Selling Summer, Buying Winter
Bhutan sells electricity to India all summer and buys it back all winter, because nearly every plant it has built runs on the river rather than on a reservoir and the rivers fall when the snowmelt stops. The largest of those plants was begun in 2008, was due in 2016, and is still not generating, because the hillside it is anchored to keeps moving.
The road down the Punatsangchhu below Wangdue Phodrang runs past a construction camp that has been standing there longer than some of the men working in it have been employed. Access roads switchback down to the river, spoil heaps sit where the terraces used to be, and the right-hand hillside above the dam site is stitched with anchors, drainage galleries and instrument cables. This is Punatsangchhu-I: 1,200 megawatts, begun in November 2008, scheduled to generate in 2016. It has never generated anything. In February 2026 the project reported physical progress of 87.75 per cent and financial progress of 93.7 per cent, and the working completion date was 2030.
Every visitor to Bhutan drives past this, usually between Thimphu and Punakha, and almost nobody is told what they are looking at. It is worth stopping for, because it is the country's economy in one riverbed. Electricity is Bhutan's largest export by a distance. Loans from India to build the plants that generate it made up around 61 per cent of Bhutan's external borrowing in the public debt report of September 2025 — equivalent on its own to something over half of national output, inside a total public debt that has been running at roughly the size of the entire economy.
Run of the river
Bhutan's plants are almost all run-of-river. There is a barrage, a diversion, a long headrace tunnel through the mountain and a powerhouse far below, and what there is not is a large storage reservoir. That was a deliberate choice, and a defensible one: a storage scheme in a Himalayan valley means drowning the valley floor, which is where the villages, the paddy and the temples are. Run-of-river schemes displace far fewer people, cost less to build and flood almost nothing.
The trade-off is that output follows the hydrograph. In the monsoon the rivers are enormous and the turbines run flat out; from December to March the snowmelt has stopped, the rain has stopped, and the same machinery has a fraction of the water. Before Punatsangchhu-II came online, Bhutan held about 2,336 megawatts of installed capacity and could count on roughly 415 megawatts of it in the lean months. The plate on the wall says one thing for four months of the year and something else entirely for the other eight.
The season that reverses
So every winter the direction of trade flips. Bhutan is a net exporter across the year and a net importer from about October to March, buying back from the Indian grid the power its own rivers cannot make. In the 2025–26 lean season it imported 2,118 million units at a cost of around 7.1 billion Indian rupees, more than double the 999 million units of the winter before. Domestic demand is what moved: peak load has climbed past 750 megawatts while lean-season generation sits nearer 400 to 450, and the gap is filled at whatever the Indian market charges in January rather than at what Bhutan was paid in July.
A country can be a net exporter of electricity across the year and still be importing it every evening in January. The annual figure is a true number that describes nothing anybody in the country actually experiences.
The hillside that keeps moving
Punatsangchhu-I is what happens when that model meets bad ground. On 23 July 2013 a landslide came down at the toe of the dam's right abutment; another moved within the same body of debris on 12 August 2016. Satellite radar analysis published later indicated that the dam had been sited against an ancient, slowly creeping slope — not a slide triggered by the excavation so much as one the excavation woke up. Dam construction stopped for around seven years while engineers argued about whether the right bank could be stabilised at all, or whether the structure should be redesigned downward. Concrete pouring on the main dam resumed on 10 April 2026, with stabilisation works on the right bank as the condition of going ahead. Meanwhile the sister project downstream on the same river, Punatsangchhu-II, 1,020 megawatts in six units of 170, synchronised its first units in December 2024 and its last in August 2025, lifting national capacity by about 40 per cent in nine months. The same river, the same decade, the same funding structure, two completely different outcomes.
Who carries it
These projects are financed by India, in rupees, as a mix of grant and loan, and repaid out of the electricity they sell back to India. That structure is why the IMF has kept assessing Bhutan's debt risk as moderate despite a debt-to-GDP ratio that would alarm anyone reading it cold: hydropower debt is self-liquidating, because the asset earns the currency the loan is denominated in. The clause everyone skips is that the asset has to be finished, and then it has to run. Punatsangchhu-I has spent eighteen years testing both halves of that sentence, and the interest has not paused while it did.
What it pays for
This is the money behind the things Bhutan is known for. Free healthcare and free education are funded from a budget that hydropower revenue and Indian grants dominate. So is the enforcement of the constitutional requirement, written into the 2008 charter, that at least 60 per cent of the country stay under forest cover for all time — a promise that costs a poor mountain state real forgone timber and real forgone farmland. The carbon accounting that makes Bhutan a net sink works twice over, once through those forests and once because the electricity it exports displaces coal generation in India.
What a visitor sees
Not much of this is signposted, and all of it is visible. The construction camps and the Indian labour force in the Punatsangchhu valley. The widened, blasted sections of the Thimphu–Punakha road, which exist because turbines had to be driven up it. The buried cables in Phobjikha, put underground at real expense so that wintering cranes would not fly into them, which is the same government making the opposite trade in a different valley. And the weather itself: the clearest mountain views of the year are in December and January, and those are precisely the weeks when the rivers are lowest and the turbines are idling. The country is at its most photogenic in the season it earns least.