The core objective of this master thesis is to analyze (i) the global development of the hydropower sector, (ii) the potentials, challenges and opportunities of the electricity and hydropower sector in Peru and (iii) to come to a conclusion if the development of small hydropower plants (sHPPs) in Peru is a viable business opportunity for project developers and investors from a risk-return perspective, taking into account the technical potential, the stability of the country, the regulatory framework and economic and financial considerations. This question has been answered by means of a diligent literature and internet research. Furthermore, a case study with regard to the development of sHPPs in Peru has been analyzed, including inter alia the calculation of the internal rate of return (IRR) and the net present value (NPV). Finally, the challenges, risks and market barriers, but also the strengths, opportunities and potentials with regard to the development of sHPPs in Peru for project developers and investors have been discussed in detail. Concluding, it can be stated that the small hydropower sector in Peru is very interesting and promising for local but also foreign project developers and investors. Even though several risks, challenges and market barriers remain, the development of sHPPs in Peru can be considered as a viable business opportunity for project developers and investors. However, a collective assessment of the economic and financial feasibility of sHPPs in Peru is not possible, as an investment decision can only be taken individually, based on the specific site conditions of the project and the experience, risk appetite and available resources of the project developers and investors.