UP TO 100 farmers in the region are to share in a £2.5m-a-year deal to supply a new power station.

SembCorp has appointed Greenergy to supply 55,000 tonnes a year of willow as biomass fuel for its £50m power station at Wilton, on Teesside.

The plant will be one of the UK's largest biomass renewable energy projects. It will generate 30 megawatts of electricity - enough to power about 30,000 homes - when it comes online in mid-2007.

A key factor in making the venture cost-effective will be keeping down transport costs.

This means about 3,000 hectares of willow coppice will have to be grown by farmers within a 50m radius of Wilton.

It offers a lifeline to farmers struggling to break even against current low cereal crop prices.

Renewable Energy from Agriculture (Refa), based in Sedgefield, County Durham, will manage the individual supply contracts on behalf of Greenergy.

Robin Twizell, Refa managing director, said: "We envisage around 100 farmers being involved."

The farmers will be offered ten-year contracts paying £45 per tonne, which will go up with inflation.

After transport and harvesting costs, this should leave them making a profit of £25 per tonne.

Government grants of £1,000 per hectare are available to pay for planting costs.

Mr Twizell said: "Farmers are not making anything out of growing cereal crops.

"This offers small farmers an opportunity to diversify, while large farmers can use their set-aside land."

The Wilton10 power station will require about 300,000 tonnes of wood a year, made up of energy crops, forestry logs, sawmill chips and recycled timber.

Roughly 20 per cent of this feedstock will be Short Rotation Willow Coppice supplied exclusively by Greenergy. The contract will be signed at the Cereals 2005 event in Cambridgeshire next Wednesday.

The power plant will be a key player in the region's growing renewable energy industry.

Yesterday, The Northern Echo exclusively revealed that Somerset-based Wessex Grain is looking at building a bioethanol plant on Teesside, converting wheat into ethanol, which can be mixed with petrol to make biofuel.

The plant would create 70 jobs directly and another 200 in the supply chain.

Progressive Energy is also planning to build a "clean" coal station on the banks of the Tees, creating 100 jobs, and three other biofuels companies have expressed an interest in the region