Bhutan Hydropower Wins UN Cross-Border Approval for Emissions Cuts

THIMPU, Bhutan, April 12, 2010 (ENS) – A hydropower project on Bhutan’s Dagachhu River that will enable Bhutan to export clean energy to India has been registered as the first cross-border project under the Clean Development Mechanism of the UN’s Kyoto Protocol.

The power generated by the hydro project will replace electricity generated by burning fossil fuels, reducing greenhouse gas emissions in India.

The $200 million Dagachhu hydropower project is funded with loans from the Asian Development Bank, Japan and Austria.

The project’s Certified Emission Reductions, or carbon credits, will be used by Austria and Japan to comply with their legally binding greenhouse gas limits under the protocol.

Thevakumar Kandiah, director of Asian Development Bank’s South Asia Department, said, “ADB is pleased that the Dagachhu hydropower project has been registered for the Clean Development Mechanism. It will encourage regional trade in clean and renewable energy while contributing to environmental protection.”

Under the Clean Development Mechanism, industrialized countries can invest in ventures that reduce emissions in developing countries, such as India, as an alternative to more expensive emissions reductions at home.

High-voltage transmission line runs across Bhutan’s high mountains. (Photo courtesy Bhutan Power Company)

The 114-megawatt Dagachhu hydropower project is expected to reduce carbon dioxide emissions by about 500,000 tonnes per year.

Being a run-of-river hydro project the project does not have any water impoundment and is therefore dependent upon in-stream flow rates for its ability to generate power.

It is being developed by Punatsangchhu-I Hydroelectric Project Authority, a joint venture of the governments of India and Bhutan. The company is led by Bhutan’s state-owned utility, Druk Green Power Corporation, and Tata Power Company, India’s largest private utility.

Environmental approvals are in place. Tata has begun construction of the Dagachhu hydropower project and expects to commission the first unit in 2013.

The electricity will be delivered to a regional grid consisting of Bhutan and the eastern region of India. The Dagachhu River is a tributary of the Punatsangchhu River that feeds the Brahmaputra River in India.

The income from the sale of the project’s CERs is expected to contribute to sustainable development in Bhutan.

Kaoru Ogino, senior energy specialist of ADB’s South Asia Department, said, “This project will deliver economic and social benefits on wider fronts. The project’s royalties will contribute to low-cost electricity supply to rural domestic customers in Bhutan and at the same time provide the government of Bhutan with a long-term revenue stream to support its development programs for poverty alleviation.”

Prayer flags over one of Bhutan’s moutain rivers (Photo by Michael Foley Photography)

The Dagachhu hydropower project has attracted participation by multiple Bhutanese and international stakeholders, marking it as the first public-private partnership in infrastructure investment in the remote Himalayan kingdom.

The site is in a remote part of Bhutan marked by extreme terrain. While only 40 km from the capital Thimphu, in a straight line, land access to the project site involves altitude change over marginal roads. Project components and equipment arrive in India and must be trucked over high altitude passes.

The roads, single lane in many places, are narrow, winding and poorly maintained. They overlook sheer drop-offs and are overhung by landslide-prone cliffs.

This type of access makes transporting heavy equipment and oversized components dangerous and risky, and subject to loss or delay. In addition, the remoteness of the project site requires the construction of project related access roads to the dam site as well as power house and switch yard, requiring large funds for site development.

Cofinancing is being provided by the National Pension and Provident Fund of Bhutan and the Raiffeisen Zentralbank Osterreich AG of Austria.

The Austrian government through the Austrian Development Agency has provided engineering support toward the project. The Asian Development Bank is providing assistance with overall capacity development to help strengthen policy and institutions of the Bhutan power sector.

The project structuring was promoted with support from the Japan Special Fund, established by the government of Japan and administered by Asian Development Bank. It has also received assistance from ADB’s Technical Support Facility under its Carbon Market Initiative during the process of the CDM registration.

Bhutan and India are jointly developing 10 hydropower projects with combined installed capacity of 11.5 gigawatts of power.

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