It is recognized that renewable energy could assist in diversifying energy systems, providing reliable power to the required quality standards, contributing to the struggle against global
warming and creating employment in rural - remote areas. It is mainly the integration of energy networks and the deregulation of the energy electricity market that form a new base on which the development of renewable energy should be addressed. Small hydro resources have more consistency as compared to other renewable sources and relatively better capacity factor. Small hydro-power is attracting great deal of attention as an eco - friendly renewable energy source and offers many advantages including major social ones. It is available in remote areas away from the main center of population and so it is a convenient source for giving electricity benefits to the isolated small communities. In today's scenario the share of small hydro - power plants in total hydro potential across the world is increasing and the electrical network grids are nowadays being fed also by these small hydro - power plants. Some of these power plants of very low capacity are of decentralized type, and are not connected to the grid and feed only the local hamlets according to the requirement. Small hydro - power plants thus are now a reality and one of the most appropriate options to meet increasing energy demands especially in remote areas. Various designs to connect different components have been developed and are being installed. Further study is needed to be conducted to optimize the units. Lowering the high initial cost of the small hydro - power plants and its popularization is today's challenge. This paper describes the impact of small hydro - power on economy, investment and innovation in small hydro - power system, modern control techniques, importance of modeling and simulation and role of the small hydro energy in sustainable development.