A £60M wood-burning power station will make the Tees Valley the UK's leading biofuels energy centre.

Dr Dermot Roddy, chief executive of Renew Tees Valley, said there was no doubt the area was the UK's key centre for such developments.

Dr Roddy was speaking after SembCorp Utilities announced it was to build a new wood-burning power station at Wilton, creating one of the biggest biomass energy operations in the country.

The plant will need 300,000 tonnes of wood a year, and Dr Roddy stressed that the aim was to use the maximum amount of locally-produced feedstock.

"This is very good news indeed, not just in terms of the project itself and the business and job opportunities it can generate, but in the message it sends that Tees Valley is the place to be for companies wanting to be involved in the rapidly expanding renewable energy technologies," said Dr Roddy.

As well as SembCorp's announcement, the Biofuels Corporation has begun to construct a biodiesel production plant at Seal Sands and D1 Oils, in Stockton, plans to build biofuel plants for use across the world.

The area is also seen as a key centre for development of the hydrogen economy and fuel cell applications, where hydrogen can be derived from renewable energy.

Neil Etherington, Renew chairman, said biomass energy production accounted for only 0.25pc of electricity, but was set to grow rapidly over the next few years.

"What is particularly important about this project is that the wood it will burn will come from a variety of sources, including energy crops like short rotation coppice; small forest roundwood; sawmill co-products and recycled wood - much of which can be produced locally, creating significant job opportunities," he said.

The Forestry Commission in England has guaranteed part of the wood supply needed to fuel the power station for the next ten years.

The new plant will generate 30 megawatts of electricity, enough to power 30,000 homes.

"The Forestry Commission has agreed to supply up to 50,000 tonnes of round timber for the next ten years to help kick-start the scheme," said Brendan Callaghan, Forestry Commission conservator for the North-East of England. "We hope other producers in the area will be able to take advantage of the new market opportunities for roundwood, especially grown energy crops, sawmill residues and recycled materials."

Mr Callaghan said the power station would help secure jobs in all parts of the wood supply chain and lead to improved management of local woodlands.

Initially, the station will require about 20pc of its wood supplied from purpose-grown energy crops.

"We hope that other landowners, such as farmers, will seize this opportunity by using some of their land to grow these crops," said Mr Callaghan. "Grants are available from Defra to help establish short-rotation coppice crops and there is now considerable expertise available in the North-East to advise farmers considering growing energy crops."

The plant, which expects to be up and running by the middle of 2007, will need about 7,500 acres of short rotation coppice to be grown within a 50-mile radius over the next four years.

Robin Twizell, of Renewable Energy From Agriculture, warned that the timing of last week's announcement would mean delays in planting for farmers.

"We have farmers with about 370 acres who have received confirmation of eligibility for the establishment grant from Defra," he said. "The problem is that you have to have very good weed control in the year of establishment, and that starts in the autumn.

"These farmers have not necessarily done the preparatory work for planting in the spring, so the 370 hectares will probably not be planted until next year."

But he welcomed the announcement that the station would be built. "The main good point is that for years farmers have been told to grow short rotation coppice but we never had a market," said Mr Twizell. "Now we have a serious market and it's no longer just for enthusiasts. It is excellent news; when did anyone last hear of a £60m investment in an industry for something farmers can grow?"

SembCorp has said it does not expect wood from local farmers to be phased in to the power station until 2011. Until then most supplies would come from forests.

Paul Gavens, SembCorp Utilities managing director, said such huge investment by the parent company in Singapore was a reward for the hard work and effort of the employees and contractors in the two years since SembCorp took over the business at Wilton.

"Renewable energy presents an entirely new business opportunity for this region and one that we are keen to be part of," said Mr Gavens. "We believe this investment will transform our operations and offer us a great platform from which we can move to a brighter, greener future."

* Drax power station, near Selby, is also looking for farmers to grow short-rotation coppice and miscanthus to achieve its aim of burning up to 500,000 tonnes of biomass a year to reduce carbon di-oxide emissions.

Bical Energy, the largest developer of miscanthus in Europe, has been asked to establish a local producer group to supply up to 100,000t/year, by 2010. It will require up to 10,000ha to be planted by Bical within a reasonable radius of Drax during this year and next