Hydropower is a significant component of China’s contemporary energy framework, with its construction and operation critically contributing to the advancement of sustainable development in the region. However, the influence of hydropower development on regional sustainable development is not evident, and the course of its effect is not clear. In this work, on the basis of assessing the effect of hydropower development on regional sustainable development, a system dynamics (SD) simulation model was created, and 15 distinct development modes were set and tested. The relative driving efficiency of hydropower growth on sustainable development in a province in Southwest China under several scenarios was assessed using the super-efficiency-slacks-based measurement (Super-SBM), and an efficiency analysis was undertaken. The study’s findings demonstrate that: (1) Hydropower development had a complex driving influence on sustainable development in the province in 2015–2022. (2) The relative driving efficiency of the province over the study period exhibited a changing pattern and was at a high level greater than 0.7. (3) New hydropower investment and hydropower generation are the major factors impacting the relative driving efficiency of hydropower development on regional sustainable development in the province. The study’s findings provide a platform and reference for supporting regional sustainable development through hydropower development.