The £20 million development at Inverness Harbour will be the first in Scotland to sterilise and reduce rubbish in a process known as autoclaving. The fibre will be used as a biomass fuel or converted into bio-diesel.
Developer Shore Energy hopes to secure a contract from Highland Council, which sends 100,000 tonnes of rubbish to landfill. "Landfill tax is going to increase substantially over the coming years but the council would avoid this by using our plant to treat its waste," said spokesman Jon Garvey.
Because ships will be used to transport the processed material, the plant is deemed to be part of the harbour and so does not require planning consent. However, it will require approval from the Scottish Environment Protection Agency.
"We believe that the development would be good news for everybody," said Inverness Harbour Trust chief executive Murdo MacLeod.