Plans to convert a Northumberland power station to a biomass facility have taken a major step forward following the awarding of a Government contract.

Bosses at Lynemouth Power Station have been confirmed as one of eight recipients of contracts for renewable electricity projects, with the switch set to take place from 2015.

The news was last night welcomed by the company as well as local politicians, who said it promised to safeguard up to 200 jobs and have wider benefits for the region.

The coal-fired power station, one of the smallest of its kind operating in the UK, was originally run by Rio Tinto Alcan and employed 130 staff. However, it faced closure until a deal was agreed to sell to Lynemouth Power, a subsidiary of RWE npower, in December 2012.

The new owner has until the end of next year to undertake a £100m conversion of the plant to biomass or face closure under European emissions regulations.

In December, the site was selected by the Government as one of the projects it favoured for a biomass conversion.

Later that month, the Department for Climate Change (DECC) confirmed the project met the minimum criteria for an investment contract under a scheme which aims to support major low-carbon energy projects.

Lynemouth Power was classed as “provisionally affordable” and as a result the company received a draft investment contract.

The company needed to confirm its commitment to the contract process by submitting a binding application in March.

The Government yesterday confirmed Lynemouth as one of eight recipients of the contracts.

Under them, firms receive a “fixed strike” price for the electricity they produce for 15 years of £100 per MW/h.

Bob Huntington, managing director of Lynemouth Power, said: “This is a great boost for the Lynemouth project, and for the local area. As a full coal-to-biomass conversion, this project is a win-win for all involved: it gives the power station and its workforce a long-term future, the wider North East region and the local economy benefit as supply chains and other infrastructure are created, and once operational, the project will deliver over 400MW of low carbon electricity to the National Grid, supporting the government’s climate change targets.”

Berwick MP Sir Alan Beith said: “I have been working with RWE, which owns the power station and with ministers Edward Davey at DECC and Danny Alexander at HM Treasury to secure the plans to convert the power station.

“Making sure the Government is aware of the importance of this project for employment in the area has been crucial as Lynemouth Power employs around 200 people and the conversion from coal to biomass secures these jobs, as well as creating more work during the conversion process.”

Mr Davey said: “These contracts for major renewable electricity projects mark a new stage in Britain’s green energy investment boom.

“By themselves they will bring green jobs and growth across the UK, but they are a significant part of our efforts to give Britain cleaner and more secure energy.”

The power station was built to serve Rio Tinto’s adjoining aluminium smelter in 1972.

The smelter shut down in May 2012 with the loss of hundreds of posts. Since it closed, the station has been providing electricity solely to the National Grid.

Meanwhile, MGT Power Limited was also awarded a contract for a biomass with combined heat and power site at Middlesbrough and plans for a huge wind farm off the Cumbrian coast were approved.