Bhutan secures USD 50 million OPEC Fund for hydropower development and energy security

YK Poudel 

Bhutan’s energy sector received a major boost yesterday as the Ministry of Finance signed USD 50 million loan agreement with the OPEC Fund for International Development.

This deal marks the Fund’s first-ever loan to Bhutan, earmarked for financing the 45MW Gamri-I hydropower project in Trashigang and the 25MW Begana project in Thimphu.

At the invitation of the director general of the OPEC Fund for International Development, former Prime Minister Dr Lotay Tshering attended the OPEC Fund Development Forum 2023 in Vienna, Austria. During the visit, Dr Lotay Tshering held discussions with OPEC Fund’s director general, Dr Abdulhamid Alkhalifa, exploring avenues for further collaboration and support for Bhutan. This dialogue was followed by a co-ordination meeting in July last year.

Finance Minister Lekey Dorji emphasised Bhutan’s vast hydropower potential, highlighting that diversifying the country’s energy sources reduces dependence on imported fossil fuels, stabilises energy costs, and promotes green-sector job creation.

He said that advancing renewable energy development aligns with Bhutan’s carbon-neutral pledge, reinforcing its contribution to global climate goals.

Dr Abdulhamid Alkhalifa, director general of the OPEC Fund, described the loan agreement for the development of the Gamri and Begana hydropower plants as a key contribution to Bhutan’s sustainable energy future.

“These renewable energy projects will not only enhance the national grid but also uplift livelihoods and strengthen the local economy,” he said.

The new plants are designed to primarily serve local demand through mini grids, with the flexibility to connect to Bhutan’s main grid, which already exports power to neighbouring India and Bangladesh. These facilities are expected to improve power reliability for around 50,000 households, including those in Trashigang, Bhutan’s most densely populated area and a key trade route to India, as well as in Thimphu.

Bhutan recently became the 125th member of the OPEC Fund.

With an estimated hydropower potential of 35,000 MW from over 150 sites, Bhutan has harnessed just seven percent of its clean renewable energy capacity so far.

The OPEC Fund for International Development, established in 1976, is a globally focused development institution that exclusively provides financing from its member countries to non-member nations. Collaborating with developing countries and the broader international development community, the organization aims to stimulate economic growth and foster social progress in low- and middle-income countries worldwide.

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

This initiative is part of the OPEC Fund’s broader strategy to address the dual challenges of energy poverty and climate change, as outlined in its climate action plan unveiled at COP 27.