If you put a 4 foot dam up and block the stream, you have 4 feet of water delivering pressure. If you use a pipe, you can have lots of feet of water delivering pressure (1 bar is about 33 feet of water, so this installation is at least 60 feet of water delivering pressure).
Why do large hydro electric projects always use dams? It seems like a dam wastes a ton of land creating a lake?
The other factor is that the power achieved by the station will roughly go with the volume of water and head. So if you want a lot of power you end up needing huge pipes.
http://farm5.staticflickr.com/4061/4391493249_8332c6f014_o.j...
Its a classic high head low flow pelton wheel installation.
He wouldn't need such large pipe for a penstock if he was using a pelton wheel, but he also doesn't have the head to drive a pelton efficiently - the more the better for one of those.
I've seen systems that put 2kw of energy through 2" pipe! 350+ feet of vertical head will do that.