Hydropower and Clean Energy in Nepal: Powering a Sustainable Future

Nepal’s electricity system has changed more in the past three years than in the previous two decades. The country went from chronic winter power cuts to a record-setting electricity exporter — and then, within weeks in 2026, watched a glacier-triggered flash flood destroy or damage a meaningful share of that hard-won capacity. This guide lays out where Nepal hydropower stands today, with every figure dated and sourced, including a tracker of 22 major projects and an honest look at where reliable sources disagree.

Quick Answer: Nepal Hydropower at a Glance

• Total installed electricity capacity: 4,296 MW as of early May 2026 (Ministry of Energy, Water Resources and Irrigation), of which roughly 90–94% is hydropower. This figure predates the August 2026 floods.
• Hydropower’s theoretical potential: approximately 83,000 MW, with roughly 40,000–45,600 MW considered technically and economically feasible — an estimate that traces back to a 1966 study and has been refined since.
• Peak domestic demand: 2,380 MW in the dry season (recorded mid-February 2026) versus 3,248 MW at the monsoon peak (27 July 2026).
• Electricity exports: Nepal earned NPR 29.32 billion from exports to India and Bangladesh in FY2025/26 (up 68% year-on-year), against an import bill of NPR 10.56 billion — a net electricity trade surplus of NPR 18.76 billion (NEA data, released 23 July 2026).
• Government target: 28,500 MW of installed capacity by 2035 (13,500 MW for domestic use, 10,000 MW exported to India, 5,000 MW exported to Bangladesh), under the Energy Consumption Growth and Export Strategy 2083 issued by the Ministry of Energy in April 2026, requiring an estimated US$46.5 billion in investment.
• August 2026 disruption: Flash floods on 26 August 2026 damaged 13 hydropower and solar projects with a combined capacity of 748 MW (354 MW operating, 394 MW under construction), plus roughly 24 MW of separately affected solar capacity. India approved emergency exports of up to 654 MW to Nepal from 13 September to 31 December 2026 to help cover the resulting shortfall.
• Solar capacity: reported figures range from roughly 63 MW to 115 MW of grid-connected capacity depending on the reporting date and scope (see the Solar Energy section below for why the numbers differ).

Nepal’s Electricity Sector in 2026

Nepal’s power system sits at an unusual turning point. Installed capacity has grown rapidly on the back of private investment: independent power producers (IPPs) accounted for 227 operating projects totalling 3,459 MW as of mid-August 2026, with a further 213 projects (6,472 MW combined) under construction, according to NEA data reported by Peoples’ Review. At the same time, the system remains heavily dependent on one weather-exposed technology — hydropower supplies roughly 90% or more of generation in most reporting — leaving the country structurally exposed to both drought and flood risk.

That exposure became concrete on 26 August 2026, when a glacier-related flash flood swept down the Bhotekoshi–Trishuli river corridor near the Nepal–Tibet border, devastating the Rasuwagadhi border area and a dense cluster of hydropower plants downstream. The Nepal Electricity Authority confirmed that 13 hydropower and solar projects, with a combined capacity of 748 MW, were damaged or destroyed, and hundreds of workers were initially reported missing in flooded access tunnels. The disaster also caused major loss of life across Rasuwa, Nuwakot, Dhading, Gorkha and Chitwan districts; Nepal Police and later government damage assessments recorded well over a thousand deaths and several thousand people still unaccounted for as of early September 2026 — figures that continued to be revised as search operations progressed.

In the immediate aftermath, India approved emergency exports of up to 654 MW to Nepal (13 September–31 December 2026) — a striking reversal for a country that, weeks earlier, had just posted its highest-ever annual electricity export revenue.

Current Installed Generation Capacity

Reported totals vary by reporting date and by whether off-grid, trial-phase, or micro-hydro capacity is included. The table below shows the main data points in chronological order so the trend — and the effect of the August floods — is clear:

Reading these together: 4,296 MW (May 2026) is the most complete official pre-flood snapshot of total system capacity. Effective available capacity after 26 August 2026 is materially lower than this — by roughly 748 MW of hydropower/solar capacity, plus an additional ~24 MW of solar — though NEA has not yet published a single revised total-capacity figure incorporating the damage. Where a source gives a lower total (for example, 3,878–3,983 MW in some early-2026 reporting), the difference generally reflects timing and whether off-grid or micro-hydro output is counted, not a factual conflict.

