The plant would be built on the existing site of the Materials Recycling Facility (MRF) in Fourth Drove – 400 metres from the site of a proposed privately-owned facility that would burn commercial waste.

The council revealed that the MRF site was its preferred option for a "combined heat and power energy from waste plant" after paying £5 million for the neighbouring plot that had been the headquarters of the trailer production company, the Ray Smith Group before it went into receivership last year with the loss of 147 jobs. This would house a new recycling facility.

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Cabinet member for the environment Cllr Wayne Fitzgerald said: "This purchase of an existing industrial building is an important step in the development of Peterborough's overall plans for reducing, recycling and the effective management of waste.

"It means we have avoided the additional costs and time delays that would have resulted if we had to buy a vacant site and construct a totally new building."

Planning applications for the energy from waste plant and the MRF will be submitted in the early autumn.

Today, Chris Williams, the managing director of Peterborough Renewable Energy Limited (PREL), which has tabled plans to create a £250 million energy park nearby on land south of Storeys Bar Road, questioned the need for two plants, but said he believed the pair could operate "side by side".

The fate of the PREL proposal is in the hands of the Government, while the council's energy from waste plant depends on the approval of the authority's planning and environmental protection committee.

If approved, the city council's incinerator would be operational by 2013 to coincide with the closure of Dogsthorpe landfill site.

By that time, Peterborough could boast two waste-burning plants within a stone's throw of each other.

Although Mr Williams said the council and PREL were "not in competition", he added: "Realistically, I do not see a need for two, but if there was, they could work side by side.

"If the PREL plant was operating, I would not see the need for an additional plant. I do understand that the council has to look at its waste provision for the future, which may require the development of their own facility."