A lot of people don't understand energy markets. They are not basic commodity markets. They use weird pricing mechanisms and they are tied up with national security concerns on both sides of the border. They rely on a weird kind of distribution infrastructure. The product is consumed immediately, with no (realistic) way to store a ton of it.
Most likely there is a treaty setting a floor price on the power or a demand ceiling, and they have hit one of those. Those limits are negotiated based on all of these considerations.
Without specific knowledge of the agreements between India and Bhutan, or knowledge of the constraints on the network, plus other factors, your comment is hypothetical. I agree with some of your points.
I don’t agree with “They don't control the demand for their power” because Bhutan do have choice over how much they deliver, even if it is only in the long term via their contracts. Bhutan exports 70% of their power, so clearly India wants it.
As an aside, I have two very good friends who work designing electricity markets, and planning country interlinks. I am not a specialist, but I do try to keep up with the play.
> I don’t agree with “They don't control the demand for their power” because Bhutan do have choice over how much they deliver, even if it is only in the long term via their contracts. Bhutan exports 70% of their power, so clearly India wants it.
Without specific knowledge of the agreements between India and Bhutan, this is also hypothetical, and I have to say that it's a big assumption that "India clearly wants it." And even for economics 101 commodities, no supplier controls their demand curve or the optimal quantity to sell.
Bhutan has a monopoly on the locations within its border to put hydro dams. India obviously wants the power (and perhaps Bhutan’s economic dependency) so India has negotiated with Bhutan on how to build those dams.
I get your points, but ultimately Bhutan has control over building hydrodams within its borders, so it is controlling supply, so it does have a lot of control over the price. Of course you can come up with a million quibbles about the details, but you are just arguing yourself into a corner case.
OP’s point was: “Are you suggesting they cannot sell more [electricity to india]?”. You said “They probably can't”. Yet Bhutan is developing more hydro dams, and they are going to sell more electricity to India. Case closed!
Unless you can find some data showing that they are spilling water for $0 without generating electricity…
Quantity demanded increases as price decreases https://wikipedia.org/wiki/Law_of_demand
Bhutan controls the price they will sell at, and for hydropower the marginal costs can be very low, so surely they do control the quantity demanded.