Hydropower Potential: The Theoretical Number vs. the Feasible Number

Nepal’s hydropower potential estimate — roughly 83,000 MW theoretical, with about 40,000–45,600 MW considered technically and economically feasible — originates from calculations by Nepali engineer Hari Man Shrestha in 1966 and has since been refined by later assessments, including work referenced by the Asian Development Bank and academic sources. Against the feasible-potential figure, installed hydropower capacity of roughly 3,900–4,000 MW (pre-flood) represents under 10% utilisation. That gap shows up in nearly every Nepali energy-strategy document and investor pitch — it’s both the country’s core opportunity and its core execution challenge.

Electricity Generation and Domestic Demand

Demand and hydropower output move in opposite seasonal cycles, which is the single most important structural fact about Nepal’s power sector:

• Dry season (roughly December–May): river flows drop and hydropower output falls. NEA reported total peak demand of 2,380 MW (national system peak: 2,170 MW) in mid-February 2026, with independent power producers supplying the largest single share (around 58%) of that day’s energy. Nepal typically has to import electricity from India to help close the resulting gap.
• Monsoon season (roughly June–September): river flows surge and hydropower output can exceed domestic needs. NEA recorded peak-hour demand of 3,248 MW on 27 July 2026, with zero electricity imported that day and 22,102 MWh exported — private power producers supplied the largest share of that day’s national generation.

This dry-season/wet-season swing is why Nepal’s energy planners increasingly favour storage and peaking projects (Tanahu, Budhi Gandaki, Dudhkoshi, Upper Arun) over additional run-of-river plants, which generate largely in proportion to whatever the river happens to be carrying at the time.

Major Hydropower Projects

See the full Nepal Hydropower Project Tracker below for 22 projects across four categories, each with its capacity, developer, verified status, and a “last verified” date. In summary:

• Largest operating plant: Upper Tamakoshi (456 MW), commissioned 2021.
• Largest under construction: Arun III and Upper Karnali (900 MW each).
• Largest ever planned: Budhi Gandaki (1,200 MW) and Upper Arun (1,063.36 MW), both still in pre-construction stages as of mid-2026.
• Most severely affected by the August 2026 floods: Rasuwagadhi (111 MW, completely destroyed) and Upper Trishuli-1 (216 MW, catastrophically damaged mid-construction).

A note on cost figures in the tracker: “Estimated Project Cost” is the total capital cost of building the plant (as reported at financial close or in company filings), not the amount of foreign direct investment it attracted, and not the value of any post-disaster damage. Where a project’s completion date is a target rather than a confirmed fact, it is labelled “targeted” or “expected.” Where reliable sources gave figures we couldn’t reconcile, that’s noted explicitly rather than silently resolved.

Project Tracker — Operating

Project Tracker — Under Construction

Project Tracker — Development / Planned

Project Tracker — Delayed / Uncertain (Flood-Affected)

The 26 August 2026 flash floods fundamentally changed the status of the projects below — from “under construction” or “operating” to genuinely uncertain. NEA’s official tally is 13 hydropower/solar projects damaged or destroyed, with a combined capacity of 748 MW (354 MW operating, 394 MW under construction). Several individual projects have been publicly named; NEA has not published a complete, itemised public breakdown of all 13 as of this writing, so the figures below cover the named projects only, with the remainder captured in the aggregate NEA figure.

Notably delayed projects (independent of the floods): Upper Karnali (900 MW) — first signed in 2008; financial closure was extended multiple times, and basic infrastructure tendering only began in July 2025, an 18-year gap. West Seti (750→800 MW) — studied for roughly six decades, passing through at least three developers, including China’s CTGC (which withdrew in 2018), before the current NHPC arrangement. Budhi Gandaki (1,200 MW) — studied since the 1980s, with main construction not due to start until January 2028 at the earliest. Tanahu (140 MW) — slipped roughly five years from its original 2021 target, attributed by project officials to forest-compensation funding disputes and contractor changes.

