Land cover changes and hydropower in Bhutan: Analyzing trade-offs in economic and ecosystem impacts

Hydropower is recognized as a vital renewable, stable and clean energy source that plays a crucial role in sustainable development. However, it often entails significant environmental impacts on aquatic and terrestrial ecosystems, particularly in mountainous regions where its potential is greatest. This study assesses the land cover changes driven by the development of hydropower projects in Bhutan, specifically the projects Punatsangchu I, II, and Mangdechu, with a combined capacity of 2940 MWp. We employed high-resolution satellite imagery alongside historical land use data to quantify these changes. Our analysis reveals that over the course of around 17 years, 1400 ha of forest and 270 ha of agricultural land were cleared, leading to an average annual economic cost of USD 7.6 million. The relative forest cover loss, measured at 0.5 ha MWp(-1), was significantly lower than earlier estimates of 2 ha MWp(-1). The construction of transmission lines, often a neglected aspect, accounted for the majority (>80 %) of the forest area cleared. Conducting an economic analysis, the annual net benefits of hydropower generation and transmission from these plants are estimated at USD 217 million, about 9 % of Bhutan's 2020 GDP. However, these benefits significantly diminish to USD 8.6 million annually when only considering the transmission infrastructure. The study reveals that the trade-offs between the economic benefits of hydropower and the loss of ecosystem services are relatively modest but become more pronounced when excluding generation benefits and applying higher values to ecosystem services. Although the study assumes a complete loss of ecosystem services, the creation of transmission line corridors contributes to a higher landscape heterogeneity potentially benefitting biodiversity. The findings have significant implications for Bhutan's policy-making in spatial planning, energy, forestry, and agriculture, and highlight areas for further research on hydropower's environmental and economic impacts.