ADB supports innovative project for
cross-border power trade, rural electrification in
Oct 30, 2008 - Asia Pulse Data Source
MANILA The Asian Development
Bank (ADB) is supporting an innovative power project
in Bhutan that will produce clean energy for export
to India and increase electricity coverage in rural
areas where the bulk of the poor live.
The Green Power Development Project
-- which includes Bhutans first public-private partnership
for an infrastructure project -- will help tap the
countrys under-utilized hydropower resources, increase
government revenues for development spending, and
improve the standard of living for nearly 9,000 rural
It will also help promote clean energy
development, foster cross-border cooperation, and
provide a potential model for future private investments
in the sector.
The project will help finance the construction
of the 114-megawatt (MW) Dagachhu hydropower plant
that will generate 500,000 megawatt-hours of power
annually, mostly for export to India. It will also
support a rural electrification program that will
provide electricity to domestic households and businesses
in remote regions of the country using renewable energy
sources of hydropower and solar power.
Expanding generating capacity for the
export of clean power and increasing rural access
to electricity will enhance energy and social security.
It will provide the government a long-term revenue
stream to finance its development needs and to cut
poverty. It will help stimulate regional trade in
clean energy and reduce pollution, said Kaoru Ogino,
Energy Specialist with ADBs South Asia Department.
The project is seeking a Clean Development
Mechanism (CDM) status on a cross-border basis. By
replacing fossil fuels currently used by power companies
in India, the project will help cut greenhouse gases
and entitle the operators to carbon emission credits
that can be sold for additional revenue. The governments
of Bhutan and India have already approved the projects
The Dagachhu power plant will cost US$
201.5 million to be split 60:40 between debt and equity.
ADB will provide a 30-year, US$ 51 million loan from
its ordinary capital resources and a 32-year, US$
29 million loan from the Asian Development Fund (ADF).
Additional financing of US$ 55.5 million
is expected from the Austrian government export credit
agency, OeKB, along with US$ 45 million from the government
and its company and fund, and US$ 21 million from
Indias Tata Power Company.
The state-owned Druk Green Power Corp.,
Bhutan and Tata Power Company, India have set up a
joint venture company for the Dagachhu project which
will serve as a showcase for public-private partnerships,
leading to increased foreign direct investments in
energy development and a reduced state debt burden.
The rural electrification initiative
will receive an ADB grant of US$ 25.2 million, US$
6.7 million from the government and US$ 1 million
from the Asian Clean Energy Fund, subject to Japanese
The Asian Clean Energy Fund is administered
by the Clean Energy Financing Partnership Facility,
set up by ADB and development partners to support
clean energy projects.
The project is also expected to install
over 100 solar power systems generating energy for
off-grid rural users including schools, health clinics
and other community facilities in isolated remote
Additional assistance to help build
the capacity of power sector agencies involved in
the project is also being provided, with ADBs Regional
Cooperation and Integration Fund granting US$ 888,000
and ADBs technical assistance funding program providing
The Austrian Government, which is one
of the major proponents of the project, will support
engineering implementation of Dagachhu hydropower
Bhutan -- the only South Asian country
with surplus energy available for export -- has large
reserves of untapped hydropower resources. While it
exports the bulk of its power supply, most of its
rural dwellers still do not have electricity.
The government uses some of its royalty
revenues from power exports to cross-subsidize electricity
prices for poorer customers, while the rest goes for
development needs including infrastructure, health
The government is aiming for 100 percent
electricity coverage by 2013. It also has forged an
agreement with India to raise generating capacity
to 10,000 MW by 2020, with the power available for
export. Bhutan currently has installed capacity of
Accelerating the development of hydropower
for export will generate more revenue that will enable
the government to continue providing cross-subsidies
to maintain low-cost supply to rural customers, making
the power industry environmentally, economically and
financially sustainable, said Mr. Ogino. vcs/PR/rsm
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