Nepal–India Electricity Trade

India has been the anchor market for Nepal’s electricity exports since October 2021, when it first approved a modest 39 MW. Combined cross-border transfer capacity has grown substantially since then:

• 2021: 39 MW export approval — the first.
• Before July 2026: Nepal was permitted to export up to 1,100 MW to India and import up to 1,000 MW.
• 15 July 2026 agreement: at the 13th Nepal–India Joint Steering Committee meeting in Pokhara, both sides agreed to raise combined transfer capacity via the 400 kV Dhalkebar–Muzaffarpur and Dhalkebar–Sitamarhi lines to 1,650 MW for exports and 1,400 MW for imports.
• FY2025/26 actuals: Nepal exported 3.877 billion units (kWh) of electricity to India and Bangladesh combined (up 62.9% year-on-year from 2.383 billion units), earning NPR 29.32 billion — a 68% increase — at an average price of NPR 7.56 per unit, sold via the Indian Energy Exchange, NVVN, and the Bangladesh trilateral arrangement. Imports fell 31.6% to 1.15 billion units, cutting Nepal’s import bill by 18.3% to NPR 10.56 billion. The result was a net electricity trade surplus of NPR 18.76 billion (NEA, 23 July 2026).
• Post-flood reversal: effective 13 September–31 December 2026, India approved emergency exports of up to 654 MW to Nepal (up to 600 MW via the Muzaffarpur–Dhalkebar 400 kV line and up to 54 MW via the Tanakpur–Mahendranagar 132 kV line), for 18 hours a day, to help cover the domestic shortfall from flood damage. The volume for January 2027 onward is due to be reviewed in December 2026.

These figures are easy to conflate, but they measure different things: export revenue (NPR 29.32bn) is what Nepal earned from selling power; import expenditure (NPR 10.56bn) is what it spent buying power back, mostly in winter; the net trade surplus (NPR 18.76bn) is the difference between the two; and approved transfer capacity (1,650 MW export / 1,400 MW import) is a technical ceiling on the transmission lines, not an amount actually traded. Longer term, Nepal and India signed a framework in January 2024 under which India committed to importing up to 10,000 MW of Nepali electricity over ten years — the political anchor for Nepal’s 28,500 MW-by-2035 roadmap.

Nepal–Bangladesh Electricity Trade

• 23 September 2024: NEA, Bangladesh’s Power Development Board (BPDB), and India’s NVVN signed a tripartite agreement enabling Nepal-to-Bangladesh sales via India’s transmission grid.
• 15 November 2024: first shipment — 12 hours of supply, earning NPR 265.5 million.
• Current arrangement: 40 MW, exported seasonally from 15 June to 15 November each year, at 6.40 US cents per unit. In FY2025/26 this generated NPR 1.06 billion in revenue (NEA, 24 Jul 2026).
• Planned expansion: a proposed additional 20 MW at the same rate is still awaiting India’s approval, which has been withheld citing limited transmission capacity.
• Larger pipeline: Bangladesh’s Power Development Board has separately signed a power purchase agreement for up to 500 MW from the still-undeveloped 900 MW Upper Karnali project — meaning much of Nepal’s future Bangladesh export potential is tied to a project that, as of mid-2026, had only just begun basic infrastructure tendering.

Solar Energy in Nepal

Solar remains a strategically important complement to hydropower because it can generate during the dry-season deficit months when river flows are lowest. Reported figures for total installed solar capacity genuinely disagree across sources, and rather than pick one, we lay out what each is measuring:

• 106.74 MW as of a 4 March 2025 compilation covering grid-connected solar power stations.
• 62.7 MW cited in a 9–10 May 2026 Ministry of Energy release as the solar component of the 4,296 MW national total (this appears to be a narrower, more current utility-grid figure).
• 0.115 GW (115 MW) for 2024 in a separate compilation, described there as the installed capacity share of the electricity mix.

The likely explanation is differing scope and reporting dates — grid-connected utility solar vs. total solar including net-metered rooftop and off-grid systems — rather than a genuine factual conflict, but we couldn’t fully reconcile the figures from the sources available. Treat any single solar-capacity number in circulation with that caveat.

What is well-documented: the 25 MW Nuwakot Solar Power Station, Nepal’s largest single grid-connected solar plant, was built with roughly US$130 million in World Bank financing and phased into operation between 2020 and 2022 — and was among the facilities damaged in the August 2026 floods (see the project tracker above for a note on conflicting cost figures for this specific plant). NEA’s own assessments put grid-connectable solar potential at roughly 2,100 MW.

Given how exposed hydropower proved to be in August 2026, expect solar — and eventually pumped storage — to feature more prominently in Nepal’s energy-security planning going forward, though as of this writing that shift is a policy direction under discussion rather than a funded build-out.

Transmission Infrastructure

• Domestic network: the most recent NEA-sourced total we could independently verify is 5,742 circuit-km of transmission lines (66–400 kV) as of FY2022/23, with a further 2,852 circuit-km under construction at that time and grid substation capacity at 8,867 MVA. Later NEA statements referenced substation capacity above 13,000 MVA, but we couldn’t locate a single, dated, primary-sourced total-circuit-km figure for 2026 specifically — treat any more recent aggregate figure with caution until it’s confirmed directly against NEA’s published statistics.
• Cross-border line operating: the 400 kV Dhalkebar–Muzaffarpur line, Nepal’s first cross-border transmission connection with India.
• Cross-border line under construction: the 400 kV New Butwal–Gorakhpur line (approximately 18 km in Nepal, 117 km in India), targeted for commissioning in FY2026/27; it will initially operate at 220 kV (supporting roughly 130 MW of imports / 200 MW of exports) until the New Butwal 400 kV substation, expected around December 2027, is complete.
• Additional agreements: Power Grid Corporation of India (POWERGRID) and NEA have signed joint-venture agreements for two further 400 kV lines — Inaruwa (Nepal)–New Purnea (India) and Lamki/Dodhara (Nepal)–Bareilly (India) — structured as 51/49 joint ventures on each side of the border. We couldn’t independently confirm an exact signing date or a firm completion year for these from primary sources; treat any specific 2030 completion date circulating elsewhere as unconfirmed.
• Domestic priority line: the 135 km Hetauda–Dhalkebar 400 kV line had 372 of 378 towers complete as of late August/September 2026 reporting, with commissioning targeted for FY2026/27.

The fair way to characterise this: Nepali officials, energy analysts, and India’s own approval process — which cited limited transmission capacity when it withheld Bangladesh’s requested 20 MW expansion — increasingly point to transmission capacity as a growing constraint on Nepal’s ability to evacuate and export additional electricity. It isn’t yet a hard ceiling, but it’s a bottleneck drawing more attention than generation capacity itself in current planning discussions.

Economic Impact

• Nepal’s Energy Consumption Growth and Export Strategy 2083 (Ministry of Energy, April 2026) sets the 28,500 MW-by-2035 target as part of a broader plan to raise per-capita electricity consumption roughly tenfold over the strategy period.
• NEA’s FY2025/26 cross-border trade data (see above) shows the clearest current economic signal: export revenue of NPR 29.32 billion against an import bill of NPR 10.56 billion. Hydropower exports are already one of the pillars behind Nepal’s broader macroeconomic story — see our Nepal Economy Growth 2026 overview for how this fits alongside remittances and GDP.
• Broader claims about direct economic contribution (frequently cited in industry materials as roughly NPR 105 trillion over ten years if the 28,500 MW target is met) and IPP royalty collections appeared in earlier drafts of this article but couldn’t be independently traced to a specific, dated primary source in this review; we’ve removed the unverified figures rather than repeat them. Readers wanting these numbers should request the underlying IPPAN or Ministry study directly.

Investment Opportunities and Risks

Opportunities:

• A large gap between installed capacity (roughly 4,000 MW pre-flood) and technically feasible hydropower potential (40,000+ MW).
• A long-term Indian offtake framework (up to 10,000 MW over ten years, signed January 2024) and an active, if still small, Bangladesh export corridor.
• Recently expanded cross-border transmission capacity (1,650 MW to India, up from 1,100 MW) and several new transmission joint ventures in progress.

