The 10-megawatt MW project will be in the Sound of Islay on Scotland's west coast, and will be capable of generating enough power for approximately 5,000 homes. The project, which is worth 46 million euros, US $65 million, is the first to be approved by Marine Scotland, the government agency responsible for the management of Scotland's seas.
ScottishPower Renewables will be working with Hammerfest Strom UK, in which it holds a major stake, to install 10 of its HS1000 tidal turbines. The first device is being constructed and will be deployed off Orkney for testing later this year.
A prototype of the Hammerfest Strom device has been generating electricity in Norway for the past six years.
The Sound of Islay, a channel of water that separates the islands of Jura and Islay on Scotland's west coast, was chosen after a UK-wide search for the best location. It benefits from strong tidal flows and shelter from storms and waves, and it has available grid capacity.
"ScottishPower Renewables' array will work in harmony with the environment and use the power of the tides in the Sound of Islay to generate enough green energy to power twice the number of homes on Islay," said John Swinney, Scottish Cabinet Secretary for Finance and Sustainable Growth. "There is simply nothing like it consented anywhere else in the world."
Keith Anderson, the chief executive of ScottishPower Renewables, said: "Tidal power has long been considered as one of Scotland's most valuable renewable energy resources, and we have discussed its potential for many years. Today's announcement moves the whole marine renewables industry forward in Scotland and the UK."
He added: "The testing of the HS1000 machine in Orkney this year will help us to finalize our timetable for the demonstration project in Islay, but we will begin work on the project in 2012 and plan to have machines installed as early as feasible, during the period 2013 to 2015."
Anderson also reiterated the importance of government support for the tidal energy sector: "As with any new industry, funding support is critical to compliment private funds and encourage investment. Scotland's support for wave and tidal power is better than elsewhere in the UK, but we would still like to see support for tidal power projects increased in line with the support available for wave power developments."
ScottishPower Renewables is also developing a larger, 95-turbine tidal project at Ness of Duncansbay, in the Pentland Firth. The project is part of the Crown Estate's first marine energy leasing round.