The Green Investment Bank (GIB) is to provide £80 million for the construction of an energy from waste combined heat and power (CHP) plant in Kent.
The 43MW facility will generate renewable electricity for the grid and heat for Kemsley Paper Mill.
It is expected to produce up to 154GWh of green power and 180GWh of heat annually.
The plant will also help reduce greenhouse gas emissions by more than 163,000 tonnes per year and prevent around half a million tonnes of waste from going to landfill.
Around 500 jobs are expected to be created during construction.
Project developer Wheelabrator Technologies Inc (WTI) has secured an investment of more than £300 million so far.
Business and Energy Secretary Greg Clark said: “As well as creating hundreds of construction jobs, this latest investment by the UK Green Investment Bank is an important contribution towards combating climate change and building an energy infrastructure for the 21st century that is cleaner, secure and affordable. It also shows that the green economy continues to attract finance for projects like this.”