The government has launched a £500,000 fund to help environmental entrepreneurs and small businesses develop ideas to generate electricity from the River Severn's tidal power.

The Severn Embryonic Technologies Scheme, which was recently opened to bidders, could help develop proposals such as tidal reefs and fences.

The tides in the Severn Estuary are among the highest in the world and have the potential to deliver approximately five per cent of the UK's electricity.

The £500,000 scheme is being managed by the Department of Energy and Climate Change (DECC), the Welsh assembly government, Defra, and the South West of England Regional Development Agency.

The government is already beginning a public consultation on shortlist of five power-production schemes for the Severn Estuary tides. The shortlist includes a mixture of barrages and lagoon schemes.

Mike O'Brien, UK energy and climate change minister, said that so far the government’s consultation on the shortlist has received more than 400 responses.

He added: ‘As well as this shortlist, I am keen to keep innovative options on the table. That's why we are inviting companies to bid for a share of the funds to accelerate progress.’

Jane Davidson, the Welsh assembly's government environment, sustainability and housing minister, said the new technologies developed for the estuary have the potential to be applied elsewhere.

She added: ‘Our hope is that that some of these new technologies will show promise for harnessing tidal energy with minimal environmental impact, in the Severn Estuary or elsewhere around our coast. The potential benefits could be shared across the world.’

The fund is open to new proposals as well as those submitted to the feasibility study in response to last summer's call for proposals. The closing date for bids is 1 May 2009. Full information is available on the DECC website.