The paper presents the analysis of the small hydropower plant working at variable speed. The hydro-set that consists of the guide vanes and propeller turbine integrated with the permanent magnet synchronous generator is simulated by using Computational Fluid Dynamics (CFD) in Ansys Fluent v18.0. The important part of the paper is the analysis of the mechanical power losses in the hydro-set gap. The analytical and numerical calculations show that these losses are significant and have to be considered in performance calculations. The k-epsilon and k-omega SST models, as well as the one-equation Spalart-Allmaras (SA) model, were tested and verified on the experimental hydropower plant of 75 kW power. The comparison showed that the best agreement with experimental results provides the Spalart-Allmaras model. (C) 2019 Elsevier Ltd. All rights reserved.