Bhutan: Renewable Energy for Climate Resilience

Sovereign Project | 54142-001

The project will finance the construction of one solar photovoltaic (PV) power plant located in central-west Bhutan with a minimum total capacity of 17.38 megawatt peak (MWp). This will be the first utility scale alternative renewable power plant in the country and the first step to diversify the generation portfolio of Bhutan's hydropower dominated energy sector, creating system change and building resilience against adverse climate change impacts on the power sector. The project will strengthen the institutional capacity of the Department of Renewable Energy (DRE) on solar and wind power project design, operation and maintenance and renewables grid integration. In addition, the project will provide learning opportunities and promote energy sector career paths to students in Science, Technology, Engineering and Mathematics (STEM) streams, with special attention to female students.

Project Details

Project Name Renewable Energy for Climate Resilience
Project Number 54142-001
Country / Economy Bhutan
Project Status Proposed
Project Type / Modality of Assistance Grant
Loan
Source of Funding / Amount
Grant: Renewable Energy for Climate Resilience
Asian Development Fund US$ 10.00 million
Loan: Renewable Energy for Climate Resilience
Concessional ordinary capital resources lending US$ 8.26 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Knowledge solutions
Sector / Subsector

Energy / Renewable energy generation - solar

Gender Equity and Mainstreaming Effective gender mainstreaming
Description The project will finance the construction of one solar photovoltaic (PV) power plant located in central-west Bhutan with a minimum total capacity of 17.38 megawatt peak (MWp). This will be the first utility scale alternative renewable power plant in the country and the first step to diversify the generation portfolio of Bhutan's hydropower dominated energy sector, creating system change and building resilience against adverse climate change impacts on the power sector. The project will strengthen the institutional capacity of the Department of Renewable Energy (DRE) on solar and wind power project design, operation and maintenance and renewables grid integration. In addition, the project will provide learning opportunities and promote energy sector career paths to students in Science, Technology, Engineering and Mathematics (STEM) streams, with special attention to female students.
Project Rationale and Linkage to Country/Regional Strategy

Overview.

Bhutan is a landlocked and mountainous country in the Eastern Himalayan with elevations ranging from 160 meters to over 7,000 meters above sea level and abundant water resources. Climate varies due to the country's topography and geographical location. Summer monsoon typically lasts from June to late September and creates most of the annual rainfall in Bhutan.

The country's annual average economic growth of 7% between 2007 and 2019 far exceeds the average global growth rate of 3.2%. This high growth has contributed effectively to reducing poverty. Poverty rate in Bhutan declined from 12% in 2012 to 8.2% in 2017. However, the COVID-19 pandemic is taking a high toll, decreasing growth rates to -10.1% in 2020.

Climate-sensitive economy.

Bhutan's development has been heavily dependent on climate-sensitive sectors such as agriculture and hydropower, with hydropower making a major contribution to the growth and power export to India is an important source of revenue. Hydropower contributes about 25% to total gross domestic product (GDP) annually, accounts for 32% of total exports, and generates about 25% of the government's total domestic revenue. The power generation sector almost exclusively relies on hydropower, with an installed capacity of 2,326 megawatt (MW) and 2938 MW under construction. Bhutan has a per capita electric power consumption of 3,165 kilowatt-hours (kWh) which is in the range of the average of upper-middle-income countries and a peak system demand of 388 MW in 2019. The total techno-economically viable hydropower potential is estimated to be 23,760 MW.

Power sector vulnerability. More than 80% of annual precipitation in the central-eastern part of the Himalaya is delivered by the summer monsoon. While long-term future precipitation trends in the region, and in specific river basins, are subject to considerable uncertainty, several patterns have emerged. Based on the most recent global climate modeling experiments (CIMP5), summer monsoon rainfall is predicted to increase by mid to late 21st century in the central and eastern Himalayas, while winter precipitation is projected to decline.

Glaciers have strong modulating effect on flows ensuring uninterrupted water supply during droughts. Glaciers in Bhutan are retreating rapidly, with area loss between 1980 and 2010 in order of 20-25%. It is projected with high confidence that glaciers, snow-covered areas, snow and ice volumes will decrease within these regions over the coming decades in response to increasing temperatures. The hydrological system shifts towards a more rainfall dominated pattern. This can imply more frequent hydrologic droughts and periods of low flows outside the monsoon season, as well as more frequent extremely high flows or floods during the monsoon season. The loss of buffering capacity increases susceptibility to both extreme runoff due to increasingly frequent extreme rainfall events, and to prolonged low flows. Projected flows indicate longer flow duration outside the turbine design range and therefore less generation during the low flow season, particularly for systems with limited storage or run-of-river facilities which are common in Bhutan.

The climate risk and vulnerability assessment prepared for this project indicates changes in the discharge level of events with a 50-year return period to increase in Bhutan by around 40 to 180%, depending on the climate scenario. Such strong increase in extreme flows significantly increase the risk of damage to hydropower infrastructure and leads to an increase in the number of landslides and similar natural hazards. These types of events can be disastrous for hydropower infrastructure. Extreme flows also contribute to increased sediment loads, negatively affecting hydropower infrastructure, by increased abrasion of turbines, as well as filling of head ponds and reservoirs.

