Green energy group Shrewsbury Hydro has submitted a planning application for the project – which could cost up to £3.5 million – to Shropshire Council.
It would see the creation of a channel alongside the River Severn at the Castlefields weir in Shrewsbury which would allow water to flow through a turbine positioned on the river bed, generating electricity.
Shrewsbury Town Council had looked at developing the hydro electric scheme itself but abandoned the plans in June last year after a feasibility study revealed that it would not have generated as much electricity as anticipated.
Philip Pool, spokesman for Shrewsbury Hydro, said he hoped that the scheme would attract the support of planning officers at Shirehall.
He said: "We have designed this scheme very carefully, and it is generally met with support and enthusiasm from local residents and the public, as well as expert consultants.
"It is the kind of project, producing clean, green energy, that we would expect the planners to back."
Shrewsbury Hydro was formed by Transition Town Shrewsbury and the group says it anticipates the project could generate 1.7 million kilowatt hours of electricity per year. It says that amount would be enough to power 600 houses.
In the group's planning submission, concerns over a potential increase in flooding are addressed.
The document states: "The development of the hydro scheme will not increase flood risk and will, in fact, lead to a very slight reductions in flood levels in extreme flood conditions."
The group's research indicates that the turbine will operate for about nine months of the year and that they should be able to construct the scheme without touching the weir.
Mr Pool said he believed the project would be almost hidden from public view.
He said: "It can be difficult to find sites for renewable energy schemes in an area like Shropshire so this is a winner – almost all of it is out of sight.
"All you can see will be a small building which contains a flight of steps, and that will be clad in Grinshill stone – the same stone that was used for the English and Welsh bridges."
As a method of financing the scheme Shrewsbury Hydro intends to sell shares in the project, with priority given to those who live within Shrewsbury.
The proposal also includes a plan to build a new fish pass, enabling fish to swim safely up the river and past the weir.
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