As an important marine renewable energy resource, tidal stream energy has increasingly attracted public attention. However, the detailed hydrodynamic properties are often poorly understood at potential tidal stream energy sites, where local topographical features usually induce complicated current structures, such as eddies. In the present study a three-dimensional hydrodynamic model is employed to reproduce the flow field at a promising coastal site for tidal current energy extraction, where there is an island located near a headland. Comparisons between the model predictions and the survey data show good agreement. Two large eddies are found near the island-headland system in each tidal cycle. The eddies form during the flood and ebb tides, and the rotation does not cease until slack water. When the eddies move across the island-headland system, fluctuations are detected both in current speed and direction. The eddies induced velocity fluctuations cause a significant change in the energy density, with its magnitude being about half the maximum, whilst the water elevation change is limited. Therefore, the impact of eddies should be taken into account seriously in practical tidal stream energy explorations.