Few countries have staked their economic future on water quite like Nepal. For decades it has sought to turn its rugged rivers into a renewable goldmine, touting its steep gradients and glacial-fed torrents as ideal for hydropower. The numbers are seductive: of the country’s 83,000 megawatts (mw) of theoretical hydropower capacity, 43,000 are considered economically viable. A tidy solution, it seemed, for a poor country short on fossil fuels, flush with donor goodwill and in dire need of export earnings.
Hydropower now accounts for roughly 90% of the country’s electricity generation, overwhelmingly through run-of-river schemes that generate power from the natural flow of water with minimal storage. That dependence has become a source of national pride, and a geopolitical gambit. The country recently became a net electricity exporter, selling power to India and dreaming of lighting up Bangladesh. Ambitions abound: 30,000 mw of installed capacity by 2035, enough to turn the Himalayas into the power hub of South Asia.
But as the rivers grow angrier, so does the wager. In July 2024 record monsoon rains ravaged the flagship Upper Tamakoshi plant, knocking out swathes of its 456 mw capacity and causing $13 million in damages. Months on it still limps along. That was no outlier. Floods, landslides and glacial-lake outbursts have damaged 26 hydropower projects and wiped out over 1,500 mw of generation capacity in the past year alone. As glaciers retreat and rainfall grows more erratic, the very conditions that make the hydropower viable are becoming its undoing.
Hydropower, interrupted
For a technology predicated on predictability, climate volatility is proving dangerously cruel. Himalayan hydrology is governed by extremes: monsoon rains arrive in furious bursts, accounting for up to 90% of Nepal’s annual precipitation over just four months. The rest of the year is marked by dry spells or glacial trickles. Run-of-river plants, which lack large reservoirs, can do little to buffer such seasonality. During drought years, output has dropped by as much as 40%.
Nor is the problem confined to generation. In 2023 alone north of $21 million worth of electricity was lost because it had nowhere to go. Transmission lines were either too few, too fragile or too delayed. At least 100 mw is regularly “spilled”, dumped during peak monsoon production because the grid cannot absorb it. The government has long prioritised shiny generation targets over the less glamorous task of building substations, acquiring forest clearances and appeasing local opposition to power pylons. Nepal is producing more electricity than ever; it just cannot move it.
This is more than bureaucratic inertia. It reflects a hidden flaw in how energy policy has been imagined: as a linear pipeline from megawatts to markets. But electricity systems are not pipelines. They are ecosystems, requiring storage, transmission, demand and resilience. The country has fixated on supply, assuming the rest would follow.
Its energy arithmetic also conceals a more basic inequality. Despite near-universal access to the grid, average annual electricity consumption remains only 400 kilowatt-hours per person, among the lowest in South Asia. Most households still rely on firewood, crop waste or imported LPG for cooking. Diesel generators fill the gaps during outages. The government’s lofty target of 1,500 kWh per capita by 2030 looks distant unless homes, stoves and vehicles are actively electrified.
This disconnect reflects a bigger pattern: Nepal has been more successful at generating electricity than at using it. A rational strategy would now shift focus from exporting electrons to powering domestic transformation. Electrifying transport, replacing biomass in rural kitchens, modernising industry, among others, would not only absorb excess capacity but also improve air quality, public health and productivity. Yet these goals remain peripheral to the national narrative of “hydropower for export”.
That narrative has powerful backers. International donors—India, China, the World Bank, the Asian Development Bank—have long favoured big dams as signs of modernity and regional cooperation. The logic is seductive: hydro is clean, hydro earns foreign currency, hydro reduces dependence on oil imports. And when hydrology is steady, it delivers. But it no longer is. Part of the problem is topographical.
Nepal descends from Mount Everest to the Indian plains in just 150 miles, creating wild, sediment-rich rivers that resist control. The Koshi, known as the “sorrow of Bihar”, has defied British, Indian and Nepali engineers alike. Sediment from young Himalayan rocks clogs turbines and shortens dam lifespans. Earthquakes and landslides make construction and maintenance hazardous. Meanwhile suitable sites for storage-based hydro—the kind that can regulate flow—tend to be downstream, closer to flood-prone areas.
Glacial melt has added urgency to the trouble. Warmer temperatures are accelerating runoff, swelling rivers during summer but depleting them in winter. Flash floods from glacial lake outbursts, once rare, are now frequent, as are destructive sediment surges. Climate models predict not only more water but more erratic water. Betting the grid on such volatility is like building factories on floodplains.
The curse of being blessed
Nepal is not the only country to fall into the hydro trap. Bhutan has long relied on Indian-financed dams for most of its revenue, and has struggled with debt and diplomatic dependence. Laos dubbed itself the “battery of Asia”, only to find itself mired in unsustainable development and unpayable loans. Nepal risks a similar fate: overexposed to a single technology; underprepared for shocks; and too eager to export what it cannot yet distribute.
The comparison with fossil-fuel resource curses is apt. Call it the “hydropower curse”: the tendency of water-rich countries to over-invest in dams at the expense of broader resilience. Symptoms include local displacement, environmental degradation, governance lapses and high financial risk: all present in Nepal. What’s missing is the political will to diversify.
There are alternatives. It could pivot from run-of-river projects to more climate-resilient reservoir and pumped-storage systems, which can store water during wet periods and release it during dry ones. It could invest in solar and wind power to complement hydropower. It could prioritise building out the grid, integrating mini-grids and bringing electricity to where it’s needed most.
Financing will be a hurdle. The country’s energy ambitions require over $45 billion by 2035, but less than a quarter of that capital has materialised. Tapping carbon finance, green bonds and diaspora investment could help. But none of this will matter unless it stops treating hydropower as a panacea and starts treating energy as a system.
Its rivers are no longer predictable. Nepal is failing not because it bet on clean energy, but because it bet on it blindly. In the age of climate change, even blessings come with a price tag—and sometimes, a flood warning. ■
