The green energy produced on the site of the former Curtis Fine Papers mill in Guardbridge will enable the university to slash fuel bills and help protect jobs.

The proposal would generate power through wood-fuelled biomass, then pump hot water four miles underground to heat and cool labs and residences in St Andrews.

The scheme, which would also result in the centre becoming a knowledge exchange hub, is being backed by a £10m grant from the Scottish Funding Council.

Alongside recently approved plans for a six-turbine wind power development at Kenly to the east of St Andrews, the Guardbridge scheme will support attempts by St Andrews to become the UK’s first carbon-neutral university.

A university spokesman said although St Andrews had managed to cut its power consumption in recent years, energy price hikes have represented a major threat to investment in frontline teaching and research.

He said: “Guardbridge represents a major strategic step for the university. We are committed to becoming carbon neutral and this large industrial site lends itself to the creation of a range of renewable energies which are vital to our efforts to remain one of Europe’s leading research institutions.

“There is also an ideal opportunity to establish a knowledge exchange centre for spin-out, local companies seeking affordable accommodation and for prototype testing. We believe the diverse range of potential uses atGuardbridge has the capacity to re-establish this huge site as a key economic centre in Fife.”

It is hoped the plans for Guardbridge will boost efforts to revitalise the giant site and bring new investment in renewable technologies and new industry to Fife.

The investment of at least £25m in Guardbridge is expected to support new employment in the Fife village as the biomass facility will use only virgin roundwood, locally sourced from sustainable forests.

The knowledge exchange hub will aim to provide “missing link” facilities which would allow research and discoveries made in university labs to be translated to working prototypes.

The centre will also offer affordable accommodation to local companies, with the aim of attracting businesses and skills linked to the renewables sector.

The Guardbridge mill closed on July 23 2008, with the loss more than 250 jobs.

Since it acquired the vacant site in 2010, the university has met Guardbridge Community Council regularly and members of Fife Council to discuss its proposals.

In a report for the committee, planner William Shand said: “The university has an aim of becoming the first energy carbon neutral university in the UK.

“This site has the potential to assist in this aim, both in providing land for renewable energy initiatives that can provide clean energy for the university and in the research and advancement of future technologies.

“The proposed biomass energy centre area of the site would supplement other carbon reducing projects of the university, including the Kenly Wind Farm and building improvements undertaken to reduce energy demands.

“The university also aims to promote the site for use by private business and industry which complements the principles of the site, as well as providing a teaching campus for students in this industry.”

Subject to planning permission, work will start onsite in this year, with the renewable energy centre complete and operational by December next year.