The Scottish Government has approved the construction of the Pentland Firth tidal power plant – the biggest project of its kind in Europe.
The demonstration project consisting of up to six turbines will be built in the water between the Orkney Islands and Scottish mainland.
"Today we have granted consent to MeyGen Limited to develop the largest tidal turbine array in Europe and the first commercial project off these shores,” said Fergus Ewing, Scotland’s Energy Minister.
"This is a major step forward for Scotland's marine renewable energy industry. When fully operational, the 86 megawatt array could generate enough electricity to power the equivalent of 42,000 homes - around 40 per cent of homes in the Highlands.”
When completed, the tidal power plant is expected to deliver up to 398MW of power. Earlier this year, an Oxford University research group has estimated the Pentland Firth has the potential to provide energy to cover approximately half of Scotland's electricity needs.
Through its Marine Renewables Commercialisation Fund, the Scottish Government has awarded developers Aquamarine Power Limited and Pelamis Wave Power some £13m to build the project’s first array.
Speaking before the Scottish Renewables Marine Conference, Ewing said the Scottish Government hopes the tidal project would help the country reduce its dependence on fossil fuels.
"We must tackle climate change. We need to reduce our reliance on fossil fuels through better and more efficient uses of energy. Marine energy - a home-grown technology with huge potential - is part of the solution," he said.
The Carbon Trust has previously estimated that wave and tidal resources could provide 20 per cent of the UK's electricity if fully developed.
Lang Banks, director of environmental group World Wildlife Fund Scotland appreciated the government’s decision but said the government would now have to invest into research to help harness the full potential of tidal energy.
"There is little point in generating huge amounts of marine renewable energy on Scotland's islands if it cannot also be got to the mainland, we now need UK and Scottish Ministers to find a way forward that enables us to harness the full potential of this clean energy source,” he said.
Tidal energy is expected to play an important role in securing future energy resources in the UK. Energy Secretary Ed Davey has recently revealed plans to offer cash incentives to build more turbines on Scottish islands and provide a higher subsidy for projects on Shetland, Orkney and the Western Isles than on the mainland.
The draft deal, worth some £115 per MWh for onshore wind, could lead to hundreds more turbines generating an additional 400 MWh for the grid.
''It's going to enable them to develop these wind farms, to sell that electricity, that green energy, and they will create jobs and economic activity,'' Davey said.
The so-called strike price of £115 is higher than the £100 proposed for the UK mainland in 2014-15.
An inter-governmental group has now been established to take the project forward. It is expected to focus mostly on Orkney, Shetland and the Western Isles.