The building of a tidal lagoon in Swansea Bay has been given the go-ahead by the UK government. Intending developer Tidal Lagoon Power (TLP) says it will now negotiate how much subsidy will be paid for the energy. Negotiating a subsidy is still a big hurdle for TLP, which want five other lagoons on the west UK coast to harness power, and needs a guaranteed price for it.

There are also concerns about the impact on the environment and migratory fish, nevertheless the backing by the Department of Energy and Climate Change (DECC) is seen as a significant step forward for the developers.

Energy Minister Lord Bourne, who is also Wales Office Minister, said: "We need more clean and home-grown sources of energy, which will help to reduce our reliance on foreign fossil fuels. Low carbon energy projects like the tidal lagoon in Swansea Bay could bring investment, support local jobs and help contribute to the Welsh economy and Swansea area."

The tidal lagoon on the eastern side of Swansea Bay, between the docks and the new university campus, would use the flow and ebb of the tide to generate energy, which would then be converted into electricity.

Before the lagoon becomes a reality, there are three main challenges that need to be met:

The estimated cost of the project has almost doubled to £1bn. To make this scheme possible, a government subsidy for the power generated - a strike price - has to be agreed. The company is asking for a higher incentive than wind turbines, solar power and nuclear.

An updated validation report has to be completed, to convince the government that the technology is workable.

Environmental concerns regarding silting, sand dredging and potential impact on fish have to be addressed before a marine licence to allow the lagoon to be built can be issued.

The attraction for the UK Government is the potential for a new industry.

Thousands of construction and manufacturing jobs could be created, especially if five much bigger lagoons are built in the Severn estuary and off the north Wales coast.

There would also be a boost to the UK's standing as a generator of clean, green energy. Good Energy, an investor in the tidal lagoon, has welcomed the news. Juliet Davenport OBE, CEO and founder of the renewable electricity company said: “We’re thrilled to hear that Tidal Lagoon Swansea Bay has got the go-ahead from planners today. This is a truly visionary project, providing an excellent opportunity for the UK to diversify its sources of renewable electricity and become more energy secure as a nation.

“Innovation is in our DNA, that's why we led the way with an early stage investment back in 2014. Our stake includes the right to purchase 10% of the lagoon’s electricity output. This will enable us to further diversify our sources of renewable electricity to supply our growing customer base.This world-first project will also make an important contribution towards national carbon emission reduction targets saving over 236,000 tonnes of CO2 each year. Harnessing transformational technology, this kind of renewable generation project lies at the heart of everything Good Energy is about, and we’re delighted that it has received the green light to proceed today.

Once operational, the development will provide electricity for more than 155,000 homes for at least 120 years – an amazing contribution to the UK’s renewable electricity mix. Looking further ahead the opportunity is truly game changing. We now look forward to the government working in partnership with the project to give it the support it needs.”