TUAS Power, Singapore's third-largest power generator, on Thursday announced plans to build a $2 billion steam and electricity production plant, the first here to run on clean coal and biomass.

The plant will ensure that coal, a controversial but abundant fossil fuel, is used in an efficient and non-polluting way to power industries on Jurong Island.

If successful, Tuas Power says it could pave the way for greater use of clean coal here against the backdrop of soaring global oil and gas prices.

The Tembusu Multi-Utilities Complex will start operating in 2011 and is expected to supply heat in the form of steam and electricity for up to 10 petrochemical companies housed on Jurong Island.

The plant will be powered by 80 per cent low ash, low-sulphur coal and 20 per cent biomass, which is waste woodchips and palm kernel shells sourced from here and neighbouring countries.

Its use of clean coal technology from Japan will mean that 'overall, we are able to produce one unit of energy at a more competitive cost', said Tuas Power's president and CEO Lim Kong Puay.

The high carbon emissions from coal have been brought down to acceptable standards through the injection of biomass, which produces zero emissions, and highly efficient technology.

Investment in this plant means that come 2012, clean coal will contribute to 15 per cent of Tuas Power's revenue. It is now wholly gas firing.

In the long term, 'if we're not looking at different sources of fuel, the cost of production will be high and investors on Jurong Island will look at alternative companies for their utilities', Mr Lim told The Straits Times.

To allay environmental concerns about coal, 'the approach we are taking is to incorporate very efficient energy processes and renewable biomass to minimise the impact on the environment', he added.