India-Bhutan Energy Partnership: Strategic Growth in Hydropower and Regional Energy Security

The India-Bhutan energy partnership has emerged as a cornerstone of cross-border renewable energy investment in South Asia, blending economic pragmatism with geopolitical strategy. As Bhutan advances its ambitious hydropower expansion plans and India seeks to secure clean energy supplies, the collaboration offers a compelling case study of how regional energy security and strategic alignment can drive sustainable growth.

A Powerhouse of Potential

Bhutan’s hydropower sector is undergoing a transformative phase, with projects like the 5,000 MW initiative led by the Adani Group and Druk Green Power Corporation (DGPC) setting new benchmarks. This partnership, formalized in 2025, aligns with Bhutan’s Renewable Energy Roadmap 2040, which aims to achieve 25,000 MW of installed capacity by 2040 [4]. India, already importing over 95% of Bhutan’s hydropower output, stands to benefit from a stable, low-cost energy source while supporting Bhutan’s economic diversification [5].

Recent developments underscore the scale of this collaboration. The 570 MW Wangchhu Hydropower Project, signed between Adani Power Ltd. and DGPC, marks a historic milestone in public-private partnerships [1]. Meanwhile, the 600 MW Kholongchhu project, a joint venture with Satluj Jal Vidyut Nigam Limited, is nearing completion, exemplifying the long-standing synergy between the two nations [3]. These projects are not isolated endeavors but part of a broader strategy: Bhutan’s 13th Five-Year Plan (2024–2029) prioritizes energy infrastructure to address labor market inefficiencies and stimulate job creation [1].

Geopolitical Leverage and Strategic Alignment

The India-Bhutan energy nexus is inextricably linked to regional geopolitics. Bhutan’s strategic location between India and China positions it as a critical buffer state. India’s deepening investment in Bhutan’s hydropower infrastructure reinforces this alignment, countering China’s growing influence in the region. For instance, the 2007 Friendship Treaty, which includes provisions for India’s support in defense matters, ensures Bhutan’s sovereignty amid border disputes with China over the Doklam Plateau [3].

This partnership also serves India’s broader Indo-Pacific strategy. By securing Bhutan’s energy and economic dependence, India strengthens its “Act East” policy, which seeks to counterbalance Chinese infrastructure projects in South Asia [4]. Bhutan’s cautious diplomacy—balancing ties with both India and China—remains a key variable, but its reliance on Indian financing for major projects ensures continued strategic alignment [2].

Investment Opportunities and Risks

For investors, the India-Bhutan hydropower corridor presents a unique blend of high-impact returns and geopolitical stability. The World Bank’s $605 million commitment to the Dorjilung project in FY25 highlights international confidence in the sector [1]. Additionally, India’s grant-loan model (60% grant, 40% loan) for projects like Tala and Chukha has proven financially viable, offering a template for future collaborations [2].

However, risks persist. Climate change poses a direct threat to hydropower viability, with glacial retreat and erratic rainfall patterns challenging long-term projections [4]. Environmental concerns, particularly in ecologically sensitive Himalayan regions, could also delay projects. Investors must weigh these factors against the geopolitical stability that India-Bhutan cooperation inherently provides.

Conclusion

The India-Bhutan energy partnership exemplifies how cross-border renewable investments can serve dual objectives: economic growth and geopolitical resilience. As Bhutan transitions from a hydropower exporter to a regional energy hub, and India solidifies its role as a strategic partner, the collaboration offers a blueprint for sustainable infrastructure development in contested regions. For investors, the key lies in aligning with projects that balance environmental stewardship with geopolitical foresight—a challenge that both nations are uniquely positioned to address.

Source:
[1] Bhutan Overview: Development news, research, data [https://www.worldbank.org/en/country/bhutan/overview]
[2] India–Bhutan Hydropower Cooperation [https://www.idsa.in/publisher/comments/india-bhutan-hydropower-cooperation]
[3] India and Bhutan Form First-Ever Joint Venture for a 600 ... [https://mercomindia.com/india-bhutan-jv-hydro-project]
[4] Bhutan and Adani sign MoU to develop 5000 MW of ... [https://etedge-insights.com/featured-insights/geopolitics-and-strategy/bhutan-and-adani-sign-mou-to-develop-5000-mw-of-hydropower/]
[5] Preserving India's Strategic Interests in Nepal and Bhutan [https://indiafoundation.in/articles-and-commentaries/himalayan-crossroads-preserving-indias-strategic-interests-in-nepal-and-bhutan/]