World Bank says USD 600 million annually for energy generation to Bhutan is in the pipeline
The discussion on harnessing Bhutan’s renewable energy resource, especially hydropower, and the challenges confronted emerged as a key theme at the Bhutan Innovation Forum (BIF). Key challenges that Bhutan faced in the face of increasing demand requiring a substantial increase in capacity and the need of finance emerged in the discussions. The forum witnessed Bhutan asserting the importance to address its energy needs and a development partner in the World Bank (WB) say that it could raise the ceiling on energy generation support substantially for Bhutan.
Speaking during the third day of BIF, the Managing Director (MD) of Druk Green Power Corporation (DGPC), Dasho Chhewang Rinzin said Bhutan has reached the crossroads in terms of hydropower and that the country is setting up the way forward, as it looks at the Gelephu Mindfulness City (GMC). He said it has brought new thinking as to how to manage energy resources and ensure that Bhutan has energy security for perpetuity. Underlining that Bhutan “has been very lucky” in ensuring that generation capacity met demand, Dasho spoke about the changes that have come with time; the dependency on the monsoons for Bhutan’s electricity generation and the current situation. “Today is raining, so we are generating full electricity from all our power plants. But tomorrow, day after tomorrow, as the winter comes on, our rivers will dry up, get smaller and smaller, and we will generate only 1/4 to 1/5 of the installed capacity of the hydropower plants that we have,” Dasho said.
He further added that in the winter months, Bhutan generates only about 450 megawatts (MW) of energy, while the demand has grown 100 times in the last two years, “from 45 0 MW to 900 MW this year.” He said the demand would reach 1100 MW next year, about 1600MW by 2034 and touch about 4000 MW by 2040. “To produce 4000 MW, we have to have an installed capacity of anywhere from 20,000 to 25,000 MW,” he said.
Dasho mentioned that over the next 15 years, Bhutan would invest in about 15,000 MW of hydro power and about 5,000 to 6000 MW in solar power. “Total addition that we have to do over the next 15 years is about 20,000 MW, in addition to the 2500MW that we have in operation just now, and about 3000MW which are under construction at the present moment for this.”
Challenges on the financial front was underlined with Dasho saying that from now till 2040, Bhutan would need USD 26 billion, which is about USD 1.5 to 1.6 billion required annually for the energy sector alone. He said that in view of this Bhutan is looking at structuring projects, finance of projects, and for the first time ever, decided to allow private sector investments.
Maritn Raiser, Vice President for South Asia, the World Bank (WB) said that there are substantial opportunities for sustainable development through careful planning, innovative financing, and integration with regional energy market. “The best way to think is by implementing a project finance approach, where debt is raised against the project’s revenue rather than government guarantees, allows Bhutan to mobilize larger funding without incurring sovereign debt.”
He also said that Bhutan’s capacity to generate power during the summer coincides with India’s peak demand for cooling, presenting a strong market opportunity. “So, integration between Bhutan and India’s power systems can create a very good economic growth opportunity,” he said, adding that that by transitioning from government-to-government financing toward a PPP model can attract a diverse range of financing partners.
“There are some collective scopes of challenges but we are here to help think them through and perhaps start with few projects, for instance like Dorjilung, where we could demonstrate that this is possible and encourage other to follow.” The World Bank has invested USD 17 billion over the last three decades, in 68 countries.
Raiser said that in the face of the regional significance of the development of hydro resources of Bhutan, as it can help critically complement the rollout of solar power, for example, in India, but also help Bangladesh substitute out of dirty fossil fuels that is of a global and certainly of a regional interest, the WB can provide additional funding to Bhutan. “We are looking, drawing from a regional pot of money, to very significantly expand our financial support to the country in the coming months. Traditionally, we were in the range of USD 50 million per year. We now have a pipeline of USD 600 million per year. I can’t say exactly how quickly that’s going to come on stream, but it gives you an indication of the commitment that we have because of the importance that we see,” he said, yet again emphasizing on Bhutan’s regional role.
Meanwhile, on the role of the private sector, and specifically private capital, Rod Phillips, vice chair of Canaccord Genuity, Canada shared that private capital can significantly contribute to Bhutan’s development, particularly in the energy sector. He praised the DGPC for its world-class operational capabilities and engineering expertise, also emphasizing that the country’s existing institutional infrastructure, including an independent energy regulatory body, enhances investor confidence in sustainable energy projects.
“Similarly, the distribution capacity, I’m a little embarrassed to say, in Ontario, Canada, where we had full scale electricity going on two centuries, we are only at 95% of the province, but here in Bhutan, with all the challenges associated with mountainous territory, 99% electrification is remarkable and impressive,” he said adding that on the positive side, is the vision of His Majesty for any significant institutional investor one of the considerations that they’re always looking at is the stability as a business partner, directly or directly, of the sovereign. And I think the focus not just on the mindfulness city project, but on hydropower will being quite helpful.
However, he acknowledged that Bhutan has not yet captured significant private foreign direct investment due to a lack of familiarity with its legal framework and regulatory environment among global investors. He stressed that there is need to improve awareness and understanding of Bhutan’s investment landscape to attract a broader pool of international capital.
He shared that the BIF served as a platform to discuss the potential for private sector engagement in Bhutan’s development, signaling a crucial step towards integrating the country into the broader global investment community.
The discussion also highlighted the environmental challenges associated with hydropower, despite its status as a green energy source. Experts emphasized the importance of ensuring that the benefits of hydropower projects extend to local communities, balancing resource utilization with environmental stewardship. “We need to think through the linkages that these investments can create to provide opportunities for the Bhutanese people,” Raiser suggested.
By Nidup Lhamo, Thimphu
