Global Small Hydropower Market Size and Share Outlook - Forecast Trends and Growth Analysis Report (2024-2032)

Small Hydropower Market Trends

Legislative reforms, public acceptance, and investment are the key market trends.

• Renewable energy is receiving more attention, with small hydropower growing further as a clean solution.
• Technological changes of turbines and generators that can provide efficiency improvement and cost reduction for the project, thus leading to new trends in the small hydropower market.
• The government should ensure that more funds are available by increasing its support toward the small hydropower projects through policies and incentives.
• Integration of digital technologie through the use of AI and real-time monitoring that enhances performance and enables grid integration.

Industry News

March 2022

The European Union launched two projects in Nigeria: Small Hydro Power Development for Agro-industry Use (SHP-DAIN) and Advancing Nigeria's Green Transition. Funded by a €9 million EU contract, both projects will be managed by UNIDO.

March 2021

Hillsboro, Oregon, launched a micro-hydropower project worth USD 400,000 in conjunction with Portland-based startup InPipe Energy, which harnesses In-PRV technology to produce clean energy while eliminating excess pressure in drinking water pipelines.

Historical Market Analysis

Five years ago, the market for small hydropower faced hurdles like high capital costs, very complex regulatory processes, and limited awareness in rural areas, thus impeding the small hydropower demand. Market players eventually overcame these issues by obtaining government subsidies and incentives that reduced the initial investment burden. Technological changes in turbine efficiency and automation were other factors that reduced the cost of running the power plants. Involvement of local governments and communities facilitated smooth approvals of projects. Also, a greater emphasis on environmental sustainability and eco-friendly designs also helped reduce regulatory hurdles, thus spreading it more extensively into disadvantaged areas.

Opportunities in the Small Hydropower Market

Government initiatives, industrialization, and grid absence boost small hydropower demand in remote areas.

Governments from various developing and underdeveloped countries are initiating more and more programmes to improve rural electrification, which is boosting the small hydropower market growth.
In order to efficiently supply electricity in remote locations, governments in the BRIC countries are focusing on increasing industrialisation. The need for small hydropower generators is projected to rise as a result of the absence of grids in such locations. This will have an additional effect on market demand for small hydropower. Small hydropower facilities are also best suited in regions with weak grid access.

Market Dynamics

Increased renewable energy production, incentives, and IoT integration drive small hydropower growth.

In the upcoming years, a significant increase in the production of energy from renewable sources is anticipated to accelerate the small hydropower market expansion. The expanding financial incentives and assistance in the form of subsidies, low-interest loans, renewable purchase obligations, and feed-in tariffs for small hydropower is aiding the market growth.
Several technology developments, such as the integration of Internet of Things (IoT) with SHP components, are providing significant impetus to the market development. Despite drastic weather variations, these technologies enable automation and make it possible to produce limited amounts of electricity.

Growth Drivers

Rural electrification efforts and industrialization drive small hydropower adoption in off-grid, remote areas.

A significant driver of the small hydropower market is off-grid and decentralised power solutions, mostly in remote and rural areas, thereby propelling the growth of small hydropower market. Small hydropower systems are particularly suited for such areas in which extension of traditional power grids is usually not economically feasible. Many developing country governments, such as those of BRIC countries, are focusing on rural electrification and industrialization. This has resulted in an increase in the adoption of the small hydropower technologies: these provide a reliable, sustainable, and cost-effective source of energy to the regions that lack access to centralised electricity infrastructure.

Market Restraints

High costs, environmental impact, regulatory challenges, and site limitations constrain small hydropower growth.

• High initial capital investment required for small hydropower projects.
• Environmental concerns related to ecosystem disruption and water resource management may lead to small hydropower market challenges. 
• Regulatory hurdles and complex permitting processes in certain regions.
• Limited availability of suitable sites for small hydropower installations in some areas.

Small Hydropower Industry Segmentation

“ Small Hydropower Market Report and Forecast 2024-2032” offers a detailed analysis of the market based on the following segments:

On the basis of capacity, the market can be divided into the following:

• Up to 1 MW
• 2- 10 MW
• Others

On the basis of type,  the market can be divided into the following:

• Micro Hydropower
• Mini Hydropower

On the basis of component,  the market can be divided into the following:

• Electromechanical Equipment
• Electric infrastructure
• Civil Works

Based on region, the market can be segregated into:

• North America
• Europe
• Asia Pacific
• Latin America
• Middle East and Africa

Small Hydropower Market Share

By Capacity Analysis

Small hydropower growth is driven by demand for clean energy, efficiency, and government support.

Rising demand for clean, renewable energy and incentives from the government for sustainable power generation to support more hydropower systems. As per small hydropower market analysis, projects with capacities up to 1 MW are attractive for off-grid or remote applications, posing economically viable solutions for rural electrification. Economies of scale and efficient energy production characterise the 2-10 MW range. These include improvements in turbine technology, environmental impact, increased focus on energy security, and decarbonization, which are leading to growth in the market.

Market Analysis by Type

Micro hydropower is gaining traction for decentralised, off-grid energy solutions in remote areas.

The micro hydropower market is on an uptrend, and technology is well poised as a decentralised, off-grid energy solution- ideal for isolated and rural areas. Such systems are typically sized under 100 kW, cheap, environmentally friendly, and relatively simple to install with minimal civil works. They will provide reliable small-scale energy production that will benefit particularly communities outside the reach of the central grid. There is increasing demand for mini hydropower (100 kW-2 MW), ensuring greater demand for medium-scale, affordable renewable energy solutions both for local industries and agricultural applications.