Another hazard which is increased by climate change is the risk of glacier lake outburst floods (GLOFs). With the retreat of glaciers, frequently proglacial lakes are formed between the former moraines and the retreating glacier front, filled with melt water. These can become unstable and burst, resulting in extreme flooding downstream. The Himalayas in Bhutan have more than 700 glacial lakes, of which several have the potential for severe GLOF. Hydropower infrastructure in the pathway of a GLOF is at risk of severe damage.

Diversification of generation portfolio for building resilience. Other renewable energy resources such as solar photovoltaic (PV) can complement hydropower in forming a more diversified electricity generation system, which, in healthy mix, creates resilience to the impacts of changes in seasonal weather patterns and weather extremes. Bhutan's run-of-the-river hydropower generation drastically drops during the winter dry season (December to March) due to low precipitation and snow melt, almost falling short to meet peak demand. The generating utility of Bhutan experienced poor hydrologic conditions in 2018 and 2022 and for the first time since its formation in 2008, required net energy import from India in the dry season of February and March. In future, climate change could amplify this effect. Renewable energy sources such as solar PV in Bhutan have complementary annual generation profiles to hydropower, producing most power during the dry season from December to March. Estimates for the technical potential of solar PV in the country is 12,000 MW.

Impact Carbon neutrality, climate, and disaster resilience improved (National Key Result Area 6, Twelfth Five Year Plan 2018-2023)
Outcome Bhutan's clean energy generation system diversified to non-hydro resources
Outputs

Utility scale non-hydro renewable energy generation assets established and promoted

Knowledge in climate resilient renewable energy systems improved

Geographical Location Nation-wide
Safeguard Categories
Environment B
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services The Department of Renewable Energy (DRE), Ministry of Economic Affairs will be the executing agency. The implementing agency will be Druk Holding & Investments (DHI) which will establish a special purpose vehicle (SPV) for the project, an entity owned by DHI, to implement the project. DHI is the largest and only government-owned holding company in Bhutan operating in the manufacturing, energy, natural resources, financial, communication, aviation, trading, and real estate sectors. In total, six ADB-financed projects have been implemented by companies owned by DHI and one project was directly implemented by DHI. The Ministry of Finance is the sole shareholder of DHI.
Procurement The Department of Renewable Energy (DRE), Ministry of Economic Affairs will be the executing agency. The implementing agency will be Druk Holding & Investments (DHI) which will establish a special purpose vehicle (SPV) for the project, an entity owned by DHI, to implement the project. DHI is the largest and only government-owned holding company in Bhutan operating in the manufacturing, energy, natural resources, financial, communication, aviation, trading, and real estate sectors. In total, six ADB-financed projects have been implemented by companies owned by DHI and one project was directly implemented by DHI. The Ministry of Finance is the sole shareholder of DHI.
Responsible ADB Officer Meindl, Christoph
Responsible ADB Department South Asia Department
Responsible ADB Division Energy Division, SARD
Executing Agencies
Department of Renewable Energy, Ministry of Economic Affairs
Thimphu, Bhutan
Timetable
Concept Clearance 18 Nov 2020
Fact Finding 01 Feb 2022 to 11 Feb 2022
MRM 29 Apr 2022
Approval -
Last Review Mission -
Last PDS Update 18 Nov 2020

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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Title Document Type Document Date
Renewable Energy for Climate Resilience: Initial Poverty and Social Analysis Initial Poverty and Social Analysis Nov 2020

Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.


Evaluation Documents See also: Independent Evaluation

None currently available.


Related Publications

None currently available.


The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.

Tenders

Tender Title Type Status Posting Date Deadline
PROJECT MANAGEMENT CONSULTANT Firm - Consulting Closed 19 Jan 2022 17 Feb 2022
Ecological Expert (National) Individual - Consulting Closed 15 Dec 2020 21 Dec 2020
Ornithological Expert (National) Individual - Consulting Closed 15 Dec 2020 17 Dec 2020
Environment Expert (National) Individual - Consulting Closed 15 Dec 2020 17 Dec 2020
Ecological Expert Individual - Consulting Closed 09 Dec 2020 15 Dec 2020
Environment Expert Individual - Consulting Closed 08 Dec 2020 14 Dec 2020
Ornithological Expert Individual - Consulting Closed 07 Dec 2020 13 Dec 2020
Wind Power Expert Individual - Consulting Closed 02 Dec 2020 08 Dec 2020
Power System Expert, team leader Individual - Consulting Closed 02 Dec 2020 08 Dec 2020
Solar PV Expert, deputy team leader Individual - Consulting Closed 02 Dec 2020 08 Dec 2020
Financial Expert Individual - Consulting Closed 01 Dec 2020 07 Dec 2020
Economic Expert Individual - Consulting Closed 01 Dec 2020 07 Dec 2020

Contracts Awarded

No contracts awarded for this project were found


Procurement Plan

None currently available.