Energy from a long-delayed biomass plant will cost almost three times as much as new wind and solar power and could ultimately push up bills, analysis for The Telegraph has found.

The MGT Teesside plant, which is set to begin operating this year, will burn wooden pellets to create enough electricity to power 600,000 homes. It was initially due to open in 2018 and failed to meet a deadline to come online last December.

The deadline has since been extended by the government-owned Low Carbon Contracts Company (LCCC) until the end of this year.

But the plant has been criticised as expensive and inefficient.

Once online, the plant will start producing electricity at an agreed price of £147.45 per megawatt hour (Mwh).

Under an agreement with the Government, renewable energy producers get an agreed price, which the Government tops up when wholesale electricity prices experience a dip. The excess is added on to the green levies included in consumer bills.

When electricity prices are higher than the agreed strike price, producers pay the difference back to the Government.

The price for the MGT Teesside plant is nearly three times the cost of new offshore wind projects, which have a cap in upcoming low-carbon energy auctions of £54 per Mwh.

‘Misguided government largesse’

Lord Randall of Uxbridge, a Conservative peer, said the approach to biomass should be reconsidered.

“We need to rethink our approach to bioenergy,” he said. “It is expensive and the environmental benefits are questionable. It’s difficult to justify these subsidies at a time of rising energy bills, especially when genuinely clean energy sources are significantly cheaper.”

Phil MacDonald, the CEO at think tank Ember, said: “This is a story of an obsolete technology limping along thanks to misguided government largesse.

“Biomass is an eye-wateringly expensive way of generating power. This money could have been spent on wind and solar, which are so cheap they now act to lower energy bills.

“The Government is backing a dead horse here, and energy bills will go up as a result.”

While wholesale electricity prices are at record highs because of the global cost on gas, the project is likely to pay back to the Government.

But as prices come down to more stable levels of around £50-60 per Mwh, the Teesside plant could receive an annual subsidy of around £180-200million, equivalent to between £2.20 and 2.50 per household, according to analysis by the website Carbon Brief for The Telegraph.

That stands in contrast to new wind and solar projects, which are expected to continue receiving zero or negative subsidies.