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Bhutan Goes Electric

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Pacific Money

Bhutan Goes Electric

The tiny kingdom’s capital city, Thimpu plans to phase out gasoline-powered vehicles.

Pacific Money normally focuses on the important economic and financial stories of the Asia Pacific region. The economic affairs of China, India, Japan, Australia and the ASEAN states can have significant regional and global impacts.  Rarely is there an opportunity to draw attention to what is happening in the tiny, isolated mountain kingdom of Bhutan.

The small and exotic kingdom, with a population of around three quarters of a million people, rarely makes news headlines, even in its region. This week Bhutan, however, announced plans to convert the capital city’s entire vehicle fleet to electric cars, according to the Financial Times. This would make Thimpu the first capital city in the world to go electric.

The plan involves the participation of Renault-Nissan, and specifically the company’s electric car, the Nissan Leaf. The Bhutanese government’s entire fleet of official vehicles will be replaced by Nissan’s electric model by March 2014.  Then, the city’s population of 120,000 will gradually have their vehicles (and the many taxis that most people rely on to get around) converted to electric alternatives after this initial target is completed.

The plan makes quite a bit of sense for Bhutan. The country produces a surplus of electricity from abundant renewable (hydroelectric) sources, and exports a significant amount of this electricity to India. A significant portion of the foreign exchange earned from this is used to import fossil fuels back into the country – much of which is used for the old fashioned gasoline-powered vehicle fleet.  Using electricity directly for this task is an entirely rational plan.

As the Financial Times article reports, Bhutanese government officials report that taxi drivers in Thimpu currently spend around 800 ngultrum ($13) a day on fuel, whilst switching to electricity (and presumably ignoring the costs of installing the infrastructure and electric vehicle grid) would slash the daily price to no more than 10 ngultrum.

Nissan has confirmed that it is in talks over Bhutan’s plan, both with regard to the supply of vehicles and the electric vehicle grid necessary to support them. There are also reports that Bhutan has had talks with Tesla on the issue.

Whether this scheme will be rolled out across the whole country remains to be seen, significant challenges would remain. For one thing Bhutan’s foreign exchange situation will deteriorate as it switches its electricity from export to domestic usage. Even with the reduced fossil fuel import costs, there will still be a need to pay for the infrastructure and vehicles that must be imported to the country, and Bhutan does have other import needs.

Still, this idea of leap-frogging the old fossil fuel vehicle fleet model whilst Thimpu is still a growing city (the population is rising rapidly although the exact number since the last census in 2005 is unknown) is an attractive one. While Thimpu’s model cannot really serve as a realistic short-term example for major world cities, there is great potential for smaller, developing cities and towns to think hard about the idea, when the right factors are in place.