The European Commission (EC) has approved the British government’s plans to subsidise the conversion of Lynemouth power plant from firing coal to biomass.
The decision follows a nine-month investigation into the proposals which eventually concluded that the government’s intention to fund the plant through a contracts-for-difference (CfD) scheme was acceptable under European environmental and energy goals.
Subsidised funding for energy produced from the plant will be maintained until 2027.
RWE, which bought the coal-fired power plant in 2012, said it would now take 18 months to adapt the station to run 100 per cent on biomass with a generation capacity of 420 megawatts.
EC approval of the state aid proposals has also had positive implications for Drax power station in Yorkshire, which is capable of co-firing biomass and coal.
The operator of Drax is similarly waiting for the EC to determine whether the use of state aid to help the plant convert a third unit to biomass is acceptable under European regulations.
CfD contracts for the two biomass conversion projects are comparable, analysts said, increasing Drax's chances for its plans to also gain state aid approval.
"This is positive news for the company and it could even potentially lead to the government having a more positive outlook on the base load potential of biomass," said Angelos Anastasiou, utilities analyst at Whitman Howard.
A Drax spokesman said the decision was encouraging but the two contracts had different underlying technical and economic assumptions.
The company is also considering converting a fourth of the six units at its site to run on biomass.
In July last year, Drax secured a €300m (£220m) grant from the EU to fund a carbon capture project for emissions from its energy production.
However, after changes to green energy policies by the government in the summer, the company decided to abandon the project after completing a feasibility study for the new technology.