Small hydropower substituting fuel (SHSF) is an ecological environment protection program to improve regional ecosystems and alleviate poverty. However, the sustainability of SHSF programs remains controversial due to lingering doubts about its potential for socioeconomic development and its environmental impacts. The sustainability of SHSF was examined based on field investigations and household questionnaire surveys. The results were as follows: (1) Biomass of SHSF protected masson pine (Pinus massoniana) and weeping cypress (Platycladus orientalis) plantations were 11.06 t·ha⁻¹ and 7.15 t·ha⁻¹ higher than unprotected plantations, respectively. Furthermore, the differences in ecosystem biomass were mainly derived from arbor biomass. While the energy conversion efficiency based on field investigations was merely 1.28 kg (kWh)⁻¹, which was only 64% of the empirical value and 54% of the guideline for accounting for the ecological benefit of small hydropower substituting fuel. (2) Households’ total income in SHSF villages was higher than in households with access to a hydropower plant but no substituting fuel or households with no hydropower plant. (3) Most of the households had a positive attitude towards SHSF because of its cheaper electricity and associated ecological environmental improvements. Overall, our results suggest optimistic and sustainable prospects for the SHSF program; however, continued education and policy communications are needed to sustain program success.