Government approval was necessary as the plant, to be built in the southern town of Huelva, will use state aid set aside for renewable energy projects.

The factory will have a capacity of 50 megwatts and will supply green energy to some 400,000 people, Ence said in a statement.

It represents an investment of more than 100 million euros (130 million dollars), said Ence, which has drawn up a short list of three companies -- Tecnicas Reunidas, OHL and Acciona-Idom to build the plant.

According to experts, biomass energy plants, which are fired by organic matter ranging from agricultural waste such as straw or manure to forest waste products, can have C02 emissions up to 60 percent lower than facilities using fossil fuels.

In Spain last year, it made up only 1.3 percent of energy production, compared to 12.5 percent for wind farms.

Ence describes itself as Spain's "leading company in renewable energy through the use of biomass residue and energy crops" and "manages approximately 116,000 hectares of forests in Spain, Portugal, and Uruguay."

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