2022 study projects higher power supply costs amid rising demand and infrastructure investment
TIL BDR GHALLEY | Thimphu
The cost of supplying electricity in Bhutan is projected to rise from Nu 3.38 per unit in the 2025–28 tariff period to Nu 4.51 per unit by 2040, driven by rising electricity demand, higher generation costs and increased investment in power infrastructure.
The projection is contained in the Domestic Tariff Projection 2040, prepared by the Department of Hydropower and Power Systems, Bhutan Electricity Authority, Druk Green Power Corporation and Bhutan Power Corporation.
The study, finalised in July 2022, projects electricity prices over five tariff periods from July 2025 to June 2040. It considers three electricity generation scenarios and two demand scenarios.
Among the scenarios examined, the study identifies Scenario A-II as the most likely generation and demand combination.
Under this scenario, the average generation price is projected to rise from Nu 2.39 per unit in 2025–28 to Nu 3.33 per unit in 2037–40.
The overall cost of supplying electricity, which includes the cost of generating and delivering power to consumers, is projected to increase from Nu 3.38 to Nu 4.51 per unit over the same period.
The study estimates that the average generation price could increase by about 9 percent during each tariff cycle, while the cost of supply could increase by about 8 percent.
However, the study cautions that the figures are projections and do not represent guaranteed future tariffs.
“The actual domestic tariffs may vary to a large degree,” the study states, citing uncertainty surrounding future electricity generation and demand.
Under Scenario A-II, the average generation price is projected at Nu 2.39 per unit in 2025–28, Nu 3.13 in 2028–31, Nu 3.34 in 2031–34, Nu 3.43 in 2034–37 and Nu 3.33 in 2037–40.
The corresponding cost of supply is projected at Nu 3.38, Nu 4.08, Nu 4.32, Nu 4.51 and Nu 4.51 per unit across the five tariff periods.
The study also considers scenarios involving higher electricity demand. Under Scenario B-III, the highest-cost scenario, the cost of supply could reach Nu 4.93 per unit by 2040.
Scenario B assumes additional industrial electricity demand beyond the levels considered under Scenario A.
According to the study, the projected increase in electricity costs is linked to rising demand, investment in transmission and distribution infrastructure, generation costs, operation and maintenance expenses and financing costs.
The cost of supply also includes expenses related to operating and maintaining the electricity network, depreciation, returns on fixed assets, taxation, electricity losses, working capital and regulatory charges.
Under the tariff framework used for the study, electricity tariffs were reviewed every three years, with different charges applying to consumers based on their voltage level and electricity use.
The study also considered Power Purchase Agreements (PPAs) as an option for industrial consumers. Under the PPA model, electricity prices were projected to increase by about 4 to 7 percent annually between 2025 and 2040, potentially providing industries with greater certainty over long-term electricity costs.
The study concludes that Scenario A-II represents the most probable outcome among the scenarios considered. However, it notes that the projections depend on several assumptions and could change as electricity demand, generation capacity and other costs change.
The projections were prepared in 2022 and should not be interpreted as Bhutan’s current electricity tariff in 2026.
The regulatory framework has also changed since the study was prepared. The Electricity Regulatory Authority adopted the Tariff Determination Regulation 2025, which came into force in December 2025.
The Nu 4.51 per unit figure should therefore be understood as a long-term projection based on assumptions made in 2022, rather than a forecast of the actual tariff consumers will pay in 2040.
