Hydropower is an extension of the sun-driven hydrologic cycle, which gives the earth its renewable water supply. Atmospheric water reaches the earth's surface as precipitation. Some of this waterevaporates,butmuchof it either percolates in the soil or becomes surface runoff. Water from rain and melting snow eventually reaches ponds, lakes, reservoirs, or oceans where evaporation is constantly occurring.

The use of hydropower for productive mechanical drive service applications dates back more than 2,000 years to Egypt, Rome, and Greece. There are numerous documented water wheel applications for grinding wheat and corn, with the technology changing and improving over time. These initial devices tapped the energy of running or falling water by means of a set of paddles mounted around a wheel. The force of the moving water was exerted against the paddles, and the consequent rotation of the wheel was transmitted to machinery via a shaft, either directly or through a crude set of gears for mechanical advantage.

All watermills used the same principle — running water was used to turn a wheel, which through a system of cogs, gears, shafts, and pulleys, could be used to power a range of equipment. Waterwheels were classified according to the point at which the water entered them. The earliest designs were undershot wheels, which had paddles around their circumference. The water passes beneath the wheel, so its speed is dictated by the speed of the stream. Using this principle, tide mills operated on the rising tide, allowing water to flow and be impounded into a millpond through a lock gate. As the tide ebbed, there was sufficient head to turn the heavy waterwheel. This relatively inefficient undershot design was largely replaced in the Middle Ages by the designs in which the water was introduced through a chute either halfway up (breastshot) or all the way up (overshot). Buckets built into the wheel structure filled with water, so it was turned not only by the speed of the water but also by its weight, thereby improving the efficiency. These were especially beneficial in hilly terrain where a large head (elevation) was available. Storage ponds were often built to guarantee a more reliable and steady source of water supply. By the mid 10th century, more than 5,000 waterwheels are reported to have been in operation in England alone.

The combination of waterwheel and transmission linkage, often including gearing, was developed and applied in the Middle Ages. Hydropower continued as a mainstay technology for providing mechanical power and later played an important role in colonial United States and in the industrial revolution for milling, textile manufacture, paper mills, irrigation, etc. In northern climates, where waterwheels were subject to freezing, they were enclosed in sheds with stoves used to provide heat. The early waterwheels were built from wood. These were subject to rapid wear and needed relatively frequent overhauls and rebuilds. By the mid-18th century, cast iron gradually began to take over from wood. In the 1840s, for example, new fabrication techniques, including the use of strong and durable wrought iron, enabled the replacement of several breast wheels, that had been in operation since 1801 at the famous Harpers Ferry Armory, with large 15 ft (4.6 m) diameter iron overshot wheels.

In the 19th century, a series of advancements produced modern, powerful hydraulic (water) turbines, many designs of which endure today. As with steam turbines, there are 2 basic types of modern water turbines: reaction and impulse. Each type has several sub-types featuring design variations within the same basic concepts.

In 1827, Benoit Fourneyron introduced a reaction turbine that channeled water through an enclosed chamber fitted with an inner ring of fixed guide blades. These guide blades deflected the water outward against the moving vanes of a runner (or waterwheel). The vanes of this outer runner were curved in the opposite direction from the fixed inner guide blades, reversing the direction of water flow within the device and creating a reactive force. In 1844, Uriah Boyden patented an improved outward flow turbine featuring a conical approach passage, giving the incoming water a gradually increasing velocity and a spiral motion that corresponded to the direction of the motion of the wheel. It also featured improved guide vanes that directed the flow of water through the wheel passages more efficiently. In 1845, James Francis conducted tests that showed 88% of the energy available in the falling water was converted into power. This was a significant improvement to the 60 to 75% efficiency achieved by the previous breast-type water wheels, an impressive achievement even by today's standards. In 1849, Francis further perfected the reaction turbine with a design that endures today. In fact, the terms "reaction" and "Francis" turbine are now used interchangeably.

In 1862, James Leffel patented the Double Turbine Waterwheel. This departed significantly from previous designs by combining two wheels in a single case. The upper wheel was comprised of inward-flow buckets, while the lower wheel had axial-flow buckets that curved inward and downward. This mixed flow design resulted in a longer, narrower, and faster turbine that operated very efficiently under a variety of water conditions.

In 1890, Lester Pelton designed an impulse turbine, also called the Pelton wheel. A high-pressure jet of water directed against buckets, on the rim of the wheel, turns this turbine. A few decades later, Forest Nagler developed a type of reaction turbine called the propeller turbine. It has fewer blades and larger spaces between blades than the other turbine designs. This design helps reduce the chance that the turbine will be damaged by debris in the water that passes through it.

The evolution of hydropower applications includes the taming of Niagara Falls with the first of the major American hydroelectric sites for power generation. These first plants were direct current stations built to power arc and incandescent lighting just before the start of the 20th century. With the advent of the electric motor, the market transformed from more localized mechanical drive plants to centralized hydroelectric stations, and the use of hydropower increased significantly. Backed by enabling legislation to build plants on federal land and the desire to control water resources and use them for irrigation, several massive depression-era dams and hydropower plants were built. By the 1940s, hydropower provided about one-third of the electric energy in the United States.

Since this zenith, its market share has dwindled significantly. However, hydropower still provides for approximately 10% of the nation's electricity production and remains a very valuable and cost-effective renewable resource. While not without environmental issues and negative impacts, hydropower stands alone as the most widely applied renewable technology. Currently, hydropower provides the vast majority of the electricity produced from renewable technologies in the United States and in the world.

Historically, hydroelectric generation for power sales and transmission over interconnected power grid was often a by-product of water development associated with large dam projects. Internal mechanical equipment drive and pumping applications for irrigation were the targeted uses of hydropower at many of the dams. Power sales were viewed as an added return on investment, one that could reduce the cost recovery burden on irrigation water users alone. Over time the availability of low-cost power in the regions served by hydropower plants supported large-scale growth of industry and associated expansion of populations, notably in the western United States. In response, many plants were up-rated with the installation of additional electric generation capacity to serve these expanded loads.

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