The Dagachhu Hydroelectric Project is a 126 MW run-of-river hydropower plant in Dagana District, Bhutan. Commissioned in 2015, it was the first cross-border public-private partnership in South Asian hydropower and the first Clean Development Mechanism-registered project in Bhutan, funded by the Asian Development Bank and the Austrian development finance institution.
The Dagachhu Hydroelectric Project is a 126-megawatt (MW) run-of-river hydroelectric power plant located on the Dagachhu River in Dagana District, southwestern Bhutan. Commissioned in stages between 2015 and 2016, it is a landmark project in Bhutan's hydropower sector for several reasons: it was the first cross-border public-private partnership (PPP) in South Asian hydropower, the first project in Bhutan registered under the United Nations Clean Development Mechanism (CDM), and the first Bhutanese hydropower project financed by a multilateral development bank rather than through bilateral arrangements with India. The project is owned and operated by Dagachhu Hydro Power Corporation Limited (DHPC), a joint venture between Druk Green Power Corporation (DGPC) of Bhutan and Tata Power of India.[1]
The Dagachhu project demonstrated that Bhutan could successfully diversify its hydropower financing model beyond the traditional government-to-government framework that had characterised earlier projects such as Chhukha, Kurichhu, and Tala. By bringing in the Asian Development Bank (ADB), the Austrian Development Bank (OeEB), and private-sector partner Tata Power alongside the Bhutanese government entity DGPC, the project established a template for future public-private partnerships in Bhutan's energy sector and across the broader South Asian region.[2]
Development History
The Dagachhu project was first identified in Bhutan's master plan for hydropower development in the 1990s. The Dagachhu River, flowing through the sparsely populated hills of Dagana District before joining the Punatsangchhu (Sunkosh) system, offered a viable site for a medium-scale run-of-river development. However, the project did not advance rapidly under the traditional bilateral model, and the Royal Government of Bhutan, seeking to accelerate hydropower development while diversifying its financing sources, explored alternative funding structures.[2]
In 2006, the ADB approved financing for the project under an innovative structure that combined a sovereign loan to the Royal Government of Bhutan, a non-sovereign loan to DHPC, and grant financing from the Government of Austria through the ADA. This blended financing package was designed to make the project commercially viable while keeping tariffs affordable. Tata Power Company of India joined the venture in 2008, acquiring a 26 percent equity stake in DHPC and bringing private-sector discipline, commercial expertise, and experience from India's competitive power market.[2]
Construction
Construction commenced in 2009 following the completion of detailed design work and environmental and social impact assessments. The project was built by a consortium of contractors including Jaiprakash Associates of India. The key structures include a diversion weir on the Dagachhu River, a 9.5-kilometre headrace tunnel bored through the mountain terrain, a surge shaft, a steel-lined penstock, and a surface powerhouse housing three 42 MW vertical-axis Francis turbine-generator units manufactured by Andritz Hydro of Austria. The total project cost was approximately US$201 million.[1]
The construction period was extended beyond the original schedule due to geological challenges encountered during tunnel boring, including unexpected rock formations and water ingress that required additional reinforcement and grouting. Despite these difficulties, the first generating unit was synchronised with the grid in 2015, and all three units achieved commercial operation by 2016. The project provides employment to Bhutanese staff for operations and maintenance, contributing to the development of domestic technical capacity in the hydropower sector.[2]
Technical Specifications
The Dagachhu plant has a total installed capacity of 126 MW from three Francis turbine units, each rated at 42 MW. The run-of-river design exploits a gross head of approximately 310 metres between the intake weir at an elevation of roughly 1,960 metres and the powerhouse at approximately 1,650 metres. The design discharge is approximately 50 cubic metres per second. Annual energy generation is estimated at approximately 500 GWh, with output varying seasonally — peaking during the monsoon months and declining during the dry winter period when river flows are lower.[1]
Power from the plant is evacuated through a 220 kV transmission line connecting to the national grid. The electricity is available for both domestic consumption and export to India under the existing power trade framework between the two countries. Revenue from power sales services the project's debt and provides returns to the equity holders — DGPC and Tata Power — while also generating royalties and tax revenue for the Royal Government of Bhutan.[3]
Clean Development Mechanism Registration
The Dagachhu project was registered with the United Nations Framework Convention on Climate Change (UNFCCC) as a Clean Development Mechanism (CDM) project, making it the first CDM-registered project in Bhutan. Under the CDM framework, the project is eligible to generate certified emission reductions (CERs) — carbon credits — based on the displacement of fossil fuel-based electricity generation in the South Asian regional grid. The project was estimated to displace approximately 500,000 tonnes of carbon dioxide equivalent per year. These carbon credits provided an additional revenue stream that improved the project's financial viability and underscored Bhutan's commitment to clean energy development.[2]
The CDM registration also brought international attention to Bhutan's status as one of the few carbon-negative countries in the world, a distinction arising from the combination of extensive forest cover (over 70 percent of the national territory) and a power sector dominated by zero-emission hydroelectricity. The Dagachhu project reinforced this narrative and contributed to Bhutan's profile in international climate negotiations.[1]
Significance as a Public-Private Partnership
The Dagachhu project's PPP structure was closely watched by regional policymakers and development institutions as a potential model for unlocking South Asia's vast but largely untapped hydropower resources. The successful completion and operation of the project demonstrated that private-sector participation, multilateral financing, and government ownership could be effectively combined in the Bhutanese context. The ADB subsequently cited the Dagachhu project as a model for similar public-private arrangements in Nepal, Myanmar, and other hydropower-rich countries in the region.[2]
For Bhutan specifically, the project validated the government's strategy of diversifying beyond the Indo-Bhutanese bilateral hydropower model. While large projects such as the 1,200 MW Punatsangchhu-I and 1,020 MW Punatsangchhu-II continue under the traditional government-to-government framework with India, the Dagachhu model offers an alternative pathway for medium-scale projects that can attract multilateral and private-sector capital, reducing Bhutan's dependence on any single financing partner.[2]
References
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