Nova Scotia is setting up a $10-million research facility to test underwater turbines to convert tidal energy into electricity.

Three Canadian companies have been selected to field test their experimental technologies in the Bay of Fundy, home of the highest tides in the world.

Premier Rodney MacDonald made the announcement Tuesday in Parrsboro.

"It's said that harnessing this made-in-Nova Scotia green energy source could power a minimum of 100,000 homes," he said.

That's about 10 per cent of the electrical grid. However, that vision will only become a reality if these demonstration projects are followed by a commercial development of 200 turbines.

The first step — a strategic environmental assessment of the Minas Channel — is underway.

Energy Minister Richard Hurlburt said ice, fishing activity and sediment could all affect companies investing in underwater turbines.

"We need to understand the possible effects these machines may have on the environment. We may not find the best design for some time, but we must move quickly to meet the challenges of climate change," Hurlburt said.

The three companies chosen for the project are Minas Basin Pulp and Power, Nova Scotia Power and B.C.-based Clean Current.

Minas Basin Pulp and Paper is partnering with UEK Hydrokinetic Turbine, while Nova Scotia Power is aligned with OpenHydro Turbine of Ireland.

The companies will spend between $10 million and $15 million on their test turbines, the first three of which are expected to hit the water in the fall of 2009.

Positive results from one design could create jobs in Cumberland County in maintaining and even manufacturing components of underwater turbines.

The province has earmarked $4.7 million for the tidal energy centre, while EnCana is putting forward a $3-million interest-free loan.

With files from the Canadian Press