The European Investment Bank (EIB) has initiated its first-ever project in Bhutan, one of only three net carbon-negative nations worldwide. The project, supported by a 30-year loan of €150 million, focuses on enhancing Bhutan's renewable energy infrastructure, particularly through new solar photovoltaic and hydropower schemes under the EU’s Global Gateway initiative.

This investment aims to address Bhutan's vulnerability to climate change while expanding energy access without increasing carbon emissions. By diversifying the country’s power mix with small to mid-size run-of-river hydropower plants and solar photovoltaic generation, the project seeks to bolster Bhutan's energy security and facilitate the trading of clean energy across borders.

The renewable energy framework loan was signed during the 2024 IMF/World Bank Spring Meetings by Bhutan’s Finance Secretary Leki Wangmo and acting Managing Director of EIB Global Markus Berndt. The signing was attended by EIB President Nadia Calviño.

“Bringing green, reliable and affordable energy to communities around the world, especially in more remote regions, has huge benefits not just in environmental terms, but also by improving access to health, education and economic activity,” commented Calviño. “That’s why I am delighted that we’ve been able to agree this €150 million investment with our Bhutanese partners, under the EU’s Global Gateway initiative. We’re looking forward to working as a key partner for climate action and sustainable economic development in Bhutan.”

Lyonpo Lekey Dorji, Finance Minister of the Kingdom of Bhutan, added: “As Bhutan strives to maintain its carbon-negative status amidst rising global challenges, this partnership not only strengthens Bhutan's renewable energy sector, but also contributes to the broader regional and global effort in combating climate change. We welcome the European Investment Bank as our partner in our pursuit of the sustainable development goals and look forward to more collaboration in the future as we take forward our agenda of building a more sustainable planet.”

Implemented by Druk Green Power Corporation, the new projects are expected to contribute significantly to climate action by increasing Bhutan's renewable energy capacity. The installation of an estimated 310 MW of hydropower and solar power generation capacity is projected to generate around 670 GWh in the first year of operation. Increasing solar power generation will reduce the potential need for energy imports during the dry season, when river flows and hydropower generation capacity are reduced.

Bhutan is an environmental leader, and one of only three net carbon-negative countries in the world. It sequesters much more carbon than it emits, thanks to substantial hydropower capacity and the forests that cover 71% of the country.

While hydropower provides a reliable source of growth, other renewable energy technologies, including solar photovoltaic, offer ways to diversify Bhutan’s electricity mix and increase resilience to changing seasonal extreme weather patterns that can adversely affect hydropower supply.

To meet its annual power needs, Bhutan uses solar power alongside hydropower in a complimentary manner. This promotes climate adaptation by diversifying the power generation portfolio, a systemic approach that builds resilience against climate change impacts. Adding new hydropower will increase electricity generation during the dry season and allow Bhutan to exploit its renewable energy generation potential in a way that can also benefit the wider region in the wet season.