The number of small-scale hydropower schemes to generate energy from rivers in England and Wales has surged in the last decade, figures from the Environment Agency showed today.
The number of new licences issued by the Government agency for hydropower schemes has increased sixfold since 2000.
Last year, 31 new licences for energy schemes in rivers were granted - compared to just five in 2000.
The Environment Agency has already issued 29 licences this year and is considering a further 166 applications, as businesses and communities attempt to cash in on a new Government incentive which pays people for generating electricity from small-scale renewables.
In all, there are around 400 hydropower schemes in England and Wales and the Environment Agency estimates the number could rise to 1,200 by 2020.
Small-scale hydropower currently produces enough electricity to power 120,000 homes in the UK, but could produce significantly more.
Earlier this year, the agency identified thousands of hotspots for hydropower schemes which could each provide clean energy for dozens of homes and benefit from "feed-in tariffs" which pay people for generating electricity from small-scale renewable technology.
The feed-in tariffs scheme, which came into force in April, could pay around £25,000 a year for a medium-sized hydropower project which would cost around £100,000 to £150,000 to install, the Environment Agency said.
The organisation said many areas were not suitable for installing hydropower because it could damage the environment, harm fish or increase the risk of flooding.
But it identified more than 4,000 places where sensitively designed schemes which included fish passes, enabling species such as salmon to navigate around the turbine or other technology, could provide a "win-win" situation for the environment.
Sustainable hydropower schemes are ones with a fish-friendly turbine - such as an Archimedes screw - or adequate screening, safe passage for fish where needed, sufficient water flow to maintain the river ecology and design that does not harm flood management or land drainage, the Environment Agency said.
At a speech to the Chartered Institution of Water and Environmental Management (CIWEM) National Hydropower conference today, Environment Agency chairman Lord Chris Smith will say that hydropower presents a "unique set of challenges".
"It is a great example of a natural resource which produces few wastes. It is a reliable and proven technology and is increasingly attractive to local communities.
"But it can have a big impact on fish, in particular migratory fish. It can increase the risk of flooding. The change in the quantity of water in a river can have impacts on the wider ecology.
"On top of that, climate change may impact on the future flow of rivers."
He will tell delegates at the conference: "The challenge is to encourage the deployment of renewables, build public confidence, meet obligations on nature conservation and the environment, and not increase the risk of flooding.
"For the Environment Agency there is an extra challenge - to regulate these technologies in a simple and efficient way.
"We are committed to getting the regulatory balance right - making it as easy as possible for organisations to apply for hydropower permits while still protecting the local environment."