The £8.5m project will be located at the River Allt Coire Chaorach, near Crianlarich. It is the first project to benefit from a wider £60m initiative of green funding from the UK Green Investment Bank.
The 2MW run-of-river hydro scheme will be developed by Green Highland Renewables (GHR) and will generate around 8GWh of electricity per year; the equivalent to powering 1,900 homes.
Run-of-river hydro projects use the natural river flow to generate renewable electrical energy.
The £60m investment by the UK Green Investment Bank (GIB) is aimed at community-scale renewable projects of 2MW or less, with up to 30 projects benefiting. Of the funding, £50m has been put forward by the GIB with the Strathclyde Pension Fund (SPF) committing an additional £10m. The funding is being administered by Albion Community Power, which hopes to attract a further £40m of funding.
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Business Secretary Vince Cable said: "Renewable energy is the future, and we must continue to use all of the new and established technologies at our disposal to power our homes and businesses in a way that doesn't damage the environment. Hydro power has a vital role to play in this.
"The first project to be funded from a new investment by the Green Investment Bank will use the natural flow of Scotland's rivers to generate electricity.
"This project, based in Crianlarich will produce enough power for nearly 2,000 homes and provide high-skilled jobs for the rural communities in Scotland. The Green Investment Bank is at the heart of our industrial strategy, creating sustainable jobs and growth."
Lord Smith of Kelvin, Chair of UK Green Investment Bank, added: "The UK is in the process of transforming how it generates its power. In future we will see less reliance on a small number of large power stations and more focus on a network of smaller, locally generated, renewable sources of power.
"Hydro is one example of how we can do this and we are delighted to play our part in helping this market grow, bringing investment to rural communities along the way."
In the UK, the GIB has said there is capacity for an additional 800 MW of new hydro-power projects. This is enough to power 500,000 homes with renewable energy – around 80% of this capacity is in Scotland, with the remainder split between England and Wales.
(JP/IT)
