The Department of Communities & Local Government has granted planning consent for Peel Energy's proposed 20MW Barton Renewable Energy Plant in Davyhulme, Manchester.
Trafford Council had refused permission for the facility to be built on a 12-acre site at the side of the Manchester Ship Canal and adjacent to the Davyhulme waste water treatment works.
The grounds given for the refusal in November 2011 were concerns that it would hinder regeneration and have a detrimental impact on air quality.
The decision follows a recommendation by a planning inspector that the plant should be given approval following a public inquiry held in Trafford in November 2012 and the granting of an Environmental Permit to operate the plant in October 2012.
The Barton Renewable Energy Plant is a £70m proposal that would generate renewable electricity for at least 25 years.
Over 100 workers would be employed at peak construction periods.
Once built, around 15 people will be employed directly, plus many more indirectly, to operate, supply and maintain the plant.
The plant will be capable of generating enough low carbon electricity to meet the needs of up to 37,000 homes.
It will utilise approximately 200,000 tonnes of biomass annually, with much of the fuel comprising reclaimed wood.
Peel Energy project manager Jon England said: "We would like to thank both the Secretary of State and the planning inspector for giving the plans a fair hearing.
"We realise that applications like these are not easy.
"However, these are exactly the kind of decisions that are required if the UK is to meet its renewable energy targets, reduce reliance on imported energy and avoid valuable resources going into landfill.
"We are very pleased with the outcome and look forward to taking the project on to the next stage, ultimately delivering renewable energy and jobs for the region.
"We will continue to inform the community about forthcoming phases of the development."
The two-year construction phase could start in 2014 meaning that the plant would be generating sustainable electricity in 2016.
A contractor is still to be appointed for the project which is currently being financed solely by Peel Energy, a division of Peel Group.