The following thesis investigates the performance and economics of a Pneumatic Water Engine capable of extracting energy from differential heads of water in the two to three metre range. Initial concepts are discussed and a system configuration is physically modelled at a laboratory scale. Outline designs using a variety of materials are developed and these provide a basis for the estimation of a probable capital cost using standard Civil Engineering methods. The proposed system is mathematically modelled using a lumped mass approach to the complex hydrodynamics. The resultant differential equations are solved by means of a variable Runge Kutta numerical analysis. The model includes the thermodynamic aspects of the system's compressible airflow. A computer program has been developed from the mathematical model and Is utilized in a series of parametric studies. An economic assessment based upon both the average power output achieved during the parametric studies and the probable capital cost of the system is presented, together with an estimate of the cost per kilowatt-hour of the electricity produced. This assessment takes into account maintenance costs, expected value of the energy produced and the possible effects of both Water Abstraction Charges and Local Authority Rating. In addition to the parametric studies a final, more rigorous optimization of the system involving a number of the many interacting variables has been undertaken. This optimization is achieved via Cumulative Evolutionary Design techniques involving the use of Genetic Algorithms. An optimal design of the chamber shape is achieved in the same manner.