The European Commission has given the go-ahead for UK power company Drax to convert a unit of its sprawling Yorkshire power station from coal to biomass.
EU antitrust regulators said the conversion will further environmental and energy targets.
An in-depth investigation was launched in January to assess whether proposer state aid to assist the conversion would lead to overcompensation and undue distortions of competition in the biomass market, as the government had said it would support the transition by paying a premium on top of the market price of the electricity generated.
In a statement, the commission said: "On the basis of this analysis, the commission has now concluded that the planned premium will not result in overcompensation."
Britain's eight remaining unabated coal power stations will be forced to close in 2025 under new government plans, but it is likely that most will be shut down by 2022.
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Drax's share price lit up on the news, jumping seven per cent to 346.9p per share.
The group's share price rocketed nearly 20 per cent at the beginning of the month after it announced a £340m deal to buy Britain's sixth-largest energy provider, Opus Energy. The firm generates 96 per cent of its energy from renewable sources.
Nuclear, biomass and gas-fired power plants are complementing renewable energy projects as coal is phased out.
Biomass power generation burns fuel developed from previously living things, such as wood products and crop residues, that would not otherwise be used.