The Scottish government has awarded the money to the first recipient of the £10 million Saltire Tidal Energy Challenge Fund.
The funding will be used to deliver the next generation O2 2MW Floating Tidal Energy Turbine, capable of powering more than 1,700 homes per year.
Scotland's Energy Minister Paul Wheelhouse said: "We have established a world lead in marine renewable technologies and this project represents a significant step forward in technological development. We are delighted this landmark turbine, designed by an innovative Scottish company, will also be built in Scotland.
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"We believe tidal energy technology can not only play an important role in our own future energy system, but it has substantial export potential and this fund will help move tidal technologies closer to commercial deployment.
"However, the large scale roll out of both tidal and wave energy technologies has been harmed by the UK Government's decision in 2016 to abandon its commitment to provide ring-fenced funding support.
"UK ministers must act quickly to provide the revenue support this exciting and innovative sector requires to achieve its economic potential."
Orbital's Chief Executive Officer Andrew Scott also said: "We greatly appreciate the Scottish Government's ongoing commitment and support for tidal stream energy, and this award will enable us to deliver a truly exciting and transformational project and continue the proud tradition of Scottish innovation and engineering.
"The O2 project will demonstrate how this emerging industrial sector has the ability to deliver new jobs and open up diversification opportunities for the UK's supply chain in a growing global market whilst pioneering solutions for a zero carbon future."
(MH/JG)
