Small Hydropower Market - Strategic Insights and Forecasts (2026-2031)

The global small hydropower market is set to reach USD 3,818.653 million in 2031, growing at a CAGR of 2.87% from a valuation of USD 3,315.611 million in 2026.

The growth in the global small hydropower market is attributed to increasing demand for clean, reliable, and decentralized energy sources, especially in rural and isolated areas. Small hydropower projects, defined as installations of production capacity up to 10 MW, have several major benefits. It offers low running costs, long life of assets, high-capacity factors, and low greenhouse gas emissions when compared to fossil fuel-based power generation.

Globally, governments are supporting the growth of small hydropower by implementing special initiatives and policy frameworks to increase renewable energy capacity. In India, the Ministry of New and Renewable Energy (MNRE) runs programs that offer capital subsidies and generation-based incentives to encourage small hydropower projects. China's support for the industry is manifested in its Renewable Energy Law and rural electrification programs managed by the National Energy Administration (NEA).

In Europe, the European Green Deal and the EU Renewable Energy Directive (RED III) are pushing the modernization of small hydropower plants. The Renewable Energy Directive III (RED III) sets the goal for the EU's renewable energy consumption by 2030. RED III sets a target for RFNBO (renewable fuels of non-biological origin) in industry, 42% by 2030 and 60% by 2035.

The United States is encouraging small hydropower by offering incentives through the Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC), facilitating the licensing process. Together, these policies are amplifying investments, facilitating grid integration, and accelerating the incorporation of small hydropower worldwide.

According to the latest official figures, India had a small hydropower (SHP) capacity of 5158.61 MW at the end of December 25) 2025-2026, up from 5100.55 MW and 5003.25 MW in 2024-2025 and 2023-2024, respectively. Several recent policies, including fiscal and infrastructure support, are targeting to speed up the installation of SHP.

The main players in the worldwide small hydropower market are Voith Group, ANDRITZ Hydro, and General Electric (GE). These companies capitalize on their deep engineering knowledge, broad global project portfolios, and turbine technologies. CKD Blansko, Siemens Energy, and Toshiba Energy Systems & Solutions emphasize the development of high-efficiency turbines, digital control systems, and the upgrading of current hydropower assets.

Additionally, regional and specialized manufacturers like Flovel Energy Private Limited, Kolektor Turboinstitut, Gilbert Gilkes & Gordon Ltd., and ATB Riva Calzoni are instrumental in providing tailored solutions to small, mini, and micro hydropower projects. Therefore, these companies, by implementing technological innovations, renovating their product lines, and expanding to new emerging markets, together constitute the factors of market competitiveness.

Small Hydropower Market Trends

The rise in the demand for energy for various applications is due to the increasing global population, with the need to shift towards renewable sources of energy. The small hydropower plants are appropriate for producing supportable as well as an inexpensive source of energy in emerging and rural areas owing to their lesser investment costs, better efficiency, versatility, and also due to their renewable nature. Furthermore, government initiatives with monetary concessions have promoted the use of renewable sources of energy. Moreover, the increasing demand for renewable sources of energy has increased generation significantly over the years.

The advent of COVID-19 hurt the small hydropower market since the pandemic brought the activities in several end-use industries to a standstill globally, which restricted the project construction, exploration and production, gas transportation, and storage activities. After the initial lockdown period, some of the activities were allowed, but with restrictions and certain protocols that were required to be followed, like the refinery will be operated with a lesser capacity, which will require less labour to come in contact, and social distancing was required to be maintained in the premises as well. A significant shift was noticed in several industries using hydropower for various applications. The investments witnessed a downturn during the period as well, which restricted the ongoing projects and activities. With the industries recovering after the pandemic gradually, the renewable energy industry is expected to operate in full capacity. This will further help in the recovery of the small hydropower market.

Market Dynamics

Drivers

• Rising Demand for Clean and Renewable Energy

The increasing need for environmentally friendly and sustainable energy is propelling the growth of the global small hydropower industry as countries aim to reduce their greenhouse gas emissions, fulfil their climate targets, and move away from fossil fuel power generation.

