Nikachhu Hydropower Project

The Nikachhu Hydropower Project is a 118-megawatt (MW) run-of-the-river hydroelectric power station situated on the Nikachhu River at Lorim in Tangsibji Gewog, Trongsa District, central Bhutan. The project was developed by Tangsibji Hydro Energy Limited (THyE), a special-purpose company wholly owned by the Druk Green Power Corporation (DGPC), the state-owned enterprise responsible for the generation and sale of hydroelectric power in Bhutan. Construction began in the spring of 2016 following the signing of a loan and grant financing agreement between the Royal Government of Bhutan and the Asian Development Bank (ADB) on 4 May 2015.^[1]

As a run-of-the-river plant, the Nikachhu project does not impound a large reservoir. Instead, it diverts water from the river through a headrace tunnel to a powerhouse, generating electricity from the natural flow and gradient of the watercourse. This design minimises the environmental and social impacts associated with large-dam hydropower, including population displacement, downstream flow disruption, and the inundation of agricultural and forest land. The project is designed to generate approximately 903,490 megawatt-hours (MWh) of electricity annually, with the bulk of the output destined for export to India under a bilateral power purchase agreement with the Power Trading Corporation of India.^[2]

The Nikachhu project is part of Bhutan's broader strategy of harnessing its abundant hydropower potential — estimated at over 30,000 MW, of which only a fraction has been developed — as the primary engine of economic growth and the country's single largest source of export revenue. Hydropower already accounts for the vast majority of Bhutan's electricity generation and is the cornerstone of its five-year development plans.^[3]

Technical Design

The Nikachhu project is located between the confluences of Nikachhu/Chhunabchhu and Nikachhu/Mangdechhu in a narrow valley in central Trongsa District. The principal infrastructure comprises a 38-metre-high concrete gravity dam, a 12.1-kilometre headrace tunnel, a surge shaft, a pressure shaft, and an underground powerhouse equipped with two Pelton turbines, each with a rated capacity of 59 MW. The total installed capacity of 118 MW makes it a medium-scale project by international standards but a significant addition to Bhutan's existing generation portfolio.^[4]

The run-of-the-river design means that generation output varies seasonally with river flows, peaking during the monsoon months of June to September when Himalayan rivers carry their highest volumes. During the dry winter months, generation declines substantially. This seasonal variability is a characteristic challenge of Bhutan's hydropower sector and influences the terms of power purchase agreements with India.^[1]

Financing and Public-Private Partnership

The Nikachhu project was financed through a public-private partnership (PPP) model — the first of its kind in Bhutan's hydropower sector. Total project costs were approximately $175 million, funded through a combination of sources. The ADB provided $120.5 million in loan and grant assistance under its Second Green Power Development Project. The State Bank of India (SBI) and the Export-Import Bank of India (EXIM Bank) provided approximately $53.5 million in co-financing. DGPC contributed approximately $16.96 million in equity.^[2]

The PPP structure represented a departure from the traditional model of bilateral government-to-government financing that had characterised earlier Bhutanese hydropower projects, most of which were developed as joint ventures with India under intergovernmental agreements. The adoption of multilateral financing through the ADB was intended to demonstrate that Bhutan could attract diverse sources of capital for its hydropower sector, potentially reducing its dependence on any single partner and broadening its development options.^[3]

Construction and Completion

Execution works commenced in the spring of 2016, with the project initially targeting completion by 2020. However, construction encountered delays, including geological challenges common in Himalayan tunnel-boring projects and disruptions caused by the COVID-19 pandemic. By October 2023, DGPC reported that 98 per cent of overall construction work had been completed, and commissioning was scheduled to begin in January 2024.^[5]

The project employed sophisticated geotechnical instrumentation throughout construction, including piezometers, inclinometers, and settlement gauges, to monitor the stability of the dam, tunnel, and surrounding terrain in the geologically active Himalayan environment.^[4]

Environmental and Social Considerations

An Environmental and Social Impact Assessment (ESIA) was conducted as a condition of ADB financing. The assessment identified the project's run-of-the-river design as significantly reducing environmental impacts compared to storage-type hydropower. Key mitigation measures included minimum environmental flow requirements downstream of the dam, sediment management protocols, compensatory afforestation, and community development programmes for affected households in Tangsibji Gewog.^[1]

The project is consistent with Bhutan's positioning as a carbon-negative country, providing clean, renewable electricity that displaces fossil fuel generation in the broader South Asian grid. Revenue from electricity exports to India remains the largest single contributor to Bhutan's national budget and is essential to financing public services, infrastructure, and the country's Gross National Happiness agenda.^[3]

References

1. "Second Green Power Development Project." Asian Development Bank.
2. "ADB to Finance Second Hydropower Plant PPP in Bhutan." Asian Development Bank.
3. "Bhutan's Hydropower Sector: 12 Things to Know." Asian Development Bank.
4. "Nikachhu Hydropower Project Instrumentation." Encardio-Rite.
5. "Druk Green Power Reports 118 MW Nikachhu Hydropower Project Nearly Completed." Renewable Energy World.
6. "118-Megawatt Nikachhu Hydropower Project Targets 2023 Completion." BBS.