The world’s largest commercial wave farm is to built off Orkney, in a £10 million development aimed at securing Scotland’s place as the renewable-energy powerhouse of Europe.

Four floating tubular generators, each 525 feet (160m) long and called Pelamis, will be installed in the Atlantic 1.2 miles (2km) off Billia Croo, near Stromness, over the next year.

Ministers say that the development marks a “vital milestone” in the drive to become a world leader in harnessing the power of the sea.

The Orkney wave farm project is being led by CRE Energy, a subsidiary of Scottish-Power, and Ocean Power Delivery, the Edinburgh-based company that developed Pelamis. The semi-submerged, sausage-shaped machines, which will be made up of five connected red tubes, will generate 3MW of electricity, enough to power about 2,000 homes, by converting the movement of the waves into energy.

Although more expensive to produce than wind-powered turbines, wave farms have an advantage because they are a much more predictable and constant source of electricity.

The project was announced yesterday by the Scottish Executive and is one of nine marine energy schemes off Orkney that the Government is supporting with £13 million funding. The other projects are mainly pilot schemes to develop new wave and tidal technology.

Nicol Stephen, the Scottish Deputy First Minister, said: “Today marks a vital milestone in Scotland’s drive to be the world leader in the development of marine renewables. Scotland has the potential to generate a quarter of Europe’s marine energy, and kick-starting the sector is vital if we are to create a significant industry based in Scotland and meet our long-term renewables targets.”

He said that Scotland had reached its 2010 target of generating 18 per cent of its electricity from renewable sources. By contrast, England generated about 2 per cent from renewable sources and Wales about 4 per cent. “This is a proud moment for the industry in Scotland,” Mr Stephen said.

Environmental groups broadly welcomed the investment, but the Scottish Green Party cautioned that Scotland’s global lead in wave power could be short-lived. Projects in Cornwall and in Portugal, which used the same Scottish technology, threatened to overtake the Orkney wave farm in size within two years.

A 5MW wave farm using seven Pelamis devices is planned to be built off Cornwall by 2008, but the project has been held up by a delay in receiving planning permission for a separate seabed “socket” and cable to transport electricity ashore.

A 2.25MW wave farm is being built at Peniche, in Portugal, using three Pelamis machines. The Portugese farm will initially be smaller than the one off Orkney, but a consortium led by Enersis, the power company, has expressed an interest in expanding it to generate a further 20MW of electricity.

Shiona Baird, of the Green Party, said: “Any investment is to be welcomed, but it pales into insignificance with the Portuguese project. Despite the gusto with which this announcement is being made, ministers remain determined to build more roads and expand airports, so it’s going to take a lot more than this to reduce climate pollution.”

Duncan McLaren, chief executive of Friends of the Earth Scotland, added: “Wave and tidal power could supply a fifth of the UK’s electricity needs and Scotland is ideally placed to generate significant amounts of this pollution-free energy.”

Richard Lochhead, the SNP environment and energy spokesman, said that Scotland needed to abandon nuclear power and seize the opportunity to lead the world in clean energy production.

Most of the nine successful projects will be based at the European Marine Energy Centre, at Stromness, which was set up with public money to develop and test marine renewables. The centre will receive about £2.5 million to upgrade its facilities and a further £800,000 to develop a new testing berth.

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