Bhutan: Rural Renewable Energy Development Project

Sovereign Project | 42252-022

Summary

The Rural Renewable Energy Development Project (the Project) will help Bhutan (i) expand rural electrification for all households, and (ii) sustain its operations and energy security, through a mix of clean energy supply sourced from hydropower, solar, wind, and biogas. The Project has four components: (i) on-grid rural electrification (RE), (ii) off-grid solar RE, (iii) establishment and grid-connection of pilot wind power generation mills, and (iv) a pilot program to promote biogas plants. The project areas are scattered throughout the country and the executing agency will be the Department of Energy, Ministry of Economic Affairs.

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Project Name Rural Renewable Energy Development Project
Project Number 42252-022
Country Bhutan
Project Status Approved
Project Type / Modality of Assistance Grant
Source of Funding / Amount
Grant 0228-BHU: Rural Renewable Energy Development Project
Asian Development Fund US$ 21.59 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Partnerships
Private sector development
Sector / Subsector Energy - Electricity transmission and distribution - Renewable energy generation - biomass and waste - Renewable energy generation - solar - Renewable energy generation - wind
Gender Equity and Mainstreaming Effective gender mainstreaming
Description The Rural Renewable Energy Development Project (the Project) will help Bhutan (i) expand rural electrification for all households, and (ii) sustain its operations and energy security, through a mix of clean energy supply sourced from hydropower, solar, wind, and biogas. The Project has four components: (i) on-grid rural electrification (RE), (ii) off-grid solar RE, (iii) establishment and grid-connection of pilot wind power generation mills, and (iv) a pilot program to promote biogas plants. The project areas are scattered throughout the country and the executing agency will be the Department of Energy, Ministry of Economic Affairs.
Project Rationale and Linkage to Country/Regional Strategy

In Bhutan, domestic demand for electricity has been growing by 17% per year on average over these 5 years. This demand growth is expected to escalate in the long run due to the increase in the number of new customers connecting as ongoing rural electrification is completed. Experiences with rural electrification indicate that overall electricity consumption will increase as rural economies develop and households increasingly rely on electricity and acquire new appliances. Bhutan has already experienced power shortages, particularly in the dry winter periods when hydropower generation is reduced due to low river flows. Despite the nation's annual net power surplus, Bhutan's power generation from run-of-the-river hydropower plants is very seasonal, as the water flows and levels are difficult to control in the dry season. Consequently, the existing generation systems have been unable to meet the recent fast-growing demand during the dry winter peak periods. In the last two winters, the BPC has been forced to limit power supply to industry, resulting in economic and revenue losses. In the 2010 winter, it is estimated that the power generation shortfall against the growing demand will be around 25 MW, which will have significant impacts on industry's production. The Druk Green Power Corporation (a state-owned generation company) also reported that levels of water flow in rivers had been declining in the past 2 years due to changes of monsoon patterns, leading to less hydropower production. Increased power imports from India would not be feasible due to more severe power deficits on the Indian side.

To improve national energy security, the DOE intends to issue the Renewable Energy Policy that aims to promote alternative renewable energy sources other than large hydropower, and diversify the energy supply base through wind, solar, biomass, and small and micro hydropower. Based on wind mapping data and subsequent surveys, the pilot wind power mills are designed to support this objective. Since wider rural electrification coverage is expected to make the domestic demand supply balance even tighter, additional alternative energy sources will need to be developed to meet the country's demand without reducing exports of surplus power and its revenue-earning opportunity. It will be an option to export additional power from renewable energy to neighboring countries if there is surplus power in the future.

Impact Sustained inclusive economic growth through reliable and affordable clean energy services
Project Outcome
Description of Outcome Expanded coverage and mix of clean energy supply in a sustainable manner
Progress Toward Outcome --
Implementation Progress
Description of Project Outputs

On-grid rural electrification sourced from hydropower, and its related skill training and livelihood improvement activities

Off-grid rural electrification sourced from solar power, and its related skill training and livelihood improvement activities

Wind power generation plants

Domestic biogas plants

Status of Implementation Progress (Outputs, Activities, and Issues)

(i) Out of 5,075 HH targeted, 4,875 were already electrified.

(ii-a) For the installation and rehabilitation, BPC and DRE agreed to engage a consultant to update the exact number & location of HH which require the solar home systems since some of the HH are already extended grid connection.

(ii-b) Training, livelihood improvement and disbtirubtion of manuals are ongoing.

(iii) Construction of wind power mills ongoing.

(iv) Out of 1,600 biogas plants targeted, 1,500 were constructed. These were well-recognized by users and public awareness has been well-developed.

Geographical Location
Safeguard Categories
Environment B
Involuntary Resettlement B
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects The IEE has been included in project preparation to streamline environmental issues in SHLS project implementation. The IEE report has been prepared as per ADB Safeguard Policy 2009. The IEE preparation led to identification of potential environmental impacts during construction and operation phases and this led to preparation of Environmental Management Plan (EMP) to mitigate the adverse impacts.
Involuntary Resettlement

A resettlement plan has been prepared for the wind power component of the project. The plan will be implemented prior to the commencement

of preparatory and construction works.

Indigenous Peoples No specific actions are foreseen.
Stakeholder Communication, Participation, and Consultation
During Project Design All relevant stakeholders, including affected communities and affected people, were fully consulted during project preparation.
During Project Implementation Public consultation with all stakeholders will continue throughout implementation of the project. Each of the IAs will post all relevant information on its website. The website will include at minimum information regarding the bidding process, bidders, contract awards, use of funds disbursed under the Project and physical progress.
Business Opportunities
Consulting Services Consulting Services yet to be determined
Responsible ADB Officer Naoki Yoneda
Responsible ADB Department South Asia Department
Responsible ADB Division Energy Division, SARD
Executing Agencies
Department of EnergyThimphu
Bhutan
Timetable
Concept Clearance 13 May 2010
Fact Finding 13 May 2010 to 28 May 2010
MRM 29 Apr 2008
Approval 29 Oct 2010
Last Review Mission -
PDS Creation Date 07 Oct 2010
Last PDS Update 19 Mar 2015

Grant 0228-BHU

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
29 Oct 2010 13 Dec 2010 22 Mar 2011 31 Dec 2015 - -
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 24.91 Cumulative Contract Awards
ADB 21.59 29 Oct 2010 19.60 0.00 91%
Counterpart 3.32 Cumulative Disbursements
Cofinancing 0.00 29 Oct 2010 13.62 0.00 63%

Evaluation Documents

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