The Tala Hydroelectric project, which is expected to generate 1020 MW power, is located in Bhutan. Although not explicitly stated in the question, it is important to note that the Tala Hydroelectric project is an Indo-Bhutan joint venture. Option 1, Arunachal Pradesh, is incorrect as the project is not located in this Indian state. Option 3, Nepal, is also incorrect as the project is not located in Nepal. Option 4, Himachal Pradesh, is also incorrect as the project is not located in this Indian state either. Therefore, the correct answer is option 2, Bhutan.