Over 225 jobs will be created during the construction phase with the University pledging apprenticeships and local companies encouraged to bid for sub-contracts.

The £11m loan comes from the Scottish Partnership for Regeneration in Urban Centres (SPRUCE) Fund, a joint Scottish Government and European Regional Development Fund initiative, managed by Amber Infrastructure Limited.

Hot water from the plant will be pumped underground to heat and cool laboratories and student residences in St Andrews. It will use only wood from sustainable local forests as biomass.

The Scottish Funding Council has also backed the centre with a £10m grant with the remaining £4m coming from the University itself.

Confirming financial close on the deal to build the Guardbridge energy centre, social justice secretary Alex Neil said: “The construction of the Guardbridge energy centre will act as a springboard for the regeneration of the village, which will provide an economic boost for the wider Fife economy.

“The centre’s projected carbon savings will help the environment and the local area will benefit from the university’s commitment to job creation and apprenticeships.

“The project also underlines the sector’s commitment to innovation and research, backed by significant investment from the Scottish Government.

“The Scottish Government is using all the levers at its disposal, including European funding, to maximise employment opportunities that help achieve sustainable economic growth.”

University of St Andrews chief operating officer, Derek Watson, added: “Guardbridge represents a major strategic step for the university. This large industrial site lends itself to the creation of a range of renewable energies which are vital for our efforts to remain one of Europe’s leading research institutions.

“We believe the diverse range of potential uses for Guardbridge has the capacity to re-establish this huge site as a key economic centre in Fife.”

Fife Council leader David Ross said: “The University’s Guardbridge development is a major project, not just for the local community but potentially for the whole of Fife’s economy.

“Following on from planning approval in November 2014, this additional investment for the Energy Centre is another significant milestone for the wider redevelopment of the Guardbridge site and is very much to be welcomed.”