The project will see 10 marine turbines each generating 1MW anchored to the seabed just south of Port Askaig between the islands of Islay and Jura off Scotland’s west coast.
Construction work is scheduled to take place during 2013.
ScottishPower Renewables’ 10MW tidal stream project will be the largest tidal energy project in the world once built.
Engineering firm Burntisland Fabrications has already secured a £4m contract to build a prototype sub-structure for the turbine at its yard at Arnish, which will be installed at the European Marine Energy Centre in Orkney this year.
Scottish Finance Secretary John Swinney said: “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 double the number of homes on Islay,” he said.
“There is simply nothing like it consented anywhere else in the world.”
The facility should generate enough electricity to power at least 5,000 houses, more than double the number of homes on Islay.
ScottishPower is also developing a 95-turbine tidal array at Ness of Duncansby in the Pentland Firth as part of the Crown Estate’s first marine energy leasing round.