Location and design must balance the need for and ability to transmit power against the potential impacts of alternative options.  Consideration of alternative options is informed by a number of tools such as a regional energy strategy, social and environmental impact assessments, community consultation and cost-benefit analysis.

Avoidance and minimisation of impacts through choice of alternative projects or designs, based on sound environmental and social assessments, is more cost-effective for a hydropower project than trying to manage and mitigate problems after they occur. 

Each site and context is unique, so it is not possible to give a formula for environmentally acceptable siting and design of hydropower schemes.  The anticipated impacts can vary considerably between temperate and tropical dams, with types of scheme (run-of-river, reservoir, pump storage), with dam capacity and geometry, with ecosystem characteristics, with catchment characteristics, and with location within the catchment.

In some cases, sequencing of dams on one river or constructing a new dam in between existing dams is determined as a lower impact option than dams on several different rivers, whereas the reverse can also be true.   Relatively shorter water retention time in the reservoir can lessen the degree of impact to downstream flow regimes and within reservoir water quality.  Minimising the amount of forest vegetation or areas of high biomass content can result in better reservoir water quality, and lessen impacts to areas of high biodiversity.  In cases, the more undammed tributaries downstream of the dam the better.