Context
Bhutan, a carbon-negative country, faces a growing threat to its environment due to climate change. Accelerated glacial melt and unpredictable river flows are impacting hydropower generation, the country’s primary energy source. This has led to increased reliance on fossil fuel-derived energy imports, jeopardising Bhutan’s carbon neutrality commitments outlined in its Nationally Determined Contribution (NDC) and Long-Term Strategy (LTS).
The healthcare sector, with facilities dispersed across challenging terrain, is particularly vulnerable to energy insecurity. Bhutan’s Renewable Energy Master Plan (2017-2032) identifies 39,462 MW of potential small hydropower, solar, and wind projects, underscoring the country’s commitment to clean energy. The project directly supports the implementation of this Master Plan.
Goals and approach to transformational change
The project aims to install 45 MW of solar PV and strengthen the regulatory environment to accelerate Bhutan’s renewable energy market, fully realising its solar energy plan of 1000 MW as planned by the government in the current five-year plan (2024-2028). The project establishes a Green Financing Framework to facilitate access to investment capital for private Energy Service Companies (ESCOs), with a focus on small and medium-sized enterprises, including those led by women. By the end of the project, Bhutan has a fully functional renewable energy market with high levels of investment confidence among ESCOs, capable of covering the country’s total 12 GW solar energy generation capacity.
Components and support mechanisms
The Financial Cooperation (FC) component consists of concessional and commercial loans leveraging EUR 16.5 million of private and EUR 11 million of public co-funding respectively.
The Technical Cooperation (TC) component focuses on establishing an enhanced policy framework alongside the government that supports the involvement of the private sector in the Bhutanese energy sector through buy-back guarantees and opening green finance channels, while also reforming energy tariffs. The project aims to set up a Green Financing Framework for ESCO consolidation, including training financial institutions and establishing credit lines. It provides a single-window technical support centre aimed particularly at women and youth-led ESCOs to give comprehensive technical and investment advisory services on setting up and operating an ESCO.
Long-term impact
Throughout the project, it aims to reduce at least 312,401 tCO2e. Additionally, the project anticipates significant emission reductions of up to 1.4 MtCO2e during the lifetime of the technology. The cost-efficiency of these interventions is estimated at ~20 EUR/tCO2e.
