Navigating Nepal’s Hydropower Ambitions: Lessons from the Inga III Project

Nepal, endowed with abundant water resources and a favorable mountainous terrain, has immense potential for hydropower development. As the country engages in discussions with its neighbors, particularly China and India, regarding large-scale energy projects, it must exercise caution to ensure financial sustainability and environmental responsibility. A key lesson can be drawn from the failure of the Inga III Dam in the Democratic Republic of Congo (DRC)—an ambitious hydropower initiative that collapsed due to governance challenges, financial instability, and the withdrawal of major investors.

The Inga III Dam, envisioned as part of the larger Grand Inga Project, was designed to be one of the world’s largest hydropower ventures, aiming to address Africa’s energy shortages. However, the project faced significant setbacks. One of the biggest blows came when China’s Three Gorges Corporation, a major state-owned enterprise, withdrew its support. Initially backed under the Belt and Road Initiative (BRI), the project lost traction as financial concerns, logistical difficulties, and political instability in the DRC raised red flags for investors. The absence of a clear financial plan and growing concerns over corruption further discouraged potential stakeholders. Additionally, there has been widespread criticism of how Chinese firms operate in Africa, with accusations of opaque business dealings and a focus on securing construction contracts rather than ensuring the long-term sustainability of projects. The Inga III initiative suffered from a lack of transparency, leading to its eventual downfall.

Nepal finds itself in a position where it can learn from these failures to shape a more strategic approach to its own hydropower ambitions. With an estimated 42,000 MW of technically and economically feasible hydropower capacity, Nepal remains largely untapped in terms of energy production. The government has set an ambitious target of achieving 28,000 MW of electricity generation by 2035, but multiple hurdles stand in the way. Financial constraints continue to be a major challenge, necessitating a comprehensive investment strategy that involves multilateral institutions, private sector players, and bilateral partners to avoid dependence on a single investor. Furthermore, Nepal’s geopolitical position between two regional powers requires careful diplomacy to balance foreign investments while safeguarding national interests.

Beyond financial and geopolitical considerations, Nepal must also address the environmental and social impacts of large hydropower projects. Infrastructure development on this scale often leads to ecological degradation and the displacement of local communities. Sustainable development practices, thorough Environmental Impact Assessments (EIA), and active engagement with stakeholders will be crucial in ensuring that hydropower initiatives do not face opposition or long-term sustainability challenges.

The failure of Inga III underscores the risks of over-reliance on a single major investor and the importance of financial diversification. Nepal must ensure a strong regulatory framework that promotes transparency, clear power purchase agreements (PPAs), and well-structured pricing mechanisms to attract investors. By implementing best practices in governance, environmental sustainability, and financing, Nepal can unlock its hydropower potential while ensuring long-term economic growth and stability.

Harsh Pandey is a PhD Candidate at the School of International Studies, JNU, New Delhi.