Bhutan hoping for happiness with hydro-power

By the middle of 2014, the stately yellow, black and white Great Hornbills that live in the forest along the Dagachhu - a river in Bhutan's Himalayan foothills - should get some peace after four years of drilling, blasting and construction around their rural haunts.

Some countries have oil and gas. Others have fertile plains on which to grow wheat or rice. Bhutan has mountains and rivers - lots of them - and has staked its future on hydroelectricity.

Dagachhu, a 126-MW plant partly financed by the Asian Development Bank, is only the latest of a series of projects that are turning this previously isolated Buddhist kingdom into a modern hydro-power nation.

Bhutan is famous for its philosophy of emphasising "gross national happiness" (GNH) over gross domestic product (GDP). The $240m project has some peculiar features suited to the country's attempts to open its economy while seeking to preserve a largely pristine mountain environment.

It is the first Bhutanese hydro project in which the private sector - in this case India's Tata Power, with 26 per cent of the equity - has a direct stake.

And it is the world's first example of cross-border use of the UN's Clean Development Mechanism: although the power plant is in clean and green Bhutan, it is permitted to earn carbon credits because the electricity is exported to India and will reduce emissions there by some 500,000 tonnes of carbon dioxide per year.

Dagachhu, however, is part of a much broader drive by the Bhutanese royal family and the two governments elected since the introduction of full democracy in 2008 to accelerate economic growth and reduce poverty.

Bhutanese ministers admit the target will slip, but the country's declared aim is to increase hydro-power capacity to 10,000MW by 2020, most of it for export to its electricity-hungry neighbour India.

So far only 1,500MW, about 6 per cent of the country's total potential, has been completed, and in winter when rivers are low Bhutan is still an electricity importer. Even at this low level, hydro-power is Bhutan's biggest export and accounts for one-fifth of GDP.

"Hydropower is the backbone of Bhutan," says Tinley Dorji, Dagachhu chief executive. Asked about GNH and GDP, he said: "As far as our policy is concerned, people should be happy. In the process, yes, we will get more money also."

Tshering Tobgay, the prime minister, is determined to make the most of Bhutan's growing output of clean electricity. In the capital Thimphu, for example, he wants to use cheap hydropower to create an electric vehicle "hotspot" that would be an example to the rest of the world and attract investments in green vehicle technologies.

Yet relying on hydropower is not without risks, including environmental ones. Lam Dorji, finance secretary, says that climate change and reduced winter snowfall is already affecting the flow of Bhutan's glacier-fed rivers (rain-fed Dagachhu is not one of them). "These are really hard facts that we are beginning to realise - that there's a possibility that some day in the future it [the water flow] would be reduced to an extent that we may not be able to make use of it."

Then there is the impact of the projects themselves. Construction is noisy and disruptive, although once completed Bhutan's "run of the river" hydro projects are less invasive than the alternative of big dams and reservoirs. ("Run of the river" plants take advantage of altitude differences in the country's steep terrain, directing water through tunnels and shafts to the power turbines, and leaving part of the river to flow in its original bed).

Ακολουθήστε το Euro2day.gr στο Google News!Παρακολουθήστε τις εξελίξεις με την υπογραφη εγκυρότητας του Euro2day.gr

FOLLOW USΑκολουθήστε τη σελίδα του Euro2day.gr στο Linkedin

But perhaps the biggest risk for Bhutan is a "resource curse" of the type that affects countries dependent on the export of a single commodity and stunts other parts of their economies.

Bhutan plans to diversify its farm production from its staples of rice, potatoes, corn and apples - into hazelnuts, coffee and organic vegetables - but will certainly rely heavily on hydro-electricity exports to a single market, India, for decades to come. It is now struggling to pay for the imports of labour and equipment for the ambitious projects backed by India, some of them 10 times as large as Dagachhu. The latest annual current account deficit was more than 22 per cent of GDP in 2010-11, according to the ADB.

"Our economy is not in the best of shapes and we've accepted that," says Mr Tobgay, the prime minister, who has set his sights on maintaining annual economic growth of 10 per cent a year and insists that hydro-power investment is a risk worth taking.

"Hydropower is a gift, a boon. It's not a curse," he says in an interview. "Right now our economy is so weak and so small that all I can say is 'Thank heavens for hydro-power'."

© The Financial Times Limited 2014. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation