Recent catastrophic floods have severely impacted Nepal's energy sector, destroying or heavily damaging hydropower projects that represent the nation's primary investment in power generation. More than 10% of Nepal's energy generation capacity has been knocked out by the recent deluge, highlighting the vulnerabilities of the country's nearly exclusive focus on hydropower.
The Upper Trishuli-1 project, once Nepal's largest foreign direct investment venture valued at approximately $647 million and supported by institutions like the Asian Development Bank and the International Finance Corporation, was nearly obliterated by the floods. Similarly, the Upper Trishuli 3A project, funded by China's Export-Import Bank, also sustained severe damage.
Climate activists and experts have voiced concerns that these risks were known and that preventive measures were inadequate. Himanshu Thakkar, coordinator for the South Asia Network on Dams, Rivers & People, stated that international lenders were "acutely aware of the extreme danger" to workers, residents, infrastructure, and the environment. He added that despite internal reports highlighting these dangers, insufficient preventive steps were taken, and preparedness for potential calamities was lacking.
The Trishuli River basin has a documented history of volatility. In September 2024, intense rainfall triggered flash floods in the Rasuwa, Nuwakot, and Dhading districts, which were also among the areas hardest hit by the recent floods. The previous year, in July 2025, a glacial lake outburst in Tibet's Gyirong county sent a flood down the same river stretch into Nepal, resulting in at least 11 fatalities, significant infrastructure damage, and a nearly six-month closure of the Nepal-China border crossing.
Officials acknowledge shortcomings in the current approach. A representative from the Nepal Electricity Authority admitted that even if climate risk assessments were conducted, the design of the plants may not have adequately accounted for such risks. Improvements in the construction and operation of hydropower plants are deemed necessary.
This vulnerability is already having a financial impact on the private sector. Insurers have reportedly paid out around $40 million for flood-related damages to over 20 private power plants in the past three years. Uttam Bhlon Lama of the Independent Power Producers' Association of Nepal warned that rising insurance premiums are making business operations increasingly unfeasible.