Nepal's data center bet

Nepal has more than ten data centers today, most below 5MW, built to serve banks, hospitals, and government agencies. That's the baseline. The government wants to change it.

Finance Minister Dr. Swarnim Wagle's FY 2083/84 budget commits Nepal to building its first "Sovereign AI Compute Center" at Sucharter in Kathmandu. The plan: procure thousands of AI processing units, offer subsidized compute to domestic startups and researchers, and back it all with clean hydroelectricity. Fifteen Nepali AI researchers working abroad will be brought back on government fellowships. The pitch is simple — convert hydroelectric surplus into high-value digital exports instead of selling raw power to India at wholesale rates.

The private sector isn't waiting. Bichuten Data World, backed by NPR 5 billion ($37M) in domestic equity and a Laxmi Sunrise Bank credit line, is building two facilities at Chobhar (Kathmandu) and Birgunj, using Google's platform and India's VVDN Technologies for liquid cooling. Managing Director Naveen Agrawal calls it an "AI-driven facility," not just storage. Chobhar is in final construction, targeting August 2026.

Communications Minister Dr. Vikram Timsina is also studying whether multinationals should be allowed to invest in large-scale facilities. Industry analyst Rohit Chandra Shah of Huawei Nepal — the country's first Accredited Tier Specialist — puts it plainly: what once served only telecoms now serves every sector. Nepal isn't ahead of this trend. It's catching up.

There are real reasons Nepal makes sense as a data center destination.

"Nepal has abundant clean power" is true for about five months. The other seven tell a different story.

Almost all of Nepal's hydropower is run-of-river — output tracks river flow directly. Rivers run high June through October, low November through May. Major stations show it: Chameliya fell from 30MW to 17MW during the 2019 dry season, a 43% drop (Kathmandu Post, Nov 2019). Other stations show similar patterns. The only facilities with real baseload buffer are the Kulekhani complex — Kulekhani I (60MW), II (32MW), and III (14MW, commissioned 2019) — 106MW total.

Nepal still imports power from India during dry months. In FY 2024–25, it imported NPR 12.92 billion worth while exporting NPR 17.46 billion, becoming a net electricity exporter annually for the first time (NEA, August 2025). That's real progress. But the seasonal mismatch hasn't gone away.

Data centers can't turn off in winter. Tier III facilities need 99.9% uptime — under 9 hours of downtime per year. Stacking hyperscale compute load on a grid that still relies on Indian imports every dry season makes that remaining deficit considerably harder to manage.

Climate change makes this worse. The Nepal Economic Forum projects droughts could cut river flows 38 to 57 percent over the long term. In June 2023, unseasonal floods damaged 30 hydropower projects totaling 463MW. Hydropower is clean. It isn't guaranteed.

The government's answer is 100MW of battery storage in Wagle's budget. Right direction, wrong scale. A hundred megawatts of storage covers minutes of demand, not months. Fixing the dry-season gap ultimately requires either reservoir-scale hydropower — a decades-long project — or accepting that dry-season data centers will run on imported power.

Electricity gets the headlines. Water is the quieter problem, and for Kathmandu it may be more urgent.

Servers generate heat. Cooling that heat takes water. A typical enterprise data center uses 1.1 to 1.9 million liters per day. A large hyperscale facility — the kind that serves global cloud clients — can use up to 19 million liters. Google reported consuming approximately 6 billion gallons across all its data centers and offices in 2024, an 8% increase over 2023 and roughly three times its 2016 level, driven largely by AI (Google 2024 Environmental Report).

Kathmandu Valley's total daily water demand is about 280 million liters — and the system is already short. Groundwater extraction exceeds natural recharge. The Bagmati and Bishnumati rivers have shrunk dramatically over three decades of urbanization. Water demand grows about 10% per year. Melamchi added supply. Demand outpaced it anyway.

A single hyperscale data center at Chobhar or Sucharter would consume 7% of the entire Valley's daily water supply, drawn from an aquifer already in deficit. This isn't hypothetical. Northern Virginia's data center cluster grew to consume close to 2 billion gallons of water in 2023 — about 3% of the Potomac River Basin's total. Kathmandu has far less slack.

Bichuten's choice of VVDN liquid cooling helps. Liquid-cooled facilities can hit a Water Usage Effectiveness (WUE) of 0.5 liters per kilowatt-hour or less, versus 1.8 liters or more for conventional air cooling. That's a big difference at scale. It doesn't make the problem disappear. It shrinks it.

There's also an upstream question rarely raised in Nepal. Reservoir-based hydropower evaporates water — published estimates suggest up to 18.27 gallons per kilowatt-hour, far more than thermal plants. Nepal's grid is mostly run-of-river, so direct evaporation is minimal. But the water flowing past turbines is water diverted from the same river systems that feed Kathmandu's drinking water intakes downstream.

Water and electricity aren't the only issues. The environmental ledger has other entries.

This chart raises a question that almost nobody in the Nepali data center debate asks: who is this infrastructure actually for?

Nepal's citizens use less electricity per person than every South Asian country except Afghanistan. Rural areas still face dry-season load shedding. Hospitals run on diesel backup. Farms in grid-unreliable areas depend on diesel irrigation pumps.

Data centers selling compute to Indian, European, or American clients will divert grid capacity from domestic users at the margin. The government's answer — monsoon surplus would otherwise be wasted or sold cheap to India — is fair for the wet months. It doesn't hold in the dry season, when the grid is already short.

Singapore only lifted its data center moratorium when operators agreed to hard numerical targets. Nepal is doing the opposite: committing public money and policy support before setting any sustainability standards. Rules need to come before the concrete, not after.