Abstract Although its environmental performance and sustainability remain unclear, small hydropower (SHP) has undergone rapid expansion in China. Through emergy analysis, this study aimed to assess the environmental impact and relative sustainability of a small hydroelectric plant in Guizhou Province, which is located in southwestern China, in 2010. The analysis included a comparison with similar evaluations that were conducted for large hydroelectric projects: two hydropower dams on the Mekong River in Thailand, one multipurpose dam in Korea, and the Three Gorges Dam in China. As indicated by the emergy yield ratio (EYR), environmental loading ratio (ELR), and emergy sustainability index (ESI), the overall environmental performance of the SHP system examined in this research surpassed the environmental performance of large dams. However, environmentally sensible designs do not automatically imply a promising future. The case-study SHP is on the verge of bankruptcy due to financial losses, which can be attributed to the current grid-connected cost of electricity of 0.23 CNY/kWh. The emergy exchange ratio (EER) quantitatively demonstrates that the fair price of electricity from the perspective of emergy balance is 0.4 CNY/kWh. The sensitivity analysis reveals that the inherent defect of unstable operation, which is exhibited by the SHP system, greatly affects the environmental performance of a SHP plant.