We developed a Parsimonious Multi-dimensional Moving Window (PMMW) algorithm that only requires Digital Elevation Model (DEM) data of a watershed to efficiently locate potentially optimal hydropower sites. The methodology requires only open source DEM data; therefore, it can be used even in remotest watersheds of the world where in situ measurements are scarce or not available at all. We used three parameters in this algorithm, and tested the method using the Advanced Spaceborne Thermal Emission and Reflection Radiometer (ASTER) and the Shuttle Radar Topography Mission (SRTM) derived DEMs. Our case study on the Morony Watershed, Montana, USA shows that (1) along with 6 out of the 7 existing hydropower plants being successfully located, 12 new potential hydropower sites were also identified, using a clearance of 1 km, diversion of 90 m, and Hydropower Index (HI) threshold of 109 m as the criteria. For the 12 new potential hydropower sites, 737.86 Megawatts (MW) ± 84.56 MW untapped hydropower potential in the Morony Watershed was also derived; (2) SRTM DEM is more suitable for determining the potential hydropower sites; (3) although the ASTER and SRTM DEMs provide elevation data with high accuracy, micro-scale elevation differences between them at some locations may have a profound impact on the HI.