Bhutan is set to strengthen its renewable energy portfolio with the upcoming commissioning of two key small hydropower projects—Yungichhu and Burgangchhu—by the third quarter of 2025. Together, these projects represent a combined investment of over Nu 8.4 billion and are expected to generate over 400 million units (MU) of electricity annually, contributing both to national energy security and long-term economic resilience.
The 32 MW Yungichhu Hydropower Project, currently 85% complete, remains on schedule for commissioning by September 2025. Developed by Druk Green Power Corporation (DGPC), the project is estimated to cost Nu 4.1 billion and will deliver an annual output of 157 MU. Tariff-related revenue forecasts are pending approval from the Electricity Regulatory Authority (ERA), with the application slated for submission upon project completion.
The 54 MW Burgangchhu Hydropower Project—similarly targeted for a September 2025 launch—recently achieved a critical construction milestone with the breakthrough of its headrace tunnel in April. With construction now proceeding smoothly, the project is expected to be completed at a cost of Nu 4.3 billion and produce 260 MU of electricity per year.
“These developments are more than energy assets; they’re long-term economic investments,” a senior DGPC official told Business Bhutan. “Beyond revenue generation, they reinforce Bhutan’s grid stability and help mitigate seasonal energy shortages, particularly in winter.”
While modest in scale, these projects carry broader economic and strategic implications that extend well beyond their installed capacities. They mark a deliberate shift in Bhutan’s hydropower development model—from large, export-oriented mega-dams toward a more decentralized and diversified energy architecture.
This strategic pivot reflects the evolving priorities of Bhutan’s energy sector, which is now placing greater emphasis on national energy security, grid resilience, and equitable regional development. By distributing generation assets across different parts of the country, projects like Yungichhu and Burgangchhu reduce overreliance on a few large plants and centralized transmission corridors. This approach not only mitigates systemic risks associated with climate events and infrastructure failures, but also enhances operational flexibility in managing seasonal demand fluctuations—especially the chronic energy shortages experienced during winter months.
DGPC officials point out that these distributed projects are already bolstering the reliability of local grids in the east and central regions, which have traditionally faced energy access constraints due to geographic and infrastructural challenges. In the event of natural disasters—such as landslides or seismic activity that often disrupts national-level transmission—these smaller, strategically located hydropower plants can act as localized energy hubs, maintaining essential services and supporting faster recovery.
Moreover, these projects are stimulating localized economic activity. Construction of access roads, powerhouses, and transmission lines has injected capital into remote communities, creating employment opportunities and spurring demand for local goods and services. The improved energy infrastructure also lays the foundation for potential rural industrialization, agro-processing, and tourism-related ventures, which can further diversify Bhutan’s economic base.
From a capacity-building standpoint, the hydropower program is strengthening domestic capabilities in engineering, construction, and equipment manufacturing. DGPC’s subsidiary, Bhutan Hydropower Services, has played a key role in producing hydromechanical components such as penstocks and gates. Additionally, Bhutanese contractors involved in the projects have gained expertise in technically demanding areas like underground tunneling and transmission line construction.
“This is not just about electricity. These projects are incubating a national supply chain for hydropower infrastructure,” the official said.
Encouraged by Phase I’s success, DGPC is now advancing Phase II of its small hydropower strategy. Contracts were awarded in late 2024 for three projects: the 90 MW Jomori in Samdrupjongkhar, 26 MW Druk Bindu I & II in Samtse, and the 54 MW Gamri I and Bamukporangchhu Integrated Project in Trashigang. Approval has also been granted for the 25 MW Begana project in Thimphu. Feasibility work is underway for future Phase III projects.
These small-scale projects are also laying the technical and operational groundwork for larger ventures. The 600 MW Khorlongchhu project, long in planning, is now closer to realization thanks to DGPC’s strengthened internal capabilities and project execution experience.
In addition to these developments, DGPC successfully commissioned the Suchhu Hydropower Project on April 10, 2025. Completed at a cost of Nu 2.33 billion, the project adds 76 MU of annual generation capacity. As with other projects, revenue potential awaits final tariff approval from the ERA.
With these investments, Bhutan is reaffirming its position as a regional leader in clean energy while strategically harnessing hydropower not just as an energy commodity, but as a key lever for broader economic transformation.
Hydropower has long been the backbone of Bhutan’s economy—accounting for the lion’s share of its exports, public revenue, and infrastructure financing. What sets the current wave of investment apart, however, is a conscious shift from the traditional, large-scale export-driven model to a more modular and regionally distributed system. This emerging paradigm reflects a sophisticated understanding of the multi-dimensional value of hydropower—beyond its role in electricity generation.
By investing in smaller, geographically dispersed projects like Yungichhu, Burgangchhu, and Suchhu, Bhutan is laying the groundwork for a more inclusive and resilient development model. These projects are catalyzing localized industrial ecosystems—facilitating the establishment of micro and small enterprises, agri-processing units, and service industries that can thrive with dependable electricity access. The availability of reliable, year-round power in previously underserved areas opens up new possibilities for rural economic diversification, while also supporting digital connectivity, education, and healthcare delivery.
From a labor market perspective, the hydropower construction pipeline continues to generate significant employment for Bhutanese engineers, technicians, skilled tradespeople, and local laborers. Additionally, the build-out of local supply chains—especially in hydromechanical manufacturing, civil works, and transmission infrastructure—is strengthening the country’s industrial base and building lasting technical competencies. Subsidiaries like Bhutan Hydropower Services and local contractors are emerging as competitive players in design, fabrication, and execution—capacities that were once heavily reliant on foreign firms.
Moreover, Bhutan’s pivot toward smaller, faster-to-commission projects has important fiscal implications. These projects typically require lower upfront capital, shorter gestation periods, and reduced debt exposure—allowing for more agile investment cycles and improved risk management. The emphasis on modular development also positions Bhutan to respond more effectively to market signals, grid needs, and environmental constraints.
Importantly, the maturation of Bhutan’s hydropower sector is not occurring in isolation. With growing energy demand across South Asia—and increasing emphasis on clean energy trade—Bhutan’s experience with scalable, sustainable hydro development positions it as a credible partner in the evolving regional energy market. As countries like India, Bangladesh, and Nepal deepen their commitments to renewable energy integration, Bhutan’s exports of green hydropower could serve as a stabilizing complement to intermittent solar and wind sources in the region.
In sum, the strategic orientation of Bhutan’s current hydropower investments reflects a maturing sector—one that is not only scaling capacity, but doing so with an eye toward economic inclusivity, sustainability, and regional integration. This long-term vision is quietly transforming hydropower from a revenue-generating asset into a cornerstone of national development policy.
Sherab Dorji from Thimphu
