MGT Power Ltd.’s biomass power station in Northern England won European Union approval for U.K. government aid that will compensate for the plant’s higher costs.

Shares in Drax Group Plc, the owner of the U.K.’s largest coal-fired power station that’s switching to burn wood pellets, surged as much as 5.7 percent after the EU lifted some of the uncertainty over state support for biomass generation.

State aid for MGT Power’s Teeside combined-heat-and-power plant got EU backing because it will reduce carbon dioxide emissions and provide steady energy output throughout the day, unlike the intermittent supply from wind energy, the European Commission said in an e-mailed statement today. The U.K. will pay the plant a variable premium above the market price for electricity.

EU regulators must approve large government payments to companies to check they don’t harm rivals.

MGT Power is one of several developers, including Drax, to get a contract for difference mechanism that guarantees the price clean energy generators receive for power for 15 years. The state program aims to ensure certainty for investors before a more permanent system is introduced. The contracts are part of reforms to the U.K. power market that seek to increase the country’s supply of renewable power.