Hydropower has been technically feasible for decades and, given a favorable site, it can be economically attractive (sometimes even offering the least-cost method of generating electricity). Least-cost hydro is generally high-head hydro sine the higher the head, the less the flow of water required for a given power level, and so smaller and hence less costly equipment is needed. Therefore, in mountainous regions even quite small streams, if used at high heads, can yield significant power levels at attractively low costs. Norway, for example, produces some of the cheapest electricity in Europe from its numerous high-head hydro installations. However, high-head sites tend to be in areas of low population density where the demand for electricity locally is relatively small, and long transmission distances to the main centers of population can often nullify the low-cost advantages at the hydro plant busbar. Easily engineered high-head sites are also relatively rare.

Low-head hydro sites are of course statistically much more common, and they also tend to be found in or near concentrations of population where there is a demand for electricity. Unfortunately the economics of low-head sites tend to be less attractive: most are at best marginally attractive economically (compared with conventional fossil-fuel power generation ) if no allowance is made for the external ¡®added costs' of using fossil fuels. Yet economic analysis of hydropower projects generally gives no significant credit for the exceptionally long useful life and low running costs of small hydro, and the high 'up-front' costs tend to make it seem financially unattractive unless low discount rates are available.