A European regulator said the benefits of moving a British power plant from coal to biomass outweigh any concerns about competition stemming from state support.

The British government in December 2014 notified the European Commission of plans to subsidize the conversion of the coal-fired Lynemouth power plant, operated by German energy company RWE, to biomass. The project is slated to receive state support until 2027.

After a nine-month investigation, the European Commission said there are no major competition concerns resulting from the subsidies.

"The commission concluded that the project's contribution to the European renewable energy and CO2 emissions reduction targets clearly outweighs any potential distortions of competition that could be triggered by the state support," it said in a statement.

The power station has the capacity to provide enough electricity to meet the annual demands of more than 450,000 average households.

"Once operational the project will be able to export 390 megawatts of low carbon electricity to the national grid, supporting the government's climate change targets," Andree Stracke, a chief commercial officer at RWE, said in a statement.

The British government aims to reduce its emissions by at least 80 percent of their 1990 levels by 2050.

The power station will use about 1.5 million tons of wood pellets per year, sourced from European and North American markets.