EIB provides €150 million for renewable energy investment in Bhutan

EIB provides €150 million for renewable energy investment in Bhutan

The first-ever EIB project will support Bhutan’s new solar photovoltaic and hydropower schemes under the EU’s Global Gateway initiative

Bhutan has received it’s first-ever investment support from the European Investment Bank (EIB) of 150 million Euros. The project, supported by a 30-year loan of 150 million Euros (about USD 160 million), focuses on enhancing the country’s renewable energy infrastructure, particularly through new solar photovoltaic and hydropower schemes under the EU’s Global Gateway initiative.

The investment aims to address Bhutan’s vulnerability to climate change while expanding energy access without increasing carbon emissions. The financing will back the construction of small to mid-size run-of-river hydropower plants and solar photovoltaic generation to help the Bhutanese government diversify the country’s power mix.

The project will allow clean energy to be traded across borders and improve access to green power, supplying thousands of households with reliable and affordable energy, and allowing country to draw more profit from its renewable energy resources.

The renewable energy framework was signed during the 2024 IMF/World Bank Spring meetings by Finance Secretary Leki Wangmo and acting Managing Director of EIB Global, Markus Berndt, in the presence of EIB President Nadia Calviño.

During the signing of renewable energy framework, the EIB president said, “Bringing green, reliable and affordable energy to communities around the world, especially in more remote regions, has huge benefits not just in environmental terms, but also by improving access to health, education and economic terms.”

The president also added, “That’s why I am delighted that we’ve been able to agree this 150 million Euro investment with our Bhutanese partners, under the EU’s Global Gateway initiative. We’re looking forward to working as a key partner for climate action and sustainable economic development in Bhutan.”

Finance Minister Lekey Dorji welcomed the partnership with EIB, emphasizing the country’s commitment to maintaining its carbon-negative status and contributing to global climate action. “As Bhutan strives to maintain its carbon-negative status amidst rising global challenges, this partnership not only strengthens Bhutan’s renewable energy sector, but also contributes to the broader regional and global effort in combating climate change,” he said.

The new project will be implemented by Druk Green Power Corporation (DGPC) and is expected to contribute significantly to climate action by increasing the country’s renewable energy capacity.

While hydropower provides a reliable source of growth, other renewable energy technologies, including solar photovoltaic, offer ways to diversify Bhutan’s electricity mix and increase resilience to changing seasonal extreme weather patterns that can adversely affect hydropower supply.

With the installation of an estimated 310 MW of hydropower, solar power generation capacity is projected to generate around 670 GWh in the first year of operation. Increasing solar power generation is also expected to reduce the potential need for energy imports during the dry season, when river flows and hydropower generation capacity is reduced.

To meet its annual power needs, Bhutan uses solar power alongside hydropower in a complimentary manner. This promotes climate adaptation by diversifying the power generation portfolio, a systemic approach that builds resilience against climate change impacts. Adding new hydropower will increase electricity generation during the dry season and allow Bhutan to exploit its renewable energy generation potential in a way that can also benefit the wider region in the wet season.

This investment in renewable power is part of the EU Global Gateway initiative which supports projects that improve global and regional connectivity in the digital, climate, transport, health, energy and education sectors.

By Nidup Lhamo, Thimphu