PUNATSANGCHHU, Bhutan -- Traveling in this western Bhutanese valley is like going back in time before the Industrial Revolution, with only forests, rice paddies and scattered farming villages visible from the road. But after one more turn, the peaceful countryside life is suddenly replaced by chugging machinery.

Welcome to the construction site of Bhutan's Punatsangchhu-I hydropower plant. The debate around this project is as loud as the construction here. Supporters call it and future hydropower plants the only hope of lifting Bhutan out of poverty, while opponents castigate the plants for casting environmental and social costs on the world's "happiest" nation.

In recent years, Bhutan has started harvesting its winding rivers at a rapid speed. It currently generates 1,480 megawatts of hydroelectricity during the summer -- sufficient to light up almost every house here. By contrast, less than one-quarter of Bhutanese families had electricity in 1999.

But Bhutan wants to move even faster. Policymakers here bet on hydropower -- already the largest export in the country -- to provide more than half its economic output by 2020. The top customer: its energy-hungry neighbor India.

"As a small country with a small population, we don't have many resources," explained Karma Tshewang, chief engineer of Bhutan's Department of Hydropower. "Hydropower is a strategic resource and the only resource that can take care of the country's future in terms of sustainable development."

So, supported by the Indian government and financed by India's money, Bhutan is now aiming to add 10,000 MW of hydropower to its capacity by the end of the decade through the buildup of 10 more projects.

Displaced birds and families
One such project is Punatsangchhu-I. Once it's constructed, a dam will stand here forcing the river go through tunnels to turn turbines, generating much-needed electricity to India and much-needed revenue to Bhutan. But Rebecca Pradhan, ecologist at the Thimphu-based Royal Society for Protection of Nature, said the country might lose its white-bellied heron.

With a global population of fewer than 200, the white-bellied heron is listed as critically endangered by the International Union for Conservation of Nature's Red List. Bhutan has about 30 of them, most of which nestle along the Punatsangchhu Valley. But since the hydropower plant construction broke ground in 2008, Pradhan found that the once-stable heron population started dropping. The result: The critically endangered species has become even more endangered.

The Bhutanese government funded Pradhan's team to try captive breeding to conserve the rare birds, with a goal of releasing white-bellied herons elsewhere. But Pradhan doubts whether those residential birds can survive in a new environment. Worse yet, she said, "there is no single river in Bhutan without a major hydropower plant. Where to relocate them is a big question."

What also remains a question is Bhutan's pursuit of what some call "gross national happiness." Hydropower project developers here hardly displace households the way their international counterparts do, thanks to the country's steep gorges and sparse population. But when such displacement happens, it upsets local communities.

In Gase Tshogom village, 22 families lost their homes and dozens more had to abandon farmlands with Punatsangchhu-I expected to soon flood the area. The government compensated those families with cash, free electricity and new land of the same acreage as the land it inundated, but Tashi Thimley, the village chief, said many villagers are still unhappy because it takes years to cultivate the new land and therefore no one was able to harvest during the last two years.

So the dispute between the government and the affected families carried on. Thimley himself refused to move away, as he claims his gain is not equal to his suffering.

An influx of cash
There are also people who benefit. A dozen miles up from the hydropower plant, in a small town called Lobesa, some residents are making a living by leasing empty rooms to construction workers. And a new hardware shop opened this year to serve truck drivers who carry goods to the construction site. "The business has been going very well, beyond my expectation," the shop manager said.

Bhutanese officials also found hydropower export a good business. The installed turbines turned water flows into cash flows of about $177 million, contributing to a quarter of the government revenue in 2012.

In addition, the buildup of those hydropower projects has helped develop a skilled workforce that the country never had before.

As Dorji Phuntshok, director of Druk Green Power Corp., explained, when Bhutan's first mega-project opened in the southwestern Chukha district in the 1980s, his company had to import engineers from India to run the plant due to a shortage of local talent. However, after years of cooperating with Indian companies, "we now have nearly 1,800 staffs; only two of them are Indian. And those two Indians work in our office in India," Phuntshok explained.

"We have a vision that one day, we can move from exporting hydropower to exporting hydropower professionals," said Tshewang, of Bhutan's Hydropower Department. "Bhutan will become a hub of hydropower professionals and provide needed human resources to Nepal, Myanmar and perhaps the whole world."

But this vision is far from materializing, some say. "Bhutan's construction sector is being surrounded by mega-projects but do not even know how to build a small one," said Tenzing Lamsang, editor of the Bhutanese newspaper. He blamed the lack of capability on the small opportunities given to local companies to learn and practice on a smaller scale, as the government favors experienced Indian companies that can do a better job technically.

And despite its long-term benefits, Lamsang says Bhutan's hard push for hydropower has created economic troubles in the short term. One case in point is that its subsequent demand for importing costly equipment and skilled labor has stressed Bhutan's already limited financial power, leaving few resources available for other businesses to grow.

Climate change: a wild card
The growth of other businesses is badly needed. Bhutan's planned hydropower projects are expected to bring only 7,000 new jobs by 2020, not good news for a country with growing unemployment among its youth.

Harvesting hydropower is also becoming costlier. For example, because of inflation and geological surprises like a sinking riverbank, the construction cost of Punatsangchhu-I skyrocketed to $94 billion from the initial $35 billion. That, in turn, weakens the price advantage of Bhutan's hydropower export compared with other energy supplies in India.

Meanwhile, climate change looms as a wild card. Karma Toeb, a geologist who specializes in Bhutan's glaciers, said repeated photographs show a serious glacier retreat in the country. Although a recent study conducted by Druk Green Power says melting glaciers contribute only 10 percent to Bhutan's river flows, Toeb argued that 10 percent is the only water resource that can keep turbines running during the dry season.

As temperatures rise, melting glaciers have increasingly formed unstable lakes up on the mountain, with several of them sitting above Punatsangchhu-I. Engineers and scientists are scrambling to devise flood preparedness, including an early warning system and efforts to lower the level of dangerous glacier lakes. They have also tried to reinforce the plant so it can survive potential hits caused by glacier lake flooding. But "we might not be able to come out with an all-out solution because you can't tackle the nature as much," Tshewang said.

Nonetheless, the construction of this multibillion-dollar project continues, and two other hydroelectricity powerhouses of its kind are being planned downstream. The river of Punatsangchhu Valley is flowing swiftly, carrying the hopes and fears of the country's future on a wild ride.

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500