Microhydro systems seem to have the fewest incentive programs worldwide. The incentives vary widely, so a generalization is impossible. If you have a farm, you may qualify for financial incentives to use the same water for multiple purposes.
Incentive programs tend to come and go, and can be fairly arbitrary. If you are counting on government money, act on it sooner than later. The paperwork burden in some cases can be significant. Check out your local incentive situation as part of the site assessment process.
Long-term, low-interest financing is quite a powerful incentive. Microhydro rebates tend to not be generous enough to affect the payback time very much, and therefore often don’t work very well. Every incentive situation is unique as well. Off-grid electricity from fuel-fired generators may cost something like $1 per kilowatt-hour to produce. This is a powerful incentive because well-designed and implemented off-grid microhydro typically costs less over the long term. Generators are noisy, stinky, and expensive. By contrast, a microhydro system can quietly run for years on end, dependably providing energy with a minimum of hassle and no emissions.
The decision on which resource to use for an RE system depends on:
Local regulations vary widely. Water rights are regulated everywhere and must be respected. Wherever you are, check with appropriate authorities before spending significant money on construction. Start with the water resources department where you live. Some states have little to no requirements and some states have a great deal of red tape.
It should be about natural law and ecology with good sense, and most small hydro systems have a very minimal impact on the environment. From anecdotal reports, many home-sized systems are not permitted because the level of regulation is out of scale with the potential impact, and the value of the systems to small landowners exceeds their desire to work with bureaucracies. For larger grid-connected systems, it can run the gamut—from just getting local water regulator permits to having to appeal to the Federal Energy Regulatory Commission for licensing or exemption. Both levels seem to be arbitrary and indeterminate processes. Working the system seems to be much more practical abroad, such as in the U.K.