The 1.5 Megawatt Rannoch River scheme on the Ardtornish Estate will create 12 jobs during construction.
Energy Minister Jim Mather said: "Renewable energy developments will help Scotland's economic recovery. Working in harmony with the environment, this scheme will generate clean, green energy, reduce emissions and create 12 new construction jobs - a model of the low carbon opportunities that exist the length and breadth of Scotland.
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"We will continue to support sustainable hydro power developments to tackle climate change and help increase sustainable economic growth."
In July 2008, Hydroplan UK submitted on behalf of Ardtornish Estate Company Ltd an application for consent to construct and operate a hydro electric station with a generating capacity of up to 1.5 megawatts at Rannoch River near Claggan. Two representations were received during the consultation.
The Scottish Government's Energy Consents and Deployment Unit is currently processing 29 renewable project applications - 24 wind farms and five hydro projects.
The Scottish Government has determined 27 energy applications, including approval for 21 renewable and one non-renewable project since May 2007 - more determinations than over the whole of the previous four years, in which 19 projects were determined.
Scottish Government targets are to meet 50% of electricity demand from renewables by 2020, and an interim target of 31% by 2011.
(GK/JM)
