RAJASTHAN, India -- The hydropower industry in the Hindu Kush Himalaya region is seeing persistently high damage-related losses as high-altitude icy zones become more unstable due to human-induced climate change, increasing the risk of floods and avalanches In Nepal alone, insurance claims have exceeded premiums in four of the last five years, raising questions over the ambitious expansion of this clean energy source.

India Bhutan and China are also turning to hydropower to reduce their reliance on fossil fuels. However, experts say the scale of August's devastating flooding on the Nepal-Tibet border, which knocked out more than 400 megawatts of operational hydropower in Nepal in one stroke, should make climate risk a major consideration in the financial model behind such infrastructure.

"Repeated evidence across Himalayan borders and rivers should prompt a rethink of where to build and how to design hydropower projects," said Arun Shrestha, CEO of Hydrominds, a mountain water resources data platform.

Flash floods and glacial lake outburst floods -- the latter caused by the failure of the dam containing the glacial lake -- triggered losses of at least 170 billion Indian rupees ($1.77 billion) to under-construction and existing hydropower infrastructure in India alone in the last five years.

Hydropower losses during the Nepal-Tibet flood -- which climate change played a role in creating the conditions for, scientists have said in an initial assessment -- are so far estimated at 20 billion Nepalese rupees ($128 million), said Rena Rijal, acting CEO of Kathmandu-based United Ajod Insurance.

Prompt hydropower claim settlements would help to speedily restore plant operations. However, about half of the 11.45 billion Nepalese rupees in insurance claims made in the last five years remain outstanding, according to data from the Nepal Insurance Authority. It remains unclear whether the burden will ultimately fall on the insurers or the claimants. Long settlement times do not imply rejection, as delays can be due to the complexity of large projects or difficulty in making assessments.

"Claim settlements can get delayed if reinsurer arrangements are inadequate," said Toton Chakraborty, CEO of the Nepalese branch of The Oriental Insurance Co.

Reinsurance allows insurance companies to reduce their financial exposure to catastrophic claims by transferring a part of their risk to a secondary insurer. Because the Nepalese insurance market is relatively new, it does not have much capacity to retain risk, and so relies largely on transferring much of this to the international reinsurance market, Chakraborty said.

"Securing reinsurance support for hydropower projects is getting more difficult," Rijal said, "because of the high frequency and concentration of losses, escalating climate risk and poor data transparency." Nepal is in a seismically active zone and is prone to glacial lake outburst floods, regular floods and landslides. According to Rijal, the severity and frequency of losses from such events in recent years means it is high time to revisit hydropower insurance premiums.

The number of Nepalese hydropower policies has declined in recent years after rising dramatically, while the total insured value has leveled off after similarly strong initial growth, according to data from the Nepal Insurance Authority.

Engineering experts also question continuing the business-as-usual planning and engineering of projects in the light of the mounting risks.

"Today, risk assessment needs to consider multiple hazards and their cascading and compounding effects," Shrestha said. "Hydropower projects need to adopt climate-resilient designs and a different approach to the siting of various structural components, their engineering design, provision of access and escape routes, sacrificial structures, et cetera." Hydropower facilities can generate better returns if situated upstream, said Bkesh Pradhanang, managing director of Kathmandu-based infrastructure consultancy Jade Consult, but doing so increases their exposure to disasters.

"In contrast, downstream hydropower plants are more expensive to establish but comparatively safer," he said.

However, with few optimal downstream sites left, dams in the Himalayan region have pushed steadily upstream toward river headwaters, said Ajay Pradhan, chairman and CEO of Cetus Consulting Solution Services, a New Delhi-based environment, engineering and infrastructure consultancy. At the same time, developmental pressures to expand the power network at minimal cost have caused location studies to be circumvented in many cases.

"With electricity tariffs remaining unchanged for nearly two decades in Nepal, project budgets also tend to be low," said Pradhanang.

While Nepal has some requirements regarding hydropower risk assessments, Shrestha said the country lacks a validated local methodology and proper implementation.

"While multilaterally financed projects mostly meet rigorous standards because lenders require them, most private domestic projects do not, and this gap explains much of the disproportionate damage they suffered in 2021, 2023 and 2024," he said.

As global warming changes the Himalayas, which are warming twice as quickly as the global average, by melting permafrost and glaciers and reducing snow cover, there is a question of how risk assessment needs to evolve.

One way would be to consider the full range of climate triggers and seismic risk as core engineering inputs, rather than just historical river flow data. These assessments could also be continuously updated based on glacial monitoring and community early-warning systems.

Rather than simply being understood as renewable or low-carbon, sustainable Himalayan hydropower "must also mean resilient to a mountain system whose glaciers, permafrost and rainfall patterns are actively destabilizing," Cetus Consulting's Pradhan said.

At the 1,000-megawatt Pakal Dul hydropower project in Jammu & Kashmir, the powerhouse complex, shafts and switch yards are all being built underground, despite the increased difficulty, due to the risks and to improve safety.

"We have drawn on our engineering expertise to work closely with the project's complex design requirements to deliver innovative construction solutions for this project," said KNM Rao, the business unit head of hydro and underground works at Mumbai-based construction and engineering company Afcons Infrastructure, which is executing part of the project.

Still, while projects should avoid being sited on riverbanks and consider downstream communities, river ecology, sediment flow and the livelihoods that depend on these rivers, there would still be a degree of risk despite taking these steps, said Prabhat Sood, founding director of Dr. Hutarew & Partner India, a global engineering and environmental consultancy.

"There can be no certainty of the structure being disaster-proof in view of unknown parameters associated with climate change and the Himalayas' young age and general instability," he said. Charu Bahri is a contributing writer.