Generating electricity by using water is known as hydro electric power. There are three main was of producing electricity by this means. The first is using the flow of water downstream from a source such as a dam. As the water flows throw the damn past turbines, these turn generators which produce electricity.
This method is cheap, safe and free form pollution once the initial huge costs are covered. However finding a location for building a dam can result in the large scale relocation of people and wildlife.
The second method of producing power via water is tidal power. As the daily tide comes in and out, the flow of water as it changes direction is used to turn turbines.
The third way of producing electricity from water is by wave power. This is particularly useful for the UK since it is an island. It uses the energy of the seas waves to move generating equipment and thus produce electricity. There are a number of ways of doing this. Wave power has been slow to take off but is due to increase once the engineering behind the various methods drives the cost down.