Full text can be accessed ath the following link http://www.hindawi.com/journals/isrn/2012/730631/abs/Hydropower is an important renewable energy resource worldwide. However, its development is accompanied with environmental and social drawbacks. Issues of degradation of the environment and climate change can negatively impact hydropower generation. A sustainable hydropower project is possible, but needs proper planning and careful system design to manage the challenges. Well-planned hydropower projects can contribute to supply sustainable energy. An up-to-date knowledge is necessary for energy planners, investors, and other stakeholders to make informed decisions concerning hydropower projects. This is basically a review paper. Apart from using expert knowledge, the authors have also consulted extensively from journals, conference papers, reports, and some documents to get secondary information on the subject. The paper has reviewed the world energy scenario and how hydropower fits in as the solution to the global sustainable energy challenge. Issues of hydropower resource availability, technology, environment and climate change have been also discussed. Hydropower is sensitive to the state of environment, and climate change. With global climate change, though globally the potential is stated to slightly increase, some countries will experience a decrease in potential with increased risks. Adaptation measures are required to sustainably generate hydropower. These are also discussed in the paper.