The Shetland Tidal Array which will comprise five 100kW devices and will be deployed in the Bluemull Sound in 2015/16.
Scheduled to be developed in two phases with commissioning of the first three devices by the end of 2015, the 0.5MW array project power equivalent of 300 homes.
Nova and ELSA have secured £1.85m from European investors while Scottish Enterprise is providing £1.9m of grant and loan funding.
Energy Minister Fergus Ewing said, "The Scottish Government and its agencies will do everything we can to ensure Scotland benefits from the significant economic opportunities the renewables industry presents."
ELSA (IDETA) managing director Olivier Bontems said that the company will contribute to the development of green electricity in Shetland and Scotland.
"The partnership between ELSA (IDETA) and Nova Innovation contains all the fundamental elements of a successful partnership: dedicated partners; commitment to the development of renewable energy; strong innovation in GreenTech; and co-operation across European regions."
Nova Innovation managing director Simon Forrest said the partnership’s pan-European vision will open up export markets and deliver real growth for the marine energy sector.
"This partnership agreement will accelerate Nova Innovation’s technology development; help secure the company’s Scottish manufacturing base and expand the integrated supply chain here in Shetland and Scotland," Forrest added.
