Tidal energy will be backed by £20 million-a-year of Government investment as part of the shift away from fossil fuels.
Ministers hope the ring-fenced funding for tidal stream projects will help the industry develop and reduce its costs in a similar way to offshore wind power.
Business Secretary Kwasi Kwarteng said tidal power could become a key part of the “next generation of renewable electricity projects”.
But the Scottish National Party said the promised funding fell more than £50 million short of what was required for the industry.
The announcement forms part of the Contracts For Difference (CfD) renewable energy auction, which guarantees producers a minimum price for every megawatt hour of electricity they produce.
The £20 million for tidal projects brings the total CfD funding for renewables in this round of allocations to £285 million.
Mr Kwarteng said: “As an island nation we are perfectly placed to capitalise on clean marine energy, building on our booming offshore wind sector which is now a British industrial success story.
“We hope to see marine energy follow in the successful footprints of other renewable technologies, where we’ve seen costs fall dramatically in recent years thanks to UK government support.
“The investment today provides a major push for tidal power to become a key part of the next generation of renewable electricity projects needed to strengthen energy security as we work to reduce our dependency on volatile fossil fuels.”
SNP Westminster leader Ian Blackford said the announcement of the funding was a “partial Tory U-turn” over support for tidal schemes but “it does not go anywhere near far enough”.
“The minimum required was a ring-fenced fund of at least £71 million,” he said.
“The UK government must stop hindering this vital green industry.”
Shadow Scottish secretary Ian Murray said the announcement was “a welcome U-turn”.
But he added: “The Government must now go much further to support renewable technologies in Scotland, starting with the reform of the transmission charging regime and investment in an energy interconnecter between Orkney, where a lot of tidal energy is generated, and the Scottish mainland.”
Dan McGrail, chief executive of trade association Renewable UK, said: “Ring-fenced funding for tidal stream doesn’t just unlock private investment and secure green jobs today, it also puts us in pole position to capitalise on exports to the global market in due course. That’s why we’ve been calling for this dedicated pot of funding for tidal power.
“We need a range of renewable technologies to get us to net zero as fast as possible. As an island nation with superb tidal energy resources to harness, it’s clear that tidal stream should have a key role to play in our shift to clean energy.”