It seems that their a fair bit of debate about the first origins of watermills, but it is around a few hundred years b.c., probably around present day China. The technology gradually spread West, and by the 3rd century it moved from modern day Middle East to North Africa and around the same time to Southern Europe. Around the 8th/9th century a dotted line shows transfer of the technology moving NW from the Black Sea towards Scandanavia, and another line folliwng the Celtic trade routes, up to Ireland and Northern Scotland, including the Shetland Islands where writers have been inspired by them since the 1700s.


These were all horizontal watermills, similar to the type shown here (by a Galician architect). They used a vertical shaft to transfer power to the grinding mills in the room above.
The vertical watermill (with horizontal shaft) developed later, could be used in areas of higher flow and larger head (height difference) and probably delivered more energy to the shaft. Some were used for cutting wood. This shot taken in the early 20th centry on the Minho river (Northern Portugal, 2mins from where I am sitting!)
My research (for MSc thesis) is about the viability of using the traditional horizontal and vertical mill sites that are dotted around Portugal and many other parts of the world, to generate useful energy. That means electrical power, but also mechanical energy that can be useful in today's modernised / industrialsed economy.
There are important differences here. In Nepal and Northern India, horizontal watermills are still very much in use due to the lack of rural electrification /a national grid. I was amazed to see how similar in design the Nepalese "Ghatta" wheel was to some of the Portuguese mills. Even the grinding stones are similar.
Since the 1980s the Nepalese Centre for Rural Technology and various other partners have been trying to improve the efficiency of these old watermills.

Ashden Awards have produced a short film about these projects in Nepal, and funded their further development. Nice film, watch it here
It mentions the addition of a small dynamo, or generator attached to the mill stone. I looked into this more and more, and found a plethora of experiments with hand-made spinning mill stone generators. UK Based IT Power participated in a project in Northern India to identify feasible upgrade to their local "gherat"mills.
The outcome of both projects has been an "Improved Watermill", otherwise known as a "Multi Purpose Watermill". This has got to be the best way forward: produce power with a small generator, but have the capacity to add in various other mechanical services. These could include: grinding grains, pressing oil (think olives for Portugal!), turning a potters wheel, a sharpening stone, a wood turning thing, a laithe (?). Of course the output of the electric generator would drop when you turned on one of these other systems, but power would have been stored in batteries, and would continue to run all night when other work is resting, so it wouldn't matter.
Of course such multi purpose watermills are not available in Europe to buy off the shelf. You would have to make it yourself.
But let's compare these with what's on the market for basic electricitiy generation. Finding a micro turbine for the kind of low head settings found in most watermill sites can be difficult. There aren't many systems out there, probably because the amount of energy that can be produced is quite little, around 4MWh/year, which is more or less the consumption of a modern house.
It's late already, so I'll summarise these in the next post...