Bhutan, the only South Asian country with a surplus of power for export, generates almost 100% of its power from a network of perennially flowing rivers and streams. Drawing on this comparative advantage, the government embarked on the Green Power Development Project to move closer to its target of developing a total of 10,000 megawatt- (MW) hydropower generating capacity by 2020 and expanding rural electrification coverage to 100% by end-2013.
The project had two components ─ regional clean power trade and renewable energy access for the poor.
The first component involved the construction of the Dagachhu hydropower plant (HPP), a run-of-river HPP that will export power to India through the existing transmission grid. The second component involved the extension of electricity supply to unelectrified rural households throughout Bhutan through grid connections where possible, or solar systems where a grid connection was not feasible. The Asian Development Bank supported the first component with 3 loans totaling $115.5 million, and the second with 2 grants ─ $24 million from the Asian Development Fund to finance grid connections and $1 million from the Asian Clean Energy Fund for the solar power subcomponent.
The physical outputs in each component met or exceeded appraisal targets. The Dagachhu HPP, commissioned in March 2015, has an installed capacity of 126 megawatts (MW), higher than the 114 MW planned at appraisal. In 2015, exported power to India rose by 497 GWh compared to 2014. Grid connections covered a total of 9,586 households, more than the appraisal estimate of 8,767. The number of public facilities receiving off-grid electricity totaled 116, marginally lower than the 119-target; however, as the remaining facilities opted for on-grid connections, and more solar systems were installed at some large institutions, the total number of households and facilities electrified either on or off the grid came out higher than the appraisal estimate.
Together with other initiatives undertaken in parallel, the project also achieved or exceeded most of its outcome indicators. As of completion in 2015, more than 99% of households in Bhutan had already been electrified. Almost 500,000 tons of carbon dioxide were avoided in 2015 on a cross-border basis compared to 2014. The targeted size of power export revenue was realized.
The project, rated highly successful in the project completion report, also made its mark as the first public–private partnership in Bhutan’s power sector and the world’s first cross-border project to earn Certified Emission Reduction credits under the Kyoto Protocol’s Clean Development Mechanism. However, the completion of the Dagachhu HPP was delayed by about 26 months, due mainly to additional work requirements that arose from unforeseen geotechnical issues. These additional works also raised the HPP cost by 16%.
The project had separate executing agencies (EAs) and implementing agencies (IAs) for its two components. For the Dagachhu HPP, the Druk Green Power Corporation (DGPC), a state enterprise, was the EA; and the Dagachhu Hydro Power Corporation a subsidiary of the DGPC, was the IA. For the rural electrification component, the Department of Energy (DOE) was the EA, and the IAs were the Bhutan Power Corporation for on-grid electrification and the DOE for the off-grid subcomponent.
