While modern wind turbines have become by far the largest rotating machines on Earth with further upscaling planned for the future, a renewed interest in small wind turbines (SWTs) is fostering energy transition and smart grid development. Small machines have traditionally not received the same level of aerodynamic refinement as their larger counterparts, resulting in lower efficiency, lower capacity factors, and therefore a higher cost of energy. In an effort to reduce this gap, research programs are developing worldwide. With this background, the scope of the present study is 2-fold. In the first part of this paper, an overview of the current status of the technology is presented in terms of technical maturity, diffusion, and cost. The second part of the study proposes five grand challenges that are thought to be key to fostering the development of small wind turbine technology in the near future, i.e. (1) improving energy conversion of modern SWTs through better design and control, especially in the case of turbulent wind; (2) better predicting long-term turbine performance with limited resource measurements and proving reliability; (3) improving the economic viability of small wind energy; (4) facilitating the contribution of SWTs to the energy demand and electrical system integration; (5) fostering engagement, social acceptance, and deployment for global distributed wind markets. To tackle these challenges, a series of unknowns and gaps are first identified and discussed. Based on them, improvement areas are suggested, for which 10 key enabling actions are finally proposed.