A straw-fired power plant in Lincolnshire will use 240,000 bales of straw a year benefiting local farmers, say the energy firm and the NFU.
Construction on the Sleaford Renewable Energy Plant is due to start in late May with completion set for early 2014.
Only the second straw-fired plant in the UK, it will be run by Eco2 and will generate enough electricity for 65,000 homes.
"It is very critical to make sure you locate the plant near to where the fuel is produced," an Eco2 spokesman said.
Dr Andrew Toft, project director for the plant, said: "It is not like coal and gas as it is an expensive product to ship around the country."
The 38 megawatt plant, located on the outskirts of the town in open countryside next to Sleaford Town Football Club's ground, will use straw from farmers in the Sleaford area and will employ about 80 people.
Straw will mean extra income for farmers in the Sleaford area
Ash, produced as a by-product at the plant, can be used by farmers as crop fertiliser.
Jonathan Scurlock, renewable energy advisor for the National Union of Farmers (NFU) said: "About 40% of the straw we produce in this country is chopped and incorporated into the soil after harvest, so we know farming has the capacity to meet this new and exciting market.
"Adding value to crop residues and making an extra margin on a food crop means that straw becomes a commodity in its own right."
He said the east of England was "ideally placed to supply both existing straw users and new energy markets".
The town's public swimming pool and indoor bowling centre as well as the football club will get heat from the plant along with the North Kesteven Council's offices.
Some local residents opposed the plans for the plant saying it would blight the area by bringing in straw lorries that would clog up local roads.
But Mr Toft said an agreement with the local council will ensure that a designated lorry route will avoid Sleaford town centre.
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