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Artificial intelligence is driving one of the largest infrastructure expansions in modern history. Behind every AI model, blockchain network and cloud service lies a vast network of data centres and high-performance computing clusters that consume enormous amounts of electricity. According to the International Energy Agency, electricity consumption from data centres currently exceeds 460 terawatt-hours annually and could rise beyond 1,000 terawatt-hours by 2030 as AI and cloud computing expand. However, this rapid growth will inevitably increase the carbon footprint of digital infrastructure. As a result, companies are increasingly seeking locations powered by renewable energy to meet their climate commitments.

Can Nepal, a country with immense hydropower potential, transform its rivers not only into electricity exports but also into computing power exports?

Beyond Electricity Export

Nepal has long viewed hydropower primarily from the perspective of electricity generation and export. The Nepal Electricity Authority states that Nepal has around 42,000 megawatts of economically feasible hydropower potential, yet the country’s installed capacity remains relatively low, at 3,255 MW.

Traditionally, Nepal’s economic strategy has focused on exporting surplus electricity to neighbouring markets, particularly India. Given Nepal’s geography and limited cross-border connections, India is currently seen as the primary market for electricity exports. However, this creates greater economic dependence on India. Any change in India’s energy policy or import demand could significantly affect Nepal’s export revenues. A useful example can be seen in Bhutan. Despite contributing around 20 percent of its GDP, as reported by the Asian Development Bank, most hydropower projects there have been financed through loans and grants from India, creating a concentrated economic relationship that may pose strategic vulnerabilities in the long run.

Instead of exporting raw electricity alone, renewable energy could be used to power data centres, computing clusters and blockchain networks. These digital services could then be exported globally through fibre-optic networks, potentially generating greater economic value than electricity exports while also diversifying economic dependence.

According to Reuters, Bhutan has already entered this race by mining Bitcoin using surplus hydropower since the late 2010s. Bhutan now reportedly holds one of the world’s largest sovereign Bitcoin reserves, totalling over 13,000 BTC. The country is also planning a 40–50 MW AI-focused data centre with an estimated investment of around USD 450 million.

Demand for such infrastructure is growing rapidly. According to a Deloitte report, by 2030, India’s data centre sector alone may require more than 5,000 MW of electricity, up from the current estimated demand of 1,500–2,300 MW. Across South Asia, total demand could reach 7,500 MW. Hence, Nepal could potentially become a green computing hub for the region.

However, this is more complicated than it seems. It requires addressing several challenges, including data governance, internet connectivity, geopolitics, environmental risks and infrastructure financing.

Data Governance and Digital Trust

Global companies select data centre locations based on data protection and regulatory stability. They seek clear legal frameworks governing privacy, cybersecurity and digital governance. At present, Nepal’s framework remains limited. Nepal’s primary cyber law, the Electronic Transactions Act, was enacted in 2008, early in the evolution of the internet economy, and is now outdated compared to global standards.

Countries that attract investment, such as Singapore, have robust data protection regimes, strong cybersecurity institutions and transparent regulatory systems. For Nepal to compete, it will need to modernise its digital governance framework and establish independent regulatory institutions capable of ensuring transparency and accountability.

Internet Connectivity in a Landlocked Geography

Nepal’s international connectivity is another major challenge. The country’s international internet bandwidth is currently routed primarily through India. Heavy reliance on a single corridor raises concerns about redundancy, geopolitical vulnerability and potential data security risks.

To mitigate such risks, Nepal would need to diversify its connectivity infrastructure. Strengthening cross-border fibre links with China and exploring connections with Bangladesh could reduce dependence on any single country. Such diversification would also ensure that data traffic continues to flow even if one route is disrupted.

Political and Environmental Complexity

Nepal’s hydropower sector is deeply intertwined with regional geopolitical interests. For example, the West Seti Hydropower Project, first studied in the 1980s, has changed developers multiple times, shifting from Australian to Chinese and now to Indian stakeholders. Moreover, India maintains that it will not import electricity generated by projects involving Chinese investment. Domestic political instability and policy inconsistency have further complicated matters, and the West Seti project still shows no clear signs of progress.

Furthermore, run-of-river hydropower projects generate less electricity during the winter months; as a result, Nepal, which relies heavily on such projects, imports electricity from India during the dry season. Reservoir-based projects could offer a solution but raise environmental and geopolitical concerns, particularly regarding downstream ecosystems and water flows into India.

Nepal’s mountainous geography also introduces significant risks for large infrastructure projects. Landslides, floods, earthquakes and glacial lake outburst floods threaten hydropower facilities and associated infrastructure. Climate change further complicates the long-term outlook, as glacier retreat and shifting precipitation patterns may significantly alter river flows.

Financing the Infrastructure

Even if regulatory and connectivity challenges are addressed, building a renewable-powered computing hub alongside hydropower infrastructure would require enormous financial investment. Computing infrastructure supporting AI workloads often costs hundreds of millions or even billions of dollars.

As Nepal’s capital markets remain limited, domestic financing may be insufficient. Foreign investment may therefore play a crucial role. Iceland’s renewable-powered data centre industry combines domestic operators and international technology companies, creating a hybrid investment model. Nepal could pursue a similar approach, allowing international firms to invest while maintaining regulatory safeguards to protect national interests and data sovereignty.

A Strategic Opportunity for NepalNepali culture insights

A global race for renewable-powered computing infrastructure is already underway. Technology companies are actively exploring ways to reduce the carbon footprint of data centres. For instance, Google has announced Project Suncatcher, which aims to develop solar-powered data centres in low Earth orbit, with test satellite launches planned for 2027.

If Nepal seeks to pursue this opportunity, several policy steps will be necessary. The government could begin by modernising data protection laws, establishing a national data governance authority and developing dedicated green data infrastructure zones powered by hydropower. At the same time, expanding cross-border fibre connectivity with China and Bangladesh would enhance network resilience. To ensure long-term energy security, Nepal should also explore complementary renewable sources such as solar energy.

Nepal faces significant challenges - from regulatory gaps and political instability to geopolitical constraints, climate risks and capital limitations. Yet the opportunity remains substantial.

Nepal’s rivers have long powered turbines. With the right policies and investments, they could also power the computational engines of the global digital economy. However, Nepal should first focus on reducing petroleum imports by increasing domestic electricity consumption before taking more ambitious steps.

By Bibhav Pokharel

The author is civil engineering professional based in Australia with experience in artificial intelligence.