Introduction and Background:
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 from India, 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 RE 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.
Project Goals and Approach to Transformational Change:
The project aims to install 30 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 will establish 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 will have 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.
Project Components and Support Mechanisms:
The financial component (FC) consists of concessional and commercial loans leveraging EUR 4m. of public and EUR 7m. of private and public co-funding respectively. The technical component (TC) will focus 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 will provide 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.
Mitigation Potential and 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.