Six vast underwater turbines are to be lowered into the tidal currents of the Pentland firth in the first phase of one of the largest tidal energy schemes in Europe.

Permission to install the six squat machines, which look like underwater propellers, has been granted by Scottish ministers as a demonstration project to prove they work, with more than 50 of the machines eventually due to be installed on the seabed off Caithness.

The fast-moving waters off Scotland's northern coasts and islands are seen as among the most valuable in the world for tidal and wave power, with Scottish ministers claiming there is enough capacity to replace three coal-fired power stations the size of the UK's largest, at Drax in Yorkshire.

Approval for the scheme was applauded by environmentalists. Richard Dixon, director of Friends of the Earth Scotland, said it was great news for the renewable industry. "Harnessing the huge energy in the tides of the Pentland Firth is a major engineering challenge, but this scheme will prove technologies and techniques which will be important in future tidal energy schemes around the world," he said.

Tidal energy has two main advantages over wind power: it is more predictable and it does not attract criticism from people who object to the visual impact of wind turbines on land. However, it is much more expensive because the technology is less developed.

The first phase of the project by MeyGen, a joint venture between the giant US investment bank Morgan Stanley, the French-owned energy firm International Power and the Australian turbine manufacturer Atlantis Resources Corporation, will generate up to 9MW to prove the technology works.

The consent granted by Fergus Ewing, the Scottish energy minister, will allow MeyGen to slowly enlarge the scheme to hit 86MW by the end of the decade, enough to power about 46,000 homes – about 40% of homes in the Highlands.

Ewing said: "We must tackle climate change. We need to reduce our reliance on fossil fuels through better and more efficient uses of energy. Marine energy – a homegrown technology with huge potential – is part of the solution."

Environment campaigners said the decision increased pressure on ministers in both the UK and Scottish governments to support the industry by investing far more in the electricity grid and in financial support to help cut the considerably higher costs faced by renewables schemes in northern Scotland.

Lang Banks, director of the environment group WWF Scotland, said he was stunned by apparently dismissive remarks by Ed Davey, the UK energy and climate change secretary about the prospects of extra subsidies for northern tidal and wave schemes.

Davey announced at the Liberal Democrat conference that onshore windfarms on Orkney, Shetland and the Western Isles would get a higher guaranteed price for their electricity than onshore windfarms anywhere else in the UK, to help meet their higher costs.

But asked by the Guardian if the same subsidies would be given to wave and tidal projects and offshore wind developments in the same areas in future, he said no, and described the question as hypothetical.

Banks said that Davey was undermining confidence in the industry, coming on the same day that the Lib Dems agreed to billions of pounds of support for new nuclear power stations.

"It's really, really important that governments give clear signals about what they want to do to build confidence in new renewable technologies. In the week Davey gave that support to nuclear power, it's unacceptable that he's not offering the same clear signals to real zero-carbon projects like wave and tidal," Banks said.

The MeyGen scheme will be Europe's largest tidal array project – a type of scheme where turbines are clustered across an area of seabed. Eventually MeyGen wants to dramatically expand it to 398MW, making it one of the world's biggest renewables projects.

Until that much larger scheme gets permission from the Crown Estate and Scottish ministers, it will not be the largest of all Europe's tidal power plants: the La Rance tidal barrage built across the Rance river in Brittany, northern France, nearly 40 years ago has a peak rating of 240MW from its 24 turbines.

Proposals for a more ambitious scheme to build a tidal barrage across the Severn estuary, said to be capable of meeting 5% of the UK's total energy needs, have again stalled after permission was refused by ministers on environmental grounds.

The AR-1000 turbines used in the Pentland Firth, which were first tested at the EMEC marine energy test centre in Orkney, will each weigh 1,500 tonnes but are far shorter than offshore wind turbines, standing at 22.5 metres (73ft) with a rotor 18 metres across.

Installing and running these machines in the harsh north Atlantic waters off northern Scotland is highly challenging because of the extreme weather conditions, strength of the tides and depths of water.

The Scottish government's estimates that the Pentland Firth, where tides race between the Atlantic and North Sea through a narrow eight-mile gap, can support 14GW of installed capacity are disputed by experts.

Thomas Adcock, from Oxford University, told the Guardian that the most robust estimate was that it would allow 1.9GW of power plant to be installed, even though the Firth is "almost certainly the best site for tidal stream power in the world".

Environmentalists also fear such developments will stall because of the costs of getting the power to the biggest markets in the southern UK and a lack of financial backing from ministers.

Power stations in northern Scotland are charged far higher electricity transmission costs because of their distance from southern England, and the grid needs to have expanded, at a cost of billions of pounds, to take the power south.

Last week, the spending watchdog Audit Scotland warned that Alex Salmond's ambitious target of generating 100% of Scotland's electricity needs would fail without greater investment from the UK and from power companies.

It emerged on Monday that another large tidal demonstration project by Scottish Power Renewables in the Sound of Islay off the west coast, involving a 10MW installation, would be using eight large turbines built by two firms Alstom and Andritz Hydro Hammerfest.

Once those machines were tested, Scottish Power Renewables hopes to build a 95MW tidal power scheme off Duncansby in Caithness, just east of the Pentland Firth using the same devices.