The category A-listed building at Tongland has been generating electricity for more than 90 years.
It will provide back-up supplies for the Lanark and Galloway hydro schemes which date back decades.
The Scottish government gave the project the green light despite a reporter recommending refusal.
The crossing in Kirkcudbright was shut suddenly on safety grounds more than 100 days ago.
They would provide back-up power for eight stations in the historic Galloway and Lanark schemes.
A group has criticised the decision to replace 27 miles (43km) of overhead power lines, which are considered at end of life.
The Scottish government rules the scheme between Kendoon and Tongland in south-west Scotland can proceed.
Work around the Tongland Dam in Galloway hopes to try to address a 90% drop in fish numbers.
It comes less than a fortnight before a public hearing into the Galloway plans was due to begin.
