Bhutan Hydropower Plant to Avoid Fossil Fuel Emissions, Earn Carbon Credits

Project Result / Case Study | 31 January 2014

In Bhutan's Dagana District, the 126 megawatt Dagachhu Hydropower Plant is contributing to environmentally sustainable development both at home and abroad.

Clean air, pristine rivers, and snow-capped mountains are essential to Bhutan's national identity. They are similarly crucial for the country's economic growth where the quality of the environment is a key component of its famed Gross National Happiness measure for development that the Bhutanese government uses in preference to the more common Gross National Product.

"The environment is important for us, it is important for the world," said Bhutan's Prime Minister, Tshering Tobgay.

In the Dagana District, in the southwest of the country, the 126 megawatt Dagachhu Hydropower Plant is contributing to environmentally sustainable development both at home and abroad.

Built with a $119 million loan from the Asian Development Bank and set to open in mid 2014 when the next rainy season starts, the plant will pump out around an annual 500 million units of electricity when the swiftly flowing Dagachhu River turns two gigantic turbines. This clean electricity will then be largely exported to India where it will be enough to power an estimated 700,000-800,000 homes in India.

Using Dagachhu's clean electricity instead of coal-generated energy - which most of India's power comes from - will prevent around 500,000 tons of carbon dioxide entering the atmosphere every year.

First-ever cross-border carbon credits

Because it reduces carbon emissions, the Dagachhu plant qualified in February 2010 for certified emission reduction units, or carbon credits, under the Kyoto Protocol's Clean Development Mechanism (CDM). The CDM is aimed at encouraging countries and companies around the world to develop projects which reduce carbon emissions and mitigate climate change.

"When we sell power to India, we are replacing fossil fuel-based power generation so globally we are contributing to a clean environment."

- Thinley Dorji, Chief Executive Officer of Dagachhu Hydro Power Corporation (DHPC)

In doing so, the Dagachhu Hydropower plant became the first cross-border project to be awarded CDM registration. The Dagachhu Hydro Power Corporation (DHPC), which owns and runs the project, has already sold the credits in advance for two years to the Future Carbon Fund administered by ADB, earning upfront cash for company shareholders including the government-owned Druk Green Power Corporation and private sector owner Tata Power, from India. Subsequent sales of the carbon credits will generate further income.

That should pave the way for similar hydropower projects to replace fossil fuels. Under a 2006 agreement, Bhutan has agreed to export 10,000 megawatts of hydroelectricity to India by 2020 and including Dagachhu, four are already under construction, including the large two-stage 2,220 megawatt Punatsangchhu and the 720 megawatt Mangdechhu.

"When we sell power to India, we are replacing fossil fuel-based power generation so globally we are contributing to a clean environment," said the Chief Executive Officer of DHPC, Thinley Dorji.

As a run-of-the-river operation, the plant also has had limited impact on the countryside where it is located, and no households in the sparsely populated area have had to be relocated. Although some 4,600 trees on the steep mountain slopes were cut down to make way for the plant and the road to it, the project more than made up for the losses by planting around 10,000 new trees instead and working with the local residents.

Taking care of nature

"We planted trees and donated saplings, more than we cut down," said Tshering, Environment Officer with DHPC, who uses only one name. "We worked to give them an awareness of the environment, safety, and health and until now the community has been very supportive of the project."

Meanwhile, the project developers have been keen to ensure there is no lasting impact on the wildlife in the region. A fish ladder ensures that the local migratory fish can still travel from downstream to upstream of the diversion weir along the river, while the narrow but adjacent Tanalumchhu Stream will continue to run its course alongside the dam, providing a natural environment for birds, small mammals and other wildlife.

In conjunction with the construction of the hydropower plant, ADB also provided funds to support the government's ongoing goal to connect all homes in Bhutan to electricity supply by the end of the 2013 fiscal year. Under the project, ADB has already helped provide electricity to over 9,000 households and public institutions in remote locations by extending an existing grid and through off-grid solar home systems.

As well as saving households an estimated 2-3 hours a day collecting the firewood that villagers used to use, it also relieves the stress on mountainside forests.

"Now people use rice cookers and water boilers, they do not need to go into the forest to get firewood. Electricity is much better for them and for the forest," said DHPC's Dorji.

Rinchen Norbu said the advent of electricity in his village, Balaygang, about 17 kilometers from the plant, improved his family's health.

"Before we had electricity, we used a kerosene lamp for light and charcoal for cooking. That produced a lot of smoke," said the 39-year old farmer and father of three. Now, his home has electric light which gives his children more time to study while his wife makes meals using an electric rice cooker and curry cooker.