Risks (documented, not hypothetical):

• Execution and financial-closure risk: Upper Karnali took roughly 18 years to move from signed agreement to basic infrastructure tendering. A commonly cited claim that only around 30% of approved foreign direct investment in Nepal is ultimately realised appears in several Nepali investor-guide sources, but we weren’t able to trace it to a single primary dataset in this review; treat it as a widely repeated industry estimate rather than a confirmed government statistic, and verify directly with the Investment Board Nepal or Nepal Rastra Bank before relying on it. For the broader FDI picture beyond hydropower, see Foreign Investment in Nepal: Opportunities & Challenges.
• Climate and hydrological risk: the August 2026 floods removed roughly a tenth of national generation capacity in a single event and triggered emergency imports from India.
• Concentration risk: more than 30 hydropower projects are reported to be in operation or under construction in the Trishuli river basin alone — the same corridor devastated by the August 2026 floods — a pattern environmental economists have specifically flagged as a planning concern.
• Regulatory friction: forest-clearance, land-acquisition and PPA-approval delays are widely cited by developers (Tanahu’s forest-compensation dispute is a documented example) as recurring sources of schedule slippage.

This is general market information, not investment advice. Project-level due diligence should be verified directly with NEA, the Investment Board Nepal, and the Department of Electricity Development before any capital commitment.

Environmental and Social Challenges

Hydropower’s clean-energy label sits alongside real, documented community-level costs. As of mid-2026, Nepal had well over 190 operating hydropower plants and hundreds more holding construction or survey licences — a scale of development that has visibly reshaped districts such as Sankhuwasabha and, as the August 2026 floods showed, concentrated real physical risk in others. The floods themselves destroyed thousands of homes and damaged health facilities and cultural sites across five districts, on top of the direct hydropower losses described above.

Nepali climate scientists and energy officials have since called publicly for greater diversification toward reservoir hydropower, pumped storage, and solar, given the country’s heavy reliance on run-of-river generation concentrated in glacier-fed river corridors.

Government Targets for 2030/2035

• 28,500 MW installed capacity by 2035 — 13,500 MW for domestic use, 10,000 MW exported to India, 5,000 MW exported to Bangladesh — under the Energy Consumption Growth and Export Strategy 2083 (Ministry of Energy, Water Resources and Irrigation, announced April 2026), requiring an estimated US$46.5 billion in investment.
• Nepal has also stated a longer-term national commitment to net-zero carbon emissions by 2045, referenced in national climate planning documents; we did not re-verify this specific date against a 2026 primary source in this review.
• An interim 15,000 MW installed-capacity commitment appears in independent Nepali political-accountability tracking tied to a ruling coalition’s citizen contract, rather than in the Ministry’s own 2083 strategy document — worth distinguishing a governing-party pledge from an official ministry roadmap when citing this figure.

Future Outlook

Nepal enters the second half of 2026 with a genuinely two-sided story. The structural growth case remains intact: record export revenue, a firm ten-year Indian offtake framework, an active Bangladesh corridor, freshly expanded cross-border transmission capacity, and a deep project pipeline (Budhi Gandaki, Upper Arun, Dudhkoshi, West Seti/SR6) that — if even a portion of it is built on anything close to schedule — would meaningfully change Nepal’s regional energy position by the mid-2030s.

Against that, the August 2026 floods were a costly, and in human terms devastating, reminder that a strategy built substantially on run-of-river hydropower concentrated in seismically and hydrologically volatile Himalayan river corridors carries real, recurring physical risk. That risk is now shaping the policy conversation around storage projects, solar diversification, and disaster-resilient design alongside — not instead of — the capacity targets that have defined the sector’s growth story to date.

Frequently Asked Questions

Related reading on Growing Nepal: Nepal Economy Growth 2026: GDP, Remittance, Hydropower & Future Outlook · Foreign Investment in Nepal: Opportunities & Challenges · Investment in Nepal — full section