The paper presents the main goals and achievements of the SmartGrids ERA-NET project named "Efficient Identification of Opportunities for Distributed Generation Based on the Smart Grid Technology (SmartGen)" during two years of project realization in Latvia.In the paper we proposed the basic principles of optimization of hydro power plant (HPP) working conditions under forecasted electricity prices and probabilistic water inflow values, as well as assessment of the impact of asynchronous generator connection to the existing network taking into account technical limitations.The developed model considers the most important technical parameters of HPP and the network, allowing to make HPP generation forecasts and its impact on the network using time-varying and constant input parameters. The mathematical model of a small scale HPP was developed for simulation of HPP electricity production and transient processes.The paper also includes the description and results of a case study performed to test the proposed mathematical model. The case study was carried out using the real distribution network part with the connected HPP. Different generation and load scenarios have been modelled. Load-generating interaction scenario modelling was implemented in the Matlab environment.The elaborated model can be used for representing a wide range of HPPs in electrical market and assessment analysis of the distribution network, as well as adapted for modelling of other types of power plants that use asynchronous generators.