Community hydro schemes are set to receive help with their business rates after ministers were warned the future of many in Wales was in jeopardy.
A revaluation last year saw rate increases of as much as 900% for some local energy projects, with the situation branded "ridiculous".
A new grant scheme will offer 100% relief for community hydro schemes with a rateable value of up to £50,000.
Energy Secretary Lesley Griffiths said it was a "generous" offer.
Hydropower harnesses the power of water, with it flowing through a turbine to help generate electricity.
Operators had argued the way the rates were worked out had hit community hydro schemes particularly hard at a time when they were being promoted by politicians of all hues.
- Unlike most businesses, machinery used to generate power is included in the valuation
- It is assumed the majority of the capital expenditure in delivering the schemes has been paid by the owner of the land - whereas it is the hydro's operator that usually pays
- No allowance is made for the fact they are often run by volunteers
- Schemes cannot increase the amount of money they make because they have a set rate for the power they generate.
Business rates in England and Wales are calculated by an independent body - the Valuation Office Agency - but the Welsh Government is responsible for any measures to help businesses pay their way.
After the revaluation in April last year, Community Energy Wales said the changes risked "ripping the guts" out the many projects that had been set up throughout the country.
The Welsh Government said it was aware of the problem and has now announced that hydro projects will be able to apply for a grant towards their 2018/19 rates liability and retrospectively for 2017/18.
The scheme will also provide support to cap the increase in business rates for other small-scale developments to 10% or £1,000 where there was no previous liability.
Around 18% of electricity generated in Wales is currently from renewable sources, dominated by wind, followed by solar.
Hydro electricity only represents 4% of this renewable capacity but it is now long established.
There are more than 275 projects and experts said there are still many potential sites in Wales' water courses, particularly in north Wales.
The new Welcome to Our Woods community hydro project opened on Thursday near Treherbert, Rhondda Cynon Taff.
It will receive 100% rate relief, while its outdoor space and facilities will generate income for the local community.
Ian Thomas, director, said the additional support would "help us continue to deliver our clean energy project."
Ms Griffiths said: "Our new scheme will provide 100% rate relief for community schemes and provide support for other small-scale projects towards their non-domestic rates.
"Crucially it will provide greater support to hydro-power developers in Wales than is available elsewhere in the UK."
The support has been made available as part of the Welsh Government's budget agreement with Plaid Cymru.
Simon Hamlyn, chief executive of the British Hydropower Association (BHA), called it "very welcome news and a great result for our members, the BHA and hydro in general in Wales".