As per the Budget Report 2025-2026, the Bhutan Power System Master Plan (PSMP) 2040 has identified a total of 155 potential hydropower sites across the country, offering an estimated hydropower potential of 37 GW and a corresponding design energy of 154 TWh (excluding pumped storage options). Of these, 90 sites have been assessed as techno-economically feasible, representing an installed capacity of approximately 33 GW.
The report says that as of March 2025, with the commissioning of the 18 MW Suchhu Small Hydropower Plant, Bhutan’s total installed generation capacity has increased to 2,470.6 MW—equivalent to 7.6% of the country’s feasible hydropower potential.
In addition to existing capacity, nine hydropower projects—including small hydro developments under Phase I and II—are currently in various stages of initiation, construction, and commissioning. Upon completion, these projects are expected to contribute an additional 3,101 MW to the national grid, significantly enhancing Bhutan’s renewable energy portfolio.
Hydropower Financing Modalities
Given the capital-intensive nature of hydropower development, these projects are typically financed outside the Government’s Five-Year Plans and annual budget allocations. Instead, project funding is primarily managed through external financing, and loan disbursements are reflected in the Ministry of Finance’s total debt stock, as reported to Parliament through the audited Annual Financial Statements.
The Inter-Governmental (IG) financing model remains a key modality, with terms and procedures outlined in bilateral agreements. Under this model, project authorities are directly empowered to implement and disburse funds in alignment with project progress. Upon commissioning, hydropower assets developed under IG agreements are formally transferred to the Royal Government of Bhutan (RGoB) within two years.
To enhance financing diversity and promote sustainability, Bhutan is also exploring alternative development models. The Nikachhu Hydroelectric Project serves as a pioneering example of non-IG financing. Additionally, following the endorsement of the Renewable Energy Development Roadmap 2024, the RGoB has officially opened the hydropower and solar sectors to both domestic and international investors through Public-Public and Public-Private Partnership (PPP) arrangements. In the case of hydropower, PPP structures require the RGoB’s authorized agency to retain majority shareholding, ensuring strategic oversight and national interest alignment.
Meanwhile, the report has also given updates on some of the hydropower projects.
Punatsangchhu–I Hydroelectric Project (PHEP-I)
The 1,200 MW Punatsangchhu–I Hydroelectric Project was initially scheduled from November 2008 to November 2015, with an estimated cost of Nu. 35.15 billion (as per December 2006 price level). Excavation of the dam began in June 2009, and significant progress was made until a major landslide on the dam’s right bank occurred on 19 July 2013, severely affecting the project timeline.
Between 2014 and 2019, several stabilization measures were undertaken. However, a secondary slide in August 2016, reactivated again in January 2019, halted dam foundation works completely. Since then, the Royal Government of Bhutan (RGoB) and the Government of India (GoI) have been exploring alternatives, including a barrage option upstream, based on third-party geological assessments.
The first phase of geo-technical studies concluded in March 2024, and multiple consultations have followed. As of the latest informal meeting on April 22, 2025, both governments agreed that the Central Water Commission (CWC) will prepare a comprehensive report for discussion in June 2025, with final decisions expected at the next Technical Coordination Committee (TCC) meeting.
The first Revised Cost Estimate (RCE), approved by the GoI in 2015, pegged the project cost at Nu. 93.76 billion (December 2013 PL). As of April 2025, approximately Nu. 87 billion has been disbursed, and 87.8% of the project work is completed.
Punatsangchhu–II Hydroelectric Project (1,020 MW)
The progress of the Punatsangchhu–II Hydroelectric Project faced major setbacks due to geological issues, including the collapse of the Downstream Surge Gallery (DSSG), and logistical challenges during the COVID-19 pandemic. Despite delays, the project entered the testing and commissioning phase in mid-2024.
Two generating units were synchronized with the grid on December 27, 2024, followed by a third on March 19, 2025. The remaining three units are scheduled for commissioning on May 15, June 30, and July 31, 2025.
Originally estimated at Nu. 37.78 billion (March 2009 PL), the project cost was revised to Nu. 72.91 billion (March 2015 PL), with a final cost-to-completion now projected at Nu. 94.46 billion (2020 PL). As of April 2025, Nu. 87.9 billion has been disbursed, with 98.9% of works completed.
The other includes the 500kW Lunana Small Hydro Project Lunana Gewog under Gasa Dzongkhag lying in the extreme northwest region consists of five Chiwogs with thirteen (13) villages with 198 number of households excluding the institutions and with a total population of 699.
Meanwhile, there are other energy projects under operation and construction like solar and wind. RGoB has also initiated construction of utility scale solar and introduction of solar Prosumers where remote and economically disadvantaged villages can derive income from sale of excess solar energy to the grid through net metering.
Sherab Dorji from Thimphu
