PELAMIS Wave Power, the Scottish renewable energy firm championed by Alex Salmond as an example of the nation's emerging marine economy, is to lay off nearly a third of its employees.
The Edinburgh-based wave power developer has announced a major restructuring which will axe at least 20 of its 70 highly skilled posts.
Pelamis said it is in consultation with staff "to deliver the required balance of skills to meet the needs of the programme for the coming year".
The firm is moving to a new phase of the development of its Pelamis P2 wave device, built for Eon and ScottishPower Renewables, and said the job losses were a result of a shift from a "manufacturing focus to an operational phase".
All of the jobs lost will be at Pelamis's Leith plant, with employees laid off after the ScottishPower wave machine is completed this month.
The Pelamis P2, which was unveiled last year on the Orkney coast, became the first commercial-scale wave power device to generate electricity for the national grid, while its deal with German energy giant Eon was the UK's first commercial supply contract in the marine energy sector.
Chairman Colin Moynihan is also leaving his post to focus on his role as chairman of the British Olympic Association ahead of London 2012.
Richard Yemm, chief technical officer and founder of Pelamis Wave Power, said: "We have structured a solid and efficient plan to fully prove out our Pelamis P2 machine over the coming months, and are delighted to have agreement on a major new funding package to support it.
"We are confident this programme will accelerate the signing of the large-scale orders that will trigger the growth of a major new sector and manufacturing industry for our country.
"Regrettably, the associated reorganisation is likely to lead to a number of job losses as our focus shifts from manufacture to operations."