Bhutan Secures $50 Million Loan from OPEC Fund to Enhance Energy Sector

by Yuki

The energy sector in Bhutan received a significant boost on Tuesday with the signing of a USD 50 million loan agreement between the Ministry of Finance and the OPEC Fund for International Development. This marks the OPEC Fund’s inaugural loan to Bhutan, specifically aimed at financing two hydropower projects: the 45MW Gamri-I project in Trashigang and the 25MW Begana project in Thimphu.

Former Prime Minister Dr. Lotay Tshering attended the OPEC Fund Development Forum 2023 in Vienna, Austria, at the invitation of the fund’s director general, Dr. Abdulhamid Alkhalifa. During this visit, Dr. Tshering engaged in discussions with Dr. Alkhalifa regarding potential collaborations and further support for Bhutan’s energy initiatives. This dialogue followed a coordination meeting held in July of the previous year.

Finance Minister Lekey Dorji underscored Bhutan’s extensive hydropower potential, emphasizing that diversifying energy sources will help the country reduce reliance on imported fossil fuels. He noted that this approach would stabilize energy costs and promote job creation within the green sector. “Advancing renewable energy development aligns with Bhutan’s commitment to carbon neutrality, reinforcing our contributions to global climate objectives,” Minister Dorji stated.

Dr. Abdulhamid Alkhalifa characterized the loan agreement for the Gamri and Begana hydropower plants as a pivotal contribution to Bhutan’s sustainable energy future. He remarked, “These renewable energy projects will not only enhance the national grid but also uplift livelihoods and strengthen the local economy.”

The new hydropower facilities are designed primarily to meet local demand through mini grids while maintaining the capacity to connect to Bhutan’s main grid. Currently, this grid exports power to neighboring countries such as India and Bangladesh. It is anticipated that the new plants will enhance power reliability for approximately 50,000 households, particularly in Trashigang, which is Bhutan’s most densely populated area and a crucial trade route to India, as well as in Thimphu.

Bhutan recently became the 125th member of the OPEC Fund, which has an estimated hydropower potential of 35,000 MW across more than 150 sites. However, the country has only harnessed about seven percent of its clean renewable energy capacity to date.

Established in 1976, the OPEC Fund for International Development is a development institution focused on providing financing to non-member nations exclusively from its member countries. The fund collaborates with developing nations and the international development community to stimulate economic growth and advance social progress in low- and middle-income countries around the globe.

To date, the OPEC Fund has committed over USD 27 billion to its supported nations. Furthermore, it has pledged to extend technical assistance, advisory services, and knowledge-sharing through its Climate Finance and Energy Innovation Hub, aiding Bhutan in achieving its Sustainable Development Goals (SDG 7 and 13) and Nationally Determined Contributions (NDCs).

This initiative forms part of the OPEC Fund’s wider strategy to tackle the intertwined challenges of energy poverty and climate change, as outlined in its climate action plan unveiled at COP 27.

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