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.

Fife Council’s north-east planning committee unanimously approved the plan and granted full planning consent for formation of a biomass plant and an underground network of pipes, which will carry hot water four miles to the university’s buildings in St Andrews.

St Andrews councillor Brian Thomson said: “This is a good news story. It is a very ambitious project by the university.”

Tay Bridgehead councillor Maggie Taylor said: “The university is making great use of this site.

“I was delighted to see that it is using the existing buildings. They are beautiful brick buildings and they are going to sell the bricks from the buildings that are coming down.”

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.

Councillors asked for further information on where the woodchips would come from for assurance about their sustainability.