West Virginia's streams have been harnessed for their energy since the days of early settlement. Countless gristmills and sawmills once crowded the banks of our creeks and rivers, many of them remaining in operation into the 20th century, and during the 19th century flowing water powered large factories on the Potomac and Shenandoah rivers at Harpers Ferry. By about 1900, water power was being used for the production of electricity in West Virginia. Although coal remains by far the most important fuel for electric generation in West Virginia, accounting for more than 98 percent of production in 2002, the production of hydroelectricity has slowly increased over the past century.

Hydroelectricity is produced by the capture of the energy of flowing water. Stream water is impounded by a dam to increase its "fall," and thus its gravity power, then diverted to an electric generator. There, the rushing water spins the blades of a turbine to produce electric power.

Unlike the huge dams and power plants in the western United States, hydroelectric plants in West Virginia are smaller and usually situated on existing dams. These dams were built primarily for flood control and navigation, and sometimes refitted after many years for the production of electricity. Constructed in 1924—26, Cheat Lake is one of the few lakes in West Virginia created primarily for the production of electricity. The dam and power plant at Cheat Lake are located across the state line in Pennsylvania.

The Ohio, Cheat, Kanawha, Gauley, Potomac, Shenandoah, and New rivers have all been used in the production of electricity. Perhaps the best-known hydroelectric facility in the state, the 102-megawatt Hawks Nest-Gauley Bridge hydropower complex on the New River, is also associated with one of the nation's worst industrial disasters. A tunnel was opened through Gauley Mountain to increase the fall of the water captured upstream at the dam. Construction of the three-mile tunnel began during the early years of the Great Depression, and hundreds of workers died from silicosis as the work progressed. The picturesque dam and lake are visible from Hawks Nest State Park, and the associated power plant is still in use after three-fourths of a century. The same company operated the nearby Glen Ferris dam and power plant, located at Kanawha Falls. Glen Ferris, the state's oldest hydro complex, ceased generating electricity in 2002 with an expectation to reopen later.

The production of hydroelectricity in West Virginia entered the 21st century in 2001, when the 80-megawatt power station on the Summersville Dam on Gauley River went into use. The plant is operated by the Gauley River Power Partners, which includes the city of Summersville. Other recent hydropower plants include the 42-megawatt facility on the Ohio River at Belleville, which began producing electricity in 1999 and is operated by American Municipal Power-Ohio. A similar partnership produces power on the Hannibal locks and dam on the Ohio River near New Martinsville, and another is in the planning stage for Bluestone Dam Dam in Summers County. These public private partnerships were made possible by the federal Public Utility Regulatory Policy Act, passed in 1978.

After a century of production, hydro plants provide only a small fraction of all electricity generated in West Virginia. In 2002, hydroelectric accounted for 1,065,736 of the 94,761,752 megawatt hours of electricity produced, or 1.1 percent. Over the decade 1993—2002, the production of hydroelectricity fell at an annual rate of 0.5 percent, at a time when the state's overall production of electricity was increasing at an annual rate of 2.7 percent. Less than a fourth of the hydroelectricity produced in West Virginia is produced by the electric utilities, the remainder being generated by independent producers. These independent producers include projects such as those on the Ohio River at New Martinsville and Belleville, which produce electricity primarily for sale, as well as industrial producers which themselves consume the power they generate. The electricity generated at Gauley Bridge, for example, is used by the parent company's nearby ferrometals plant.

Hydroelectric plants now dot the major rivers of West Virginia, with installations at London, Marmet, Winfield, Gauley Bridge, New Martinsville, Summersville, and elsewhere. These plants are owned by the major electric utilities, as well as industrial and independent producers, but they are much smaller than the huge coal-fired electric plants. In 2002, for example, American Electric Power's giant John E. Amos plant in Putnam County could produce 2,900 megawatts, more than ten times as much electricity as all hydroelectric plants in West Virginia combined. The Hawks Nest-Gauley Bridge complex, at 102 megawatts, is the largest producer of hydroelectricity in West Virginia.