Of the total £60m funding package, £50m comes from the UK GIB.
The package will support up to 30 community-scale 2MW or less hydropower projects, reports BBC News.
The funds are being invested through Albion Community Power, which seeks a further £40m of funding for small-scale projects. Albion Community Power constructs and operates small scale community projects.
Capable of generating enough energy to power 1,900 homes, the first of 2MW run-of-river hydropower facility will be developed at the River Allt Coire Chaorach, near Crianlarich, Scotland.
The £8.5m Crianlarich hydro power project will generate 8GW hours of electricity per year.
UK GIB chair Lord Smith of Kelvin was quoted by Bloomberg as saying: "The U.K. is in the process of transforming how it generates its power.
"In future we will see less reliance on a small number of large power stations and more focus on a network of smaller, locally generated, renewable sources of power."
