Some of the first innovations in using water for power were conceived in China during the Han Dynasty between 202 BC and 9 AD. Trip hammers powered by a vertical-set water wheel were used to pound and hull grain, break ore, and in early paper-making.
The availability of water power has long been closely associated with kick-starting economic growth. When Richard Arkwright set up Cromford Mill in England’s Derwent valley in 1771 to spin cotton and so set up one of the world’s first factory systems, hydropower was the energy source he used.
Some of the key developments in hydropower technology happened in the first half of the ninteenth century. In 1827, French engineer Benoit Fourneyron developed a turbine capable of producing around 6 horsepower – the earliest version of the Fourneyron reaction turbine.
In 1849, British–American engineer James Francis developed the first modern water turbine – the Francis turbine – which remains the most widely-used water turbine in the world today. In the 1870s, American inventor Lester Allan Pelton developed the Pelton wheel, an impulse water turbine, which he patented in 1880.
Into the 20th century, Austrian professor Viktor Kaplan developed the Kaplan turbine in 1913 – a propeller-type turbine with adjustable blades.
The world’s first hydroelectric project was used to power a single lamp in the Cragside country house in Northumberland, England, in 1878. Four years later, the first plant to serve a system of private and commercial customers was opened in Wisconsin, USA, and within a decade, hundreds of hydropower plants were in operation.
In North America, hydropower plants were installed at Grand Rapids, Michigan (1880), Ottawa, Ontario (1881), Dolgeville, New York (1881), and Niagara Falls, New York (1881). They were used to supply mills and light some local buildings.
By the turn of the century the technology was spreading round the globe, with Germany producing the first three-phase hydro-electric system in 1891, and Australia launching the first publicly owned plant in the Southern Hemisphere in 1895. In 1895, the world’s largest hydroelectric development of the time, the Edward Dean Adams Power Plant, was created at Niagara Falls.
By 1900 hundreds of small hydropower plants were in operation as the emerging technology spread across the world. In China, in 1905, a hydroelectric station was built on the Xindian creek near Taipei, with an installed capacity of 500 kW.
The twentieth century witnessed rapid innovations and changes in hydropower facility design.
Policies enacted by U.S. President Franklin Roosevelt, including the New Deal in the 1930s, supported the construction of several multipurpose projects such as the Hoover and Grand Coulee dams with hydropower accounting for 40 per cent of the country’s electricity generation by 1940. 
From the 1940s to 1970s, spurred initially by World War II followed by strong post-war economic and population growth, state-owned utilities built significant hydropower developments throughout Western Europe, as well as the Soviet Union, North America and Japan.
Low-cost hydropower was seen as one of the best ways to meet growing energy demand and was often tied to the development of energy-intensive industries such as aluminium smelters and steelworks.
Over the last decades of the twentieth century, Brazil and China became world leaders in hydropower. The Itaipu Dam, straddling Brazil and Paraguay, opened in 1984 with a capacity of 12,600 MW - it has since been enlarged and upgraded to 14,000 MW - and is today only eclipsed in size by the 22,500 MW Three Gorges Dam in China.
Decadal capacity growth stagnated in the late 1980s before falling in the 1990s. This was due to increasing financial constraints and concerns expressed about the environmental and social impacts of hydropower development, which halted many projects around the world.
Lending and other forms of support from international financial institutions (IFIs), most notably the World Bank, dried up in the late 1990s, which particularly affected hydropower construction in the developing world.
Increased focus on sustainability
Towards the end of the century, during which global understanding increased on environmental and social impacts, there was a process of reassessing hydropower’s value and role in national development. In 2000, a landmark report published by the World Commission on Dams (WCD) challenged existing practices and initiated a change in the planning and development of hydropower towards a focus on sustainability and affected communities.
The International Hydropower Association (IHA), formed under the auspices of UNESCO in 1995, began work on the IHA Sustainability Guidelines in 2004, which took into account the WCD Strategic Priorities, as well as World Bank Safeguard Policies, International Finance Corporation Performance Standards, and the Equator Principles. These guidelines led to the development of the Hydropower Sustainability Assessment Protocol (HSAP), a multi-stakeholder tool for assessing projects at all phases of their lifecycle.
These developments led to a fundamental shift in how best to plan, develop and operate hydropower projects, and resulted in a growing appreciation of the technology’s role in combatting climate change, reducing poverty and boosting prosperity.
Not long after the turn of the twenty-first century, hydropower development gained a renewed momentum, particularly across Asia and South America.
Between 2000 and 2017, nearly 500 GW in hydropower installed capacity was added worldwide, representing an increase of 65 per cent, with growth since 2010 already outstripping that recorded in the first decade of the century.
The significant rise in installed capacity and generation from hydropower has been driven by a variety of often interrelated factors, notably:
Demand for energy in emerging economies
Developing countries, including Brazil and China, needed an affordable, reliable and a sustainable source of electricity to support rapid economic growth.Since 2000, China has more than quadrupled its installed capacity to 341 GW (2017), accounting for over half of the world’s hydropower capacity growth.
South-to-South investment and trade
The boom in South-to-South investment and trade (between developing countries) has become a critical source of hydropower financing and technology transfer. From 2004 to 2012, South-to-South trade in hydropower products and equipment increased from below 10 per cent of total global trade to nearly 50 per cent.
National development banks and private investors from emerging economies such as China, Brazil and Thailand have become major contributors to foreign direct investment (FDI), which in the past was largely provided by international development agencies and multilateral development banks.
As part of the Chinese government’s ‘Going Out’ strategy and its Belt and Road Initiative, Chinese companies and banks invested nearly USD 25 billion in projects overseas between 2000 and 2016 and in the process have become world leaders in hydropower development.
Multilateral agreements and goals
The past decade has seen greater recognition of hydropower’s role in achieving internationally agreed development outcomes, such as through the Sustainable Development Goals and climate goals including the Paris Agreement which have influenced national policy targets. Small hydropower projects (under 20 MW) in particular have benefited from the Clean Development Mechanism which was introduced under the Kyoto Protocol, the precursor to the Paris Agreement, to encourage clean and sustainable development.
Support from the World Bank and IFIs
Lending from the World Bank for hydropower development increased from a few million dollars in 1999 to nearly USD 2 billion in 2014.The World Bank also extended its role from a ‘primary investor’ to an important ‘convenor’ that provides assistance in technical knowledge and bringing other financiers to the table.While the monetary value of the World Bank’s lending is a small fraction of the total amount invested in the sector each year, the bank’s recommitment to hydropower, along with other IFIs including the Asian Development Bank encouraged greater private sector investment and engagement.
Due to its multiple services and benefits, hydropower is expeted to remain the world’s largest source of renewable electricity for years to come and with significant untapped hydropower potential; much of the sector’s future growth is expected to come from Africa and Asia.
In 2018, IHA, in its annual Hydropower Status Report, reported worldwide hydropower installed capacity to have risen to 1,267 GW, with a record 4,185 TWh estimated to have been generated in 2017.
According to the International Energy Agency, in order to meet the main energy-related components of the Sustainable Development Goals, including the below two degrees Celsius commitment of the Paris Agreement, an estimated 800 GW of additional hydropower will need to be brought online over the next two decades.