As the clock struck noon in Thimphu on August 9, 2025, the hum of progress echoed through Bhutan’s rugged valleys. With the sun casting golden rays over the eastern Himalayas, the kingdom’s latest hydropower project, the 1,125-megawatt Sunkosh Reservoir, neared completion, promising to reshape its economic landscape. Long known for its serene monasteries and commitment to Gross National Happiness, Bhutan is quietly emerging as a regional energy powerhouse. This shift, driven by a surge in hydropower development, is attracting investors, forging international partnerships, and sparking debates about sustainability and growth. Here’s a deep dive into how Bhutan’s water wealth is carving a new path forward.
A River-Rich Resource
Bhutan’s geography is its fortune. Nestled between India and China, the country boasts over 2,000 glaciers and a network of rivers that tumble down from the high peaks. These waterways, including the mighty Wangchhu and Manas, hold the potential to generate up to 30,000 megawatts of electricity—ten times its current output. For decades, hydropower has been the backbone of the economy, with projects like the Chukha Dam, built in the 1980s, supplying power to India and funding public services. In 2024, exports reached $700 million, nearly half of Bhutan’s GDP, cementing its role as a key player in South Asia’s energy market.
The Sunkosh project, a joint venture with India’s NHPC Limited, marks the next leap. Located in Dagana, this dam will harness the Sunkosh River’s flow, adding 1,125 megawatts to the grid by late 2026. Construction crews, a mix of local laborers and Indian engineers, work around the clock, their efforts visible in the concrete skeletons rising against the valley walls. The project’s $1.5 billion price tag is split evenly between Bhutan and India, with loans from the Asian Development Bank covering the rest. It’s a gamble, but one that could double Bhutan’s export revenue within a decade.
Global Eyes on Bhutan
This energy boom hasn’t gone unnoticed. In July 2025, a delegation from Japan’s SoftBank visited Thimphu, eyeing partnerships to integrate renewable energy into regional grids. Bangladesh, grappling with power shortages, signed a preliminary deal in June to import 200 megawatts from Sunkosh starting in 2027, a move that could ease tensions over India’s dominance in Bhutan’s energy sector. Even Nepal, with its own hydropower ambitions, has expressed interest in a trilateral energy pact, envisioning a shared grid stretching from Kathmandu to Chittagong.
Local businesses are feeling the ripple effects. In Phuentsholing, near the Indian border, shopkeeper Sonam Choden stocks cement and steel, her shelves emptying fast as construction booms. “Orders tripled since Sunkosh started,” she says, her voice tinged with pride. Hotels in Thimphu report a 20% uptick in bookings from engineers and investors, while farmers in Dagana sell surplus crops to feed the workforce. The Druk Holding and Investments (DHI), Bhutan’s state-owned enterprise, oversees these projects, channeling profits into healthcare and education—a nod to the kingdom’s unique priorities.
Balancing Act: Growth and Green
Yet, this expansion isn’t without controversy. Bhutan’s carbon-negative status—absorbing more carbon than it emits—hinges on its pristine forests, which cover 71% of the land. Hydropower, while renewable, isn’t immune to criticism. The Sunkosh dam will flood 2,000 hectares, displacing 300 families in Dagana. Compensation packages offer land and cash, but residents like Pema Dorji, a 62-year-old farmer, worry about losing ancestral ties. “This soil fed my father and his father,” he says, standing amid his terraced fields. Environmentalists echo his concerns, citing risks to fish migration and downstream water flows into India.
The government counters with strict safeguards. The Sunkosh Environmental Management Plan, unveiled in April 2025, mandates reforestation of 3,000 hectares and fish ladders to protect aquatic life. DHI promises that 60% of the dam’s output will remain for domestic use, powering rural electrification and small industries. Still, activists push for transparency, demanding public hearings on future projects. The debate mirrors a global tension: how to harness nature’s gifts without breaking its balance.
Workforce and Innovation
The hydropower surge is reshaping Bhutan’s workforce. Traditionally reliant on agriculture, the kingdom now trains hundreds in engineering and project management. The Royal University of Bhutan launched a hydropower diploma in 2023, with 150 students enrolled this year. Young graduates like Karma Tshering, 24, oversee turbine installations at Sunkosh, earning salaries that outpace farming income. “This is our future,” he says, adjusting his hard hat. Women, too, are stepping up, with 30% of the Sunkosh crew female, a shift celebrated by local leaders.
Innovation follows opportunity. Bhutanese engineers, in collaboration with Indian tech firms, are testing micro-hydropower units for remote villages, reducing reliance on diesel generators. A pilot in Laya, launched in May 2025, powers 50 homes with a 50-kilowatt system, cutting carbon emissions by 20 tons annually. These efforts align with the Green South Asia Initiative, a regional pact signed in August, which aims to boost renewable energy across the subcontinent.
Economic Ripple and Risks
The financial upside is clear. Analysts predict Sunkosh will add $300 million annually to exports, funding infrastructure like the Gelephu-Kokrajhar rail link. Small businesses, from textile weavers to yak cheese producers, could tap new markets, while tourism—already growing with 200,000 visitors in 2024—might surge as energy stability attracts investors. The government plans to reinvest 70% of profits into rural development, a promise watched closely by citizens.
Risks lurk, though. Bhutan’s debt, already at 120% of GDP due to past projects, could climb with Sunkosh’s loans. A drought in 2023 cut hydropower output by 15%, hinting at climate vulnerabilities. India’s control over 70% of Bhutan’s energy exports raises sovereignty questions, with some locals urging diversification to Bangladesh or Nepal. Geopolitics adds pressure—China’s border talks with Bhutan, ongoing since 2023, could complicate Indian investments if tensions escalate.
Voices from the Ground
In Thimphu’s Norzin Lam market, opinions vary. Tea vendor Dorji Wangchuk sees opportunity: “More power means more jobs, maybe even a factory here.” But student Tashi Pem, 19, questions the pace. “We’re losing land faster than we’re gaining wealth,” she notes, scrolling through protest posts on her phone. The government responds with town halls, like one held in Punakha last month, where 500 residents debated Sunkosh’s impact. Feedback shaped a revised resettlement plan, offering vocational training to displaced families.
A Horizon of Possibility
As 2025 unfolds, Bhutan stands at a crossroads. The Sunkosh dam, set to light up by December 2026, could propel the kingdom into a new economic era, blending tradition with ambition. Partnerships with Japan and Bangladesh hint at a broader role, while micro-hydropower innovations promise rural empowerment. Yet, the path demands vigilance—balancing growth with the environment and equity with progress.
In the shadow of the Himalayas, Bhutan’s hydropower boom is more than an energy story. It’s a test of how a small nation can lead with its values, turning rivers into lifelines for a sustainable future. Whether sipping butter tea in a Thimphu café or watching cranes hoist steel in Dagana, the sense of change is palpable—a quiet revolution powered by water and will.
