A tidal energy project is likely to collapse without further investment, a council leader has said.
Perpetuus Tidal Energy Centre (PTEC) is hoping to install up to 60 sea bed turbines south of the Isle of Wight.
Councillors have upheld a decision to relax conditions on the authority's existing £1m loan to the company.
Isle of Wight Council leader Dave Stewart said the move would give PTEC a "chance of success" by allowing it to attract outside investors.
The firm originally hoped to deliver a 30-megawatt scheme, supplying a third of the island's energy needs, by the year 2017.
The project was put on hold because it could not compete on price with offshore wind, the council previously said.
Mr Stewart said PTEC had "stalled" and its future was "uncertain".
"If no further investment is made, the project is likely to fail and our £1m would be lost," he told the island's corporate scrutiny committee.
He said money from private investors and the European Regional Development Fund could be found if the council relaxed its loan conditions.
The committee upheld previous decisions to extend the loan repayment period from 2022 to 2027, and to give up its positions as a priority creditor and as a PTEC board member.
The council's chief finance officer Chris Ward said the changes would "better protect" the £1m loan.
However councillor Michael Lilley, who called the meeting, said: "Relaxation of the existing loan conditions would in my view put the existing public funds lent to PTEC at risk, not protect them."
He asked Mr Ward whether an investor's offer was currently on the table.
The officer replied the changes should be acceptable whether or not an investor had already come forward.
PTEC said it hoped to bid for a government energy contract in 2021.