Changes in water quality may occur within and downstream of the development as a result of impoundment.  The residence time of water within a reservoir is an influence on the scale of these changes, along with bathymetry, climate and catchment activities.  Where water quality issues arise, they can vary greatly and can include reduced oxygenation, temperature, stratification potential, pollutant inflow, propensity for disease proliferation, nutrient capture, algal bloom potential and the release of toxicants from inundated sediments.  Some water quality problems relate to activities within the catchment beyond the direct control of the proponent but which can cause water quality problems when compounded with the power station operations.

Flooding of biomass, especially forests, results in underwater decay.  In deep lakes that tend to stratify, colder de-oxygenated water at depths in the lake have in some cases released metals from the sediments e.g. methylmercury.  Deep intakes can in some cases result in deoxygenated and hydrogen sulphide rich releases out of the power station tailrace into the downstream river system.  Particularly high hydropower dams have in cases had problems with gas supersaturation resulting in fish deaths.  In shallow lakes, water quality problems can under certain catchment conditions result from wind-induced sediment re-suspension, eutrophication and algal blooms.