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Although biodiversity is crucial for Sustainable Development Goals (SDGs), following the current trajectory, we risk failing SDG 15. Using a new indicator quantifying the loss of functional habitat (habitat that is simultaneously suitable and well-connected), we show that the real impact of renewable energy is far larger than previously assumed. Specifically, we estimate that the construction of hydropower reservoirs in south Norway caused a loss of ca. 222 km2 of functional habitat for wild reindeer (Rangifer tarandus)—which is far larger than assumed based on land inundation indices (110 km2). Fully mitigating these impacts is challenging: scenario analyses reveal that the measures proposed by societal actors would yield only a fraction of the habitat lost (2–12 km2) and could cause trade-off risks with other SDGs. Using indices of functional connectivity is crucial for environmental impact assessments, as entire ecological networks for several species can be affected far beyond the reservoirs.