Abstract The demand for hydropower production, as a prominent sustainable development strategy, has created a boom in the number of planned hydropower projects, especially small ones. These projects are mainly located in post-socialist transition and developing countries. However, emerging evidence suggests that most of the projects remain on paper. One reason for this is prevalent corruption. In the literature, corruption has been identified in megaprojects but a significant number of hydropower projects are smaller in size. This leaves a literature gap and a subsequent lack of understanding regarding corruption and its potential connection to the absence of hydropower construction. We argue that it also creates a ‘safe space’ for corrupt actors who use the sector for personal gain. In this paper, we address this nexus of unfinished hydropower projects, sustainable development in transition countries, corruption, and lack of scholarly attention by presenting empirical evidence from Bosnia and Herzegovina. We highlight that sustainability goals associated with hydropower might be distorted, especially in transition countries as they are intermingled with hydropower projects that are embedded in complex bureaucratic structures. We conclude that focusing on the sector might improve its management, thus contributing to sustainable development, and also help to decrease the corruption risk.