Announced by business secretary Vince Cable, the funding for green initiatives led by the UK Green Investment Bank will see a new £8.5 million hydro electric scheme at the River Allt Coire Chaorach, near Crianlarich.

The two megawatt system will generate enough energy to power 1,900 homes.

Mr Cable said the project and others like it would “provide high-skilled jobs for rural communities in Scotland”.

The £60m funding package is aimed at “community-scale” developments of 2 megawatts or less, with up to 30 projects set for a share of the money.

Of the total, £50m was put forward by the Green Investment Bank, while the Strathclyde Pension Fund committed £10m. The funding is being administered by Albion Community Power, which hopes to attract a further £40m of funding for small-scale projects.

The £8.5m Crianlarich project is the first to be funded by the venture. It will use the natural flow of the River Allt Coire Chaorach to generate up to eight gigawatt hours of electricity per year.

Mr Cable said such projects would “create sustainable jobs and growth”.

He said: “Renewable energy is the future, and we must continue to use all of the new and established technologies at our disposal to power our homes and businesses in a way that doesn’t damage the environment.

“Hydro power has a vital role to play in this. The first project to be funded from a new investment by the Green Investment Bank will use the natural flow of Scotland’s rivers to generate electricity.

“This project, based in Crianlarich, will produce enough power for nearly 2,000 homes and provide high-skilled jobs for the rural communities in Scotland.”

The Green Investment Bank estimates there is capacity for an additional 800 megawatts of new hydro-power projects across the UK - enough to power 500,000 homes with renewable energy - with about 80 per cent of this capacity in Scotland.

Lord Smith of Kelvin, the group’s chairman, said: “The UK is in the process of transforming how it generates its power.

“In future we will see less reliance on a small number of large power stations and more focus on a network of smaller, locally generated, renewable sources of power.

“Hydro is one example of how we can do this and we are delighted to play our part in helping this market grow, bringing investment to rural communities along the way.”