A self-taught inventor has signed a contract with Country Energy, one of the country's biggest power grids, to test a new source of clean and renewable electricity that will harness ocean currents and has the potential to drastically reduce electricity costs on islands.

Mick Perry, 42, a former auto-electrician and tuna fisherman, is the driving force behind the $3 million underwater generator, the Aquanator, which will be moored in the mouth of the Clarence River at Maclean in northern NSW.

Currents of about 2.5 knots will rotate aquafoils on the generator, which is 57 metres across and nine metres high, producing one megawatt of electricity - enough to power 660 households daily.

A two-year contract begins next year, but the production company, Atlantis Energy, is already in exploratory talks with island communities, including Lord Howe, which depend on diesel-powered or wind generators.

Electricity from ocean current generators costs more than power from coal-fired grids and about the same as wind-powered energy. However, the cost is about one-sixth that of diesel-powered systems.

Ocean and river currents are more dependable than the wind or solar power and can guarantee supply. Moored underwater, the Aquanator is out of sight and silent.

"We hope to have up to 25 units in production in the next five years," said Mr Perry, Atlantis's chairman and managing director, who got the idea of harnessing the strong southward-flowing East Australian Current - featured in the hit movie Finding Nemo - from the mouth of the Clarence River while working on a tuna boat 25 years ago.

Mr Perry's first job as an auto-electrician led to his first successful invention in 1998, a device known as the Permo-Drive, which can cut fuel consumption by up to 40 per cent by capturing and storing energy normally wasted in the hydraulic braking systems of heavy trucks.

The system is manufactured under licence in the United States, has been adopted by the US Army for its huge fleet of heavy trucks, and is at present being tested by the US Postal Service.

With a family of six children and described as a "knockabout bloke" by associates, Mr Perry had to sell his household furniture to finance research on the Permo-Drive, eventually attracting 1000 investors to form a $5 million public company.

He raised $1.1 million to develop a prototype Aquanator with a new type of aquafoil designed in consultation with Monash University experts on turbulence. It measures nine metres in diameter, half the size of other aquafoils, allowing the Aquanator to be moored in shallow waters where currents are often stronger.

A prototype of the Aquanator will be on display in Martin Place today.