The European Investment Bank (EIB) has signed its first-ever investment support for Bhutan, a 30-year loan for €150 million (US$160.1 million).
Bhutan is highly vulnerable to the impact of climate change and is committed to increasing energy access without raising carbon emissions. The EIB loan will increase renewable energy generation and help Bhutan meet its Nationally Determined Contribution target of constant carbon neutrality.
The financing will back the construction of small to mid-size run-of-river hydropower plants and solar photovoltaic generation to help diversify the country’s power mix. The project will allow clean energy to be traded across borders and improve access to green power, supplying thousands of households with reliable and affordable energy, and allowing Bhutan to draw more benefit from its renewable energy resources.
“Bringing green, reliable and affordable energy to communities around the world, especially in more remote regions, has huge benefits not just in environmental terms, but also by improving access to health, education and economic activity,” said EIB President Nadia Calviño. “That’s why I am delighted that we’ve been able to agree this €150 million investment with our Bhutanese partners, under the EU’s Global Gateway initiative. We’re looking forward to working as a key partner for climate action and sustainable economic development in Bhutan.”
Lyonpo Lekey Dorji, Finance Minister of the Kingdom of Bhutan, stated, “As Bhutan strives to maintain its carbon-negative status amidst rising global challenges, this partnership not only strengthens Bhutan’s renewable energy sector, but also contributes to the broader regional and global effort in combating climate change. We welcome the European Investment Bank as our partner in our pursuit of the sustainable development goals and look forward to more collaboration in the future as we take forward our agenda of building a more sustainable planet.”
The new projects, to be implemented by Druk Green Power Corporation, will contribute to climate action, helping Bhutan to strengthen its energy security and increase the use of renewable energy.
The EIB financing will support the installation of an estimated 310 MW of hydropower and solar power capacity. In the first year of operation, the facilities are expected to generate around 670 GWh. Increasing solar power generation will reduce the potential need for energy imports during the dry season, when river flows and hydropower generation capacity are reduced.
This investment in renewable power is part of the EU Global Gateway initiative, which supports projects that improve global and regional connectivity in the digital, climate, transport, health, energy and education sectors.
Bhutan is one of only three net carbon-negative countries in the world. It sequesters much more carbon than it emits, thanks to substantial hydropower capacity and the forests that cover 71% of the country.
While hydropower provides a reliable source of growth, other renewable energy technologies, including solar photovoltaic, offer ways to diversify Bhutan’s electricity mix and increase resilience to changing seasonal extreme weather patterns that can adversely affect hydropower supply. To meet its annual power needs, Bhutan uses solar power alongside hydropower in a complimentary manner. This diversifies the power generation portfolio, a systemic approach that builds resilience against climate change impacts. Adding new hydropower will increase electricity generation during the dry season and allow Bhutan to exploit its renewable energy generation potential in a way that can also benefit the wider region in the wet season.
EIB is the long-term lending institution of the European Union. It finances sound investment in pursuit of EU policy goals worldwide. Together with the European Investment Fund, the EIB forms the EIB Group. EIB Global is the EIB Group’s specialized arm for operations outside the EU and a key partner of the EU Global Gateway strategy. For 25 years, EIB has supported economic development in Asia and the Pacific.
