutanese FDI companies shall be limited to three large projects with total installed capacity not exceeding 2000 MW.
Public Private Partnerships: 
The Royal Government shall continue to develop hydropower projects on its own or through existing bilateral arrangements and simultaneously look for private sector and public private partnership to contribute to hydropower development.
Governance
Energy institutional structures: 
Until 2002, Department of Power under Ministry of Trade and Industry was responsible for all activities related to the power sector. Due to enforcement of the Electricity Act, power sector in Bhutan has undergone major restructuring. It was split up into three organizations: the Department of Energy (DoE), the Bhutan Power Corporation (BPC) and the Bhutan Electricity Authority (BEA). The DoE is under the Ministry of Economic Affairs (MoEA), responsible for developing long term policies, plans, and guidelines related to sustainable development, monitoring and evaluating implementation of these policies and plans. The BPC is responsible for electricity transmission, distribution and supply functions. Besides, the BPC also manages and operates some embedded generation units consisting of micro/mini hydro and diesel generating units. The BPC also provides transmission access for export of surplus power to India. The BEA is an autonomous regulator for the electricity sector. Functions of the BEA include developing and implementing technical, safety and performance regulations, standards and codes for the electricity sector; developing and implementing principles and procedures for tariff setting, subsidies and economic regulation of domestic tariff; Issuing licenses and monitoring licenses as per the provision of the Electricity Act in place.
Technology
Clean energy technology priorities: 
Contribute towards development of clean energy to mitigate problems related to global warming and climate change.