The Shetland tidal array will feature five 100kW tidal turbines in the Bluemull Sound site that will power about 300 homes.
The project will be developed in two phases with the first three devices scheduled for completion by the end of 2015.
Nova and ELSA have secured £1.85m from European investors while Scottish Enterprise is providing £1.9m of grant and loan funding.
Scotland Energy Minister Fergus Ewing said the Scottish Government and its agencies will ensure that the country benefits from the significant economic opportunities the renewables industry presents.
"ELSA’s decision to invest in Scotland is a testament to the confidence felt by international investors to help develop the huge wave and tidal energy resources from the waters around the Scottish coast," Ewing added.
Nova Innovation managing director Simon Forrest said the pan-European vision of the partnership will open up export markets and deliver 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.
Image: The Shetland tidal array will feature five 100KW tidal turbines. Photo: Courtesy of Nova Innovation Ltd.