Component Insights

Small hydropower growth is driven by advances in electromechanical equipment, infrastructure, and civil works.

The small hydropower ecosystem is driven by three key components: electromechanical equipment, electric infrastructure, and civil works. As per small hydropower industry analysis, electromechanical equipment includes turbines, generators, and control systems, which are critical for converting water flow into electricity. Electric infrastructure covers transformers, grid connections, and transmission systems, ensuring efficient energy distribution. Civil works involve the construction of dams, weirs, and powerhouses. Advances in each component, including more efficient turbines and improved grid integration, are enhancing the overall market performance and growth potential.

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Small Hydropower Market Regional Insights

North America Small Hydropower Market Opportunities

The North America small hydropower market offers significant opportunities, driven by increasing demand for clean energy and supportive government policies. In the U.S., small hydropower projects contribute around 3% of the country’s total hydroelectric capacity, with the Department of Energy actively promoting their development. Canada also has substantial untapped potential, particularly in remote areas. The growing focus on renewable energy and energy storage solutions, alongside incentives and funding for green projects, is expected to accelerate small hydropower growth across North America.

Europe Small Hydropower Market Dynamics

The Europe small hydropower market is driven by the region’s strong renewable energy policies and ambitious sustainability goals. According to the European Small Hydropower Association (ESHA), small hydropower accounts for about 10% of Europe’s total renewable electricity production. Countries like Norway, Austria, and France are leaders, with thousands of small hydropower plants in operation. The European Union’s Green Deal and incentives for green energy technologies are further fueling market growth, promoting sustainable and decentralised energy solutions across the continent.

Asia Pacific Small Hydropower Market Trends

The Asia Pacific small hydropower industry is expanding due to rising energy demands and strong government support for renewable energy. Countries like China, India, and Nepal are investing in small hydropower projects to harness their abundant water resources. China, in particular, leads the region, with thousands of small hydropower plants already operational. According to the International Energy Agency (IEA), small hydropower contributes significantly to the region’s renewable energy goals, supported by favourable policies, subsidies, and infrastructure development.

Latin America Small Hydropower Market Insights

The Latin America market for small hydropower is gaining momentum due to increasing demand for renewable energy and government support. Countries like Brazil, Chile, and Argentina are tapping into their vast river systems to develop small hydropower projects. According to the Latin American Energy Organization (OLADE), small hydropower contributes significantly to the region's renewable energy capacity, with over 15,000 MW of potential identified. Governments are offering incentives, tax breaks, and financing to accelerate project development, supporting energy security and sustainability.

Middle East and Africa Small Hydropower Market Drivers

The Middle East and Africa (MEA) small hydropower market is driven by increasing energy demand, the need for sustainable power solutions, and government initiatives promoting renewable energy. Many countries in the region, such as Ethiopia, are focusing on harnessing their untapped hydroelectric potential. With abundant river systems and ongoing infrastructure development, small hydropower offers a cost-effective, environmentally friendly energy source. Regional cooperation, alongside global trends toward green energy, is also accelerating investments in small hydropower projects in MEA.

Competitive Landscape

Global small hydropower market players focus on the efficiency of energy use, sustainability, and the utilisation of untapped hydro potential. Further, optimization of technologies used in small hydro systems combined with upgraded infrastructure is also emphasised. The efforts of small hydropower companies are directed towards reducing costs, increasing project feasibility, and supporting renewable energy goals, making small hydropower a viable solution for both developing and developed markets.

Key Market Players

Key industry leaders in this market are:

Voith GmbH & Co. KGaA

Voith GmbH & Co. KGaA is one of the world's leading mechanical engineering companies which was founded back in 1867 and based in Germany. It offers solutions within the areas of robotics, hydraulics, pneumatics, cooling, hydropower components, brake systems, motors, and transmissions. The segments that the company caters to include raw materials, energy, transport, automotive, and paper. In the markets for raw materials, energy, transportation and automotive, paper, Voith establishes standards with its extensive spectrum of systems, products, services, and digital applications.

ANDRITZ AG

ANDRITZ AG, an Austrian based company founded in 1852, is one of the prime suppliers of equipment, machinery, and services for a variety of industries. Some of its industries include: metalworking, hydropower, pulp and paper, steel industries, municipal and industrial solid or liquid separation applications, animal feed, and biomass pelleting.

Siemens AG

Siemens AG is a technology firm with its headquarters in Germany, established in 1847. It deals primarily in digital transformation, transportation, infrastructure, and the generation and transmission of power. Being a company leader in power generation, the distribution, intelligent infrastructure, and distributed energy systems, this firm will develop under the focus of automation, digitalization, and electrification in the process and manufacturing industries.

Other major players in the global small hydropower market report are Toshiba Energy Systems & Solutions Corporation ("ESS") and Canyon Hydro, among others.

Recent Developments

August 2024

The Indian government has actively been promoting SHP schemes, but this time with a view to ensuring that the installed capacity does not exceed 25 MW. Studies by IIT Roorkee established a potential of 21,133 MW from 7,133 sites. Guidelines and standards have also been developed for the development of SHP across the country.

March 2024

The European Union has launched two new projects in Nigeria: Small Hydro Power Development for Agro-industry Use (SHP-DAIN) and Advancing Nigeria's Green Transition to Net Zero through Circular Economy Practices. The UNIDO, under a 9 million euro contract, will implement these for three years, focusing on upgrading small hydropower development and circular economy approaches.