The rise in electricity demand, resulting from population increase, urban development, and industrial growth, has further influenced the requirement for dependable and green energy sources, thereby making small hydropower an appealing option due to its minimal carbon emissions and durability. Renewable energy sources accounted for almost half (49.3%) of the net electricity production in the EU in the third quarter of 2025. This is a 3.8% increase compared to 47.5% when it was recorded in the corresponding quarter of 2024.

Governments are strengthening this shift with renewable energy targets, carbon neutrality commitments, and implementing policy frameworks that ultimately lead to increased investments in small hydropower projects. Additionally, raising environmental sustainability consciousness among utilities, industries, and local communities is accelerating the implementation of small-scale hydropower plants. The U.S. government has made some crucial decisions to efficiently increase its clean energy investment. Rise in clean energy investments leads capital flow towards a 2050 net-zero economy-wide emissions goal that was publicly declared in 2021.

Key Developments

• May 2026: Hull^[1] Street Energy agreed to acquire FirstLight’s U.S. generation portfolio, adding fourteen hydroelectric stations and expanding its renewable small-hydropower footprint across northeastern American energy markets.

• April 2026: The Indian^[2] Government officially launched the ?2,584.60 crore Small Hydro Power Development Scheme. The initiative financially assists decentralized, run-of-river projects between 1 MW and 25 MW capacity.

• March 2026: ANDRITZ^[3] secured a major Tata Power contract supplying electromechanical systems for the Bhivpuri pumped-storage project, strengthening advanced hydro-technology deployment supporting renewable-grid balancing and hydropower infrastructure expansion.

• 2025: Siemens Energy has advanced hybrid hydropower-storage integrations, combining small hydro with renewables for flexible grid support. The firm also rolled out digital retrofits for plant upgrades, enhancing efficiency in over 1,000 global sites.

Market Segmentation

By Application: Grid-connected power generation

Based on application, the small hydropower market is divided into grid-connected power generation, off-grid, industrial captive power, community & remote area power supply, and others. The ultra-high resolution provided by small hydropower increases the efficiency of characterizing nanomaterials and nanostructures. With the growing technological advancements and investments in advanced materials, the demand for upgraded tools for visualizing such materials has gained traction, providing new growth prospects for small hydropower.

The strong acceleration in India’s renewable generation growth, rising from 12.21% in 2024–25 to 19.36% in 2025–26, directly reinforces the outlook for grid-connected small hydropower projects. As the power sector scales renewable capacity rapidly, grid planners are increasingly prioritizing stable, dispatchable sources such as hydropower to balance intermittency from solar and wind. Small hydropower plants, with their ability to deliver predictable generation and integrate seamlessly into existing grid infrastructure, are therefore gaining strategic importance in India’s renewable mix. This trend is expected to drive sustained investment in grid-connected small hydropower installations, upgrades, and refurbishments as part of the country’s broader renewable energy expansion agenda.

Another key growth driver is the strong policy and regulatory support for renewable energy integration. Many countries provide feed-in tariffs, long-term power purchase agreements (PPAs), and favorable grid-access regulations for small hydropower projects, improving project bankability and attracting private investment. Moreover, in an attempt to address safety and power quality issues, several organizations are developing national guidelines for equipment manufacture, operation, and installation:

• The Institute of Electrical and Electronics Engineers (IEEE) has written a standard that addresses all grid-connected distributed generation, including renewable energy systems. IEEE 1547-2003 provides technical requirements and tests for grid-connected operation.

• Underwriters Laboratories (UL) has developed UL 1741 to certify inverters, converters, charge controllers, and output controllers for power-producing stand-alone and grid-connected renewable energy systems. UL 1741 verifies that inverters comply with IEEE 1547 for grid-connected applications.

• The National Electrical Code (NEC), a product of the National Fire Protection Association, deals with electrical equipment and wiring safety.

Although states and power providers are not federally mandated to adopt these codes and standards, a number of utility commissions and legislatures require regulations for distributed generation systems to be based on the IEEE, UL, and NEC standards.

