The joint venture will be built and operated by RWE npower Cogen, creating 30 new jobs, and will provide Tullis Russell with steam and electricity, safeguarding a further 540 jobs while reducing the papermill’s carbon emissions by around 250,000 tonnes each year.

“This is tremendously exciting with huge economic and environmental benefits for Scotland. The Scottish Government has fully supported the partnership working of these two leading, international companies, RWE npower Cogen and Tullis Russell,” said Salmond.

“The new biomass plant in Markinch is a significant investment in Scotland and pays testament to our competitive advantage in terms of skills and workforce and the development of energy supplies that are cleaner, greener and economically competitive.

“I am delighted that we have attracted and secured this significant investment. This project complements the Scottish Government's work to make Scotland a greener, wealthier and fairer place to live and do business in. This announcement points the way to the future and shows the resilience of the Scottish economy in the face of international financial pressure.”

The Scottish Government has set a target to produce 31 per cent of electricity demand from renewable sources by 2011, and 50 per cent by 2020. Its Energy Consents Unit is currently processing 37 renewable project applications.

Current installed renewable capacity in Scotland is 2.8 Gigawatts;1.2 GW of renewable capacity is under construction; applications to ministers amount to around 2.5 GW; and a further 1.4 GW of potential renewable development is being considered by potential applicants.

Five gigwatts will provide 31 per cent of total electricity consumption in Scotland, the target for 2011, and eight gigawatts will provide 50 per cent of electricity consumption, the target for 2020.