Bord Pleanála has refused planning permission for the development by Kenmare-based energy firm, Rainpower, of a 1.2MW hydro-electric plant on the Owbeg River at Slaght, around 2km outside Kilgarvan, Co Kerry.
The ruling represents an unsuccessful attempt by Rainpower to reverse the original decision of Kerry County Council to also refuse planning permission for the project.
Rainpower had plans to abstract and divert water from the Owbeg upstream of the Meelick Falls to run through a 1.2km pipe and pass it through a turbine house before returning the water back into the river further downstream.
The proposed development also required the construction of a weir and a new 1.3km access road to service the plant as well as the installation of the underground pipeline.
The company claimed it could generate 3m units of electricity per annum, which is enough to power around 600 houses annually.
It would be connected to the national grid.
Rainpower said in its application that it had proposed revised engineering measures to ensure that construction works would not result in a high risk to water quality.
The Owbeg River, which is part of the catchment area of the Kenmare River, is considered to be of national importance because of its brown trout and Atlantic salmon populations.
Outlining the basis for refusing planning permission, Bord Pleanála said that an ecological impact assessment submitted by Rainpower lacked clarity on information about flow, rate of extraction and impact on the river channel, particularly whether there would be a 30% change in the flows of the river as a result of the project.
The board said it also could not be satisfied on the basis of a natura impact statement provided by the applicant that the development would not adversely affect the integrity of the Kenmare River Special Area of Conservation.