As the technology of hydrokinetic tidal energy conversion looks to exploit smaller markets in the wider ‘blue economy’, innovation is still required to ensure cost competitiveness with other energy sources. A typical assumption of existing techno-economic models of tidal energy converter (TEC) arrays is that TECs positioned to minimise negative hydrodynamic interactions will maximise economic return. That the number of TECs within an array should be chosen to maximise the annual energy production, follows from this assumption. To examine the validity of these assertions for small, area-constrained arrays, a hypothetical model of the relationship of levelised cost of energy (LCOE) to the mean mechanical annual energy production (MMAEP) is developed. The model exhibits three classes of behaviour, determined by the rate of energy lost to interactions as TECs are added to an optimally positioned array; significantly, only one class has greatest MMAEP corresponding to lowest LCOE. To test this model, a contemporary optimisation algorithm is added to the advanced ocean energy techno-economic simulation tool ‘DTOcean’ and applied to arrays of TECs constrained by a 2 ha deployment area. It is shown that the hypothetical LCOE model accurately describes the DTOcean results up to and including 12 TECs deployed. At 13 TECs deployed, the level of TEC interaction increases dramatically, invalidating the hypothetical model. Notably, however, the LCOE is shown to reduce significantly by allowing negative interactions between TECs, reducing by 47.8% from the best non-interacting array. Thus, subject to an improved understanding of the relationship between the environment, TEC reliability and costs, the results indicate that allowing negative interactions between TECs may increase the economically extractable resource of small area-constrained tidal energy sites.