𝐁𝐡𝐮𝐭𝐚𝐧 𝐚𝐢𝐦𝐬 𝐭𝐨 𝐢𝐧𝐜𝐫𝐞𝐚𝐬𝐞 𝐢𝐭𝐬 𝐞𝐧𝐞𝐫𝐠𝐲 𝐜𝐚𝐩𝐚𝐜𝐢𝐭𝐲 𝐟𝐫𝐨𝐦 𝟐,𝟓𝟎𝟎 𝐭𝐨 𝟐𝟓,𝟎𝟎𝟎 𝐦𝐞𝐠𝐚𝐰𝐚𝐭𝐭𝐬 𝐛𝐲 𝟐𝟎𝟒𝟎

…𝑭𝒐𝒄𝒖𝒔𝒊𝒏𝒈 𝒐𝒏 𝒉𝒚𝒅𝒓𝒐𝒑𝒐𝒘𝒆𝒓, 𝒔𝒐𝒍𝒂𝒓, 𝒂𝒏𝒅 𝒈𝒆𝒐𝒕𝒉𝒆𝒓𝒎𝒂𝒍 𝒔𝒐𝒖𝒓𝒄𝒆𝒔

By Yeshey Lhadon

Bhutan Innovation Forum hosted the panel discussion among the key figures namely Chhewang Rinzin, Managing Director of Druk Green Power Corporation, Mertin Raiser, Vice President for South Asia at the World Bank Group, and Rod Phillips, Vice Chair of Canaccord Genuity, experts delved into Bhutan’s bold plans to transform its energy sector. Moderated by an experienced legal professional deeply connected to Bhutan’s development, the dialogue highlighted the Himalayan kingdom’s challenges and strategies as it seeks to expand and diversify its renewable energy resources.

Bhutan, celebrated for its hydropower production, has an installed capacity of approximately 2,500 megawatts, exporting 60-70 percent of this clean energy to India. The country’s hydropower-driven economy has been a model for renewable energy development, yet Bhutan now faces significant challenges due to rising domestic electricity demand.

Chhewang Rinzin pointed out the growing gap between energy supply and demand. Projections suggest Bhutan will need 4,000 megawatts of electricity by 2040 to meet its domestic needs, a sharp contrast to the 450 megawatts currently available during the winter months when river flows are diminished.

“By 2040, we need 4,000 megawatts of energy, but we currently only have 450 megawatts available during winter,” Chhewang Rinzin explained. “To meet this demand, we must increase our installed capacity tenfold, reaching between 20,000 to 25,000 megawatts.”

To bridge the energy gap, Bhutan has an ambitious plan to diversify its energy portfolio. While hydropower will remain central to the country’s energy strategy, the government is also seeking to develop solar and geothermal energy resources. Over the next 15 years, Bhutan aims to add 15,000 megawatts of hydropower and 5,000-6,000 megawatts of solar energy, requiring an estimated investment of $26 billion.

This investment is monumental for a country with a GDP of only $3 billion. Recognizing that the government alone cannot bear the financial burden, Bhutan is opening its hydropower sector to private and foreign investments. For the first time, the government will allow up to 49 percent foreign ownership in hydropower projects, while retaining a majority stake. Additionally, 100percent foreign ownership will be allowed in the solar sector.

“This is the first time we’ve allowed private sector investment in Bhutan’s hydropower sector,” Chhewang Rinzin remarked. “We hope that the global community, including multilateral banks and private sector investors, will come forward to help us achieve our goals.”

Despite these aggressive expansion plans, Bhutan remains resolute in its environmental commitments. The constitution mandates that at least 60 percent of the country remain under forest cover, a benchmark Bhutan currently exceeds with more than 70 percent forestation and 50 percent of its land designated as protected parks.

Rod Phillips highlighted that while hydropower is a green energy source, it is not without challenges, particularly when attracting environmentally conscious investors. “Institutional investors are sensitive to environmental sustainability. Bhutan’s sincere commitment to the environment is a net advantage, but the government will need to address questions about the nature and speed of development.”

Chhewang Rinzin reassured that Bhutan’s approach to expansion will adhere to international environmental standards. “We are committed to following global standards for social and environmental safeguards. Our intent is never to infringe on the commitments we’ve made to the global community.”

Mertin Raiser of the World Bank Group emphasized the importance of balancing environmental risks such as those posed by climate change and seismic activity with financial sustainability. He proposed moving toward a project financing model, where debt is tied to the revenue generated by the projects, reducing the financial burden on the government.

“Financing should move toward project finance, meaning the debt is tied to the revenues generated by the projects,” Raiser explained. “This allows a small country to raise larger amounts of money without the government guaranteeing the debt.”

However, both Raiser and Phillips acknowledged that attracting foreign investment to Bhutan’s energy sector presents challenges. The country currently lacks a national credit rating, and currency conversion and investment risk management remain significant hurdles.

“Introducing Bhutan as an investment opportunity to institutional investors may require education,” Phillips said. “Many may not be familiar with the country, its laws, or its investment climate. Addressing currency risks and jurisdictional issues will be essential.”

In response to questions on how Bhutan plans to finance its majority stake in new projects, Rinzin highlighted innovative approaches. The government is considering monetizing existing assets and using revenues from operational hydropower plants to fund future developments.

“We’re looking at ways to mobilize or own the 51percent shareholding,”Chhewang Rinzin said. “If we can get the first one to two billion dollars through such initiatives, we believe we can manage the rest as our revenues increase.”
Additionally, Chhewang Rinzin stressed the importance of energy efficiency, noting that 80 percent of the country’s electricity consumption comes from industries. The government is promoting energy-saving technologies in both industrial and residential sectors to optimize energy use.

As Bhutan scales up its hydropower capacity, climate change remains a pressing concern. Audience members raised questions about its potential impact on Bhutan’s rivers and hydropower infrastructure. Chhewang Rinzin acknowledged that changing weather patterns could lead to more erratic river flows but expressed confidence in the country’s ability to adapt.

“Studies show that monsoons are becoming more intense, and river runoffs may actually increase, though they will be more erratic,” Chhewang Rinzin said. “We have to change from run-of-the-river to some reservoir projects and, in the long run, merge solar with pump storage systems.”

These adaptations, Chhewang Rinzin explained, are part of a broader strategy to ensure Bhutan’s hydropower sector remains resilient in the face of climate variability.

In a notable development, Mertin Raiser announced that the World Bank is significantly increasing its financial support to Bhutan, acknowledging the regional significance of Bhutan’s energy projects.

“Traditionally, we were in the range of $50 million per year,” Raiser said. “We now have a pipeline of $600 million per year. This reflects the importance we see in Bhutan’s story, not just for the country but for the region.”

The journey ahead is fraught with challenges, but Bhutan’s unwavering commitment to sustainability and growth has the potential to set a shining example for the region. Chhewang Rinzin reinforced Bhutan’s optimism, saying, “We look forward to working with the global community, and we are open to business.”