Furthermore, the modernization and refurbishment of aging hydropower assets are accelerating demand in this segment. Utilities are upgrading existing dams, canals, and water infrastructure with small hydropower units to improve efficiency and prolong asset life while minimizing environmental impact. This trend, combined with an increasing emphasis on energy security and the diversification of power generation sources, continues to drive the steady growth of grid-connected small hydropower installations globally.

Regional Analysis

North America: the US

Small hydro is a readily available technology that includes a wide range of projects spread across the U.S. In fact, records from the Federal Energy Regulatory Commission show that approximately 89% of non-federal facilities have a capacity of less than 30 MW.

California-based Natel Energy Inc. completed the installation of its first commercial small hydro project in 2024. Located in Buckeye, Arizona, the project saw Natel partner with the Buckeye Water Conservation and Drainage District to install an SLH engine in one of the district’s canals. The SLH is a low-head hydropower system made by Natel, which enables power generation from low-head dams and existing irrigation canals.

In addition to this, for nearly 100 years, the Bowersock Mills & Power Company has been generating electricity from the Kaw (Kansas) River. The only operating hydroelectric plant in Kansas, Bowersock, not only provides very important river flow and public water services to the city of Lawrence, KS, but generate 2.35 MW of power each year. The clean, renewable electricity produced by the plant’s seven generators flows into the electrical grid and is purchased by the Kansas Power Pool, providing enough power for approximately 1,800 homes.

These projects highlight both modern low-head innovation and long-standing small hydropower assets that continue to support local grids.

Moreover, GE Renewable Energy positions small and fast-to-deploy hydropower plants as a critical contributor to the global energy transition, offering standardized small hydropower solutions with unit outputs starting from 5 MW. The company adopts a plant-integrator approach, leveraging its deep hydropower expertise to seamlessly combine turbines, generators, and auxiliary systems through simplified interfaces. These standardized solutions are built on GE Renewable Energy’s extensive design and engineering experience, enabling efficient project execution, reduced complexity, and reliable performance for small hydropower developments. Such standardized solutions are particularly suited to U.S. canal, dam retrofit, and run-of-river applications where rapid deployment and regulatory compliance are essential.

According to the United States Energy Department, hydropower currently provides 5.7% of all electricity in the United States, accounting for nearly 27% of renewable electricity generation, as well as 96% of all utility-scale energy storage in the United States. Hydroelectric facility owners and operators use incentive payments under this program to support operations and maintenance activities, stabilize and decrease rates to ratepayers, and explore other small hydropower opportunities.

Moreover, in support of the Biden-Harris Administration’s Investing in America agenda, the U.S. Department of Energy’s (DOE) Grid Deployment Office (GDO) announced that 39 hydropower facilities throughout the country received more than $12 million in incentive payments for electricity generated. Funded by the Bipartisan Infrastructure Law, with consideration for facilities located in communities with inadequate electric service, the payments provide funding for electricity generated and sold from dams and other water infrastructure that add or expand hydroelectric power generating capabilities. This funding will help ensure hydroelectric generators continue to provide clean, affordable electricity.

Together, technological innovation, sustained federal incentives, and the vast untapped potential of existing water infrastructure are expected to support steady growth of the U.S. small hydropower market.

List of Companies

• Voith Group

• ANDRITZ Hydro

• General Electric Company

• CKD Blansko

• Siemens Energy

• Flovel Energy Private Limited

• Kolektor Turboinstitut

• Gilbert Gilkes & Gordon Ltd.

• Toshiba Energy Systems & Solutions Corporation

• ATB Riva Calzoni S.p.A.

Siemens Energy pursues a targeted strategy in the global small hydropower market, emphasizing integrated water-to-wire solutions that prioritize efficiency, sustainability, and lifecycle optimization. The company introduces its offerings through customized engineering, turnkey automation, and modernization services, positioning small hydro as a reliable, low-impact renewable source for decentralized energy needs worldwide.

Siemens Energy focuses on future-proof technologies that reduce operational costs and ensure compliance with environmental standards. By leveraging decades of hydro expertise, the firm delivers end-to-end solutions from design to commissioning, fostering competitiveness in remote and off-grid applications.

Global Small Hydropower Market Scope: