𝐍𝐚𝐯𝐢𝐠𝐚𝐭𝐢𝐧𝐠 𝐓𝐡𝐫𝐨𝐮𝐠𝐡 𝐁𝐡𝐮𝐭𝐚𝐧’𝐬 𝐄𝐧𝐞𝐫𝐠𝐲 𝐓𝐫𝐚𝐝𝐞

Bhutan’s unique energy profile is marked by an abundant renewable hydropower potential of 30,000 MW, with about 23,760 MW deemed technically and economically feasible. As one of the world’s carbon-negative countries, Bhutan leads in sustainable energy production, primarily through hydropower, with around 8% currently harnessed. It has enabled economic growth and has been fundamental in enhancing the living standards of the people. Despite its remarkable hydropower potential, Bhutan faces the ongoing challenge of balancing its energy production with the reliance on imports of electricity and fuel.

According to the Royal Monetary Authority’s (RMA) annual report 2025, the interplay between hydropower exports and fuel imports creates a unique economic structure. Bhutan enjoys substantial revenues from electricity exports to India, providing a steady inflow of foreign exchange, but the country remains highly dependent on imported petroleum products, exposing the economy to fluctuations in global oil prices.

Bhutan’s electricity trade dynamics have undergone significant changes in recent years, marked by fluctuating exports and rising imports, primarily due to increasing domestic demand and hydrological challenges.

Between 2020 and 2024, domestic electricity 30,000 25,000 Nu in million 20,000 sales have increased significantly, rising from Nu 3,658.3 million to Nu 11,017.4 million. This growth reflects the country’s expanding energy demand, driven by economic development, industrialization, and greater household consumption.

Conversely, export sales dropped from Nu 27,304.5 million in 2020 to Nu 18,941 million in 2024, a shift towards higher domestic consumption, reducing the surplus for export. Bhutan’s dependence on run-of the-river hydropower makes its energy production susceptible to seasonal variations in water flow, causing reduced capacity during lean seasons. In 2022, Bhutan became a net importer of electricity, with imports reaching Nu 5,915.1 million by 2024.

This shift highlights the difficulty in meeting peak demand during lean seasons and the need for more reliable or diversified energy sources to avoid shortages. A fall in hydropower export sales and a rise in imports seriously tighten Bhutan’s fiscal space, increase risk to debt stability, and weaken its external position.

Bhutan lacks natural petroleum or natural gas reserves; consequently, fossil fuels such as diesel and petrol are imported entirely from India to power its transportation, industry, and other economic activities.

Between 2020 and 2023, the fuel imports exhibited strong growth. Diesel, which constitutes the largest share of fuel imports, more than doubled over the period, rising from Nu 5,217.2 million in 2020 to Nu 11,173 million in 2023. Petrol imports, though much smaller in value compared to diesel, also recorded steady growth, increasing from Nu 1,866.4 million in 2020 to Nu 3,815.3 million in 2023. This upward trend underscores Bhutan’s continued reliance on diesel as the primary fuel, while petrol imports have also expanded steadily, echoing rising vehicle numbers and economic activity. The surge in fuel import costs has been one of the key drivers of Bhutan’s twin deficits, mirroring the economy’s dependence on external energy supplies and exposure to global price volatility.

Unlike typical exports driven by production and market strategies, Bhutan engages in the re-export of fuel. This form of trade is incidental based on geographic proximity and transit needs. The term re-export refers to the portion of total petrol and diesel imports consumed by Indian vehicles operating on Bhutanese roads. This includes vehicles transporting goods to and from Bhutan, Indian tourist vehicles, and those refueling in border towns such as SamdrupJongkhar, Gelephu, Phuentsholing, Gomtu, and Samtse.

Bhutan fuel re-exports have shown a notable upward trajectory between 2020 and 2023, symbolizing both increasing cross-border demand and Bhutan’s growing role as a regional trading and transit hub. The total value of fuel re-exports rose from Nu 666.9 million in 2020 to Nu 1,116.2 million in 2023. Within the fuel re-export structure, petrol has consistently accounted for the largest share, around 90 percent of the total in 2020, though it slightly declined in subsequent years. This fluctuation suggests sensitivity to both external demand and pricing conditions but highlights a strong underlying growth trend. Diesel re-export, on the other hand, starting from a smaller base of Nu 68.7 million in 2020, experienced rapid growth, increasing to Nu 355.5 million by 2023. This remarkable growth highlights increased demand by heavy vehicles and commercial operators from across the border.

Bhutan’s energy landscape presents both opportunities and challenges. While hydropower exports generate stable revenue and support global climate objectives, dependence on imported fuels exposes it to economic and fiscal risks. The resulting trade imbalance caused by this duality remains manageable for now but is steadily increasing, underscoring the need for a coordinated strategic initiative. By diversifying energy export markets, promoting electrification at home, and strengthening fiscal resilience, Bhutan could more effectively leverage its energy resources.

Tashi Namgyal

From Thimphu