Hydropower cost and funding

This page explains the cost, payback periods and available funding for hydropower.


As stated on the main page, costs for hydropower vary according to several factors, including: site location, technology used and the scale of the installation.

The following assumptions provide an estimate for costs per kW of capacity.

  • The development of the site is associated with 85 to 90 per cent of the cost. This can be broken down into civil engineering works (65 to 75 per cent of the total costs) and meeting environmental and other criteria (15 to 20 per cent of the total cost).
  • The turbine, generator and control systems should account for only 10 per cent of the total cost.

Upfront costs for the installation of a hydroelectricity plant can be high. However, at suitable sites, hydroelectricity can be the most cost effective renewable energy option because the plant life is substantially longer than other small scale technologies. Moreover, there is no fuel cost associated with hydropower and management and maintenance costs are negligible.

Some examples of costs for installing different systems are set out below.

Low head system: A head height below four metres can cost £5,000 to £8,000 per kW of capacity installed. The cost of low head installations tends to be higher due to the required greater levels of civil engineering works.

Medium head: A head height ranging between four and 20 metres can cost £4,000 to £7,000 per kW of capacity.

Refurbishment and upgrading

The cost of installation at existing dams or refurbishing or upgrading existing hydroelectricity plants tends to be lower than the installation of a new plant. This can also offer increased hydropower capacity at a lower cost with fewer environmental impacts.

It has been estimated that upgrading a dam that already exists could cost half that of a new development. Similarly, refurbishing or upgrading an older plant costs as little as a third per ‘new' kW. Accordingly, several UK communities have already taken advantage of existing infrastructure to redevelop a hydropower plant.

Payback periods and savings

A small scale hydropower plant with a reasonable head and a reliable flow is likely to produce more than enough electricity to meet a household's needs.

A hydropower plant with an 8kW system might achieve its full potential 50 per cent of the year. The plant would produce 35,040 kWh per year, enough energy for five semi-detached homes. This type of scheme would typically have a payback period of approximately seven years.

To help give readers an idea of the costs and payback for a hydropower plant we have provided the following example.

Economic payback example

Size of hydropower plant 8kW
Amount of electricity generated annually (assuming the plant would be generating power 50 per cent of the year) 35,040kWh
Capital cost £63,000

Annual Feed-in Tariffs (FITs) income (assuming installation before April 2012) guaranteed for 20 years.

  • 19.9p for every kWh generated
  • 5p for every kWh exported to grid (assuming 90 per cent is exported to the grid and 10 per cent is used onsite)
Annual savings from not using grid electricity, assuming 14p/kWh (you will save this if you use some or all of the electricity onsite) Up to £500
Annual net income from the hydropower plant £9,000
Simple payback 7 years

A better return on financial investment will be achieved if all the power generated is used onsite, rather than exporting to the grid as the price for exported energy is less than the price of purchased energy. Each installation payback period will be site specific and FITs prices may vary.


Hydropower schemes are eligible for the Feed-in Tariffs (FITs) and Renewables Obligation Certificates (ROCs). ROCs can then be sold on the open market or to Ofgem at an inflation linked price. Although, there are currently no national energy related grants for micro-hydropower schemes, local grant assistance may be available for related work such as feasibility studies, water course improvement, fish passes and biodiversity.

Moreover, it may be possible to apply to utility companies with green energy funds, for example the Carbon Emissions Reduction Target (CERT) funding. However, it should be noted that this may affect eligibility for FITs.

For a full list of the funding, grants, incentives and loans available for hydropower projects please see the document below.

Grants, loans and financial incentives for sustainable energy projects (PDF, 3 pages, 177KB)


1 May 2012

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