The 65 MW plant will be built near Stalingborough in the North East of the county after being rubber stamped by Energy Minisiter Malcolm Wicks.
The project will be built by Helius UK which estimates the facility will produce enough energy for the equivalent of 100,000 homes.
Construction will involve more than 260 full time workers with the working power station employing 75v staff.
Mr Wicks said: 'This announcement takes us closer to achieving our proposed renewable energy targets. We have doubled the amount of renewable electricity to 5 per cent over the last few years and later this month we will be launching our consultation on how we can drive this forward even further.'
The power station will initially be fuelled by waste wood, specially grown crops and the leftovers from timber processing activities sourced from the UK and Europe.
Planning permission has also been granted to build an additional biomass processing facility and bioethanol and biodiesel refinery.
Helius plans to eventually use spent grains from the bioethanol plant and glycerol from the biodiesel plant as the fuel feedstock for the power station.