KP Renewables, the AIM-quoted renewable energy project developer, has been awarded a £5 million ($8.6 million) grant from the Welsh European Funding Office for its wave power station off the west Welsh coast.

The project is being developed with Wave Dragon, to deploy a 7 MW unit near Milford Haven.

KP Renewables has already agreed framework Power Purchase Agreements (PPAs), allowing companies to qualify for Renewable Obligation Certificates.

The news follows December’s joint-development agreement between the two for the two stage development, financing, construction and operation of up to 77MW of wave energy projects in Wales.

The first stage will see the 7 MW unit installed by spring 2007. If this proves successful, the second stage would feature up to 11 units at a deeper water, more energetic site, with a total capacity of 77 MW. These units are expected to be deployed during 2008 and 2009.

The Wave Dragon is an offshore floating device that works by channelling waves into a reservoir which is above sea level. The water is then released through a number of turbines.

The total cost of the first stage of the development is projected to be £12 million ($20 million).