The building of Britain's largest biomass plant took a step forward after the granting of a licence by Environment Agency Wales (EAW).
The £400m plant in Port Talbot will be able to power 500,000 homes and produce electricity with lower carbon emissions using material such as wood chip.
The permit will legally bind developers Prenergy Power to emission limits and health and environmental standards.
A campaign group said it was concerned the emission limits could not be met.
Biomass plants use biological material such as wood chip to generate power.
Plans for the Prenergy plant near the deep water harbour in Port Talbot were approved by the UK government in November 2007 and the licence from EAW is necessary for it to operate.
As a condition of the plant's permit, the agency has insisted that all the wood used is from sustainable sources.
EAW said the Prenegy plant will produce electricity with 50% to 80% fewer greenhouse gas emissions than gas or coal-fired power stations and is expected to be operating early in 2011.
But concerns have been raised by people in Port Talbot about the impact such a plant would have on air quality and local health.
Port Talbot Residents Against Power Stations (PTRAPS) said that changes made since the draft decision in 2007 supported its claim that emissions of a harmful chemical benzo[a] pyrenes were too high.
"The EAW have now set the limit according to the more stringent UK limit," PTRAPS said in a statement.
"This means that Prenergy Power now have to meet an emission limit 60 times lower than that set in the draft decision.
"We are concerned, however, that this licence sets limits that, by the admission of the developer, cannot be met."
The statement added: "We are still of the opinion that this licence should have been refused."
Prenergy Power director Matthew Carse welcomed the decision saying it would give "an economic boost to Neath Port Talbot and provide a major new source of clean and renewable energy in Wales".
He said: "We will continue to progress our proposals to build the renewable energy plant and create many new local jobs during the construction period - as many as 850 at its peak.
"In addition, there will be around 150 full-time jobs when the plant is operational in 2012 and further employment opportunities in companies servicing the plant."
He added that importing woodchip fuel from sustainable sources would also assist the long-term viability of Port Talbot docks.
"Prenergy is committed to being a good neighbour. We have demonstrated that the ultra-modern technology to be used will have an insignificant impact on local air quality and this has been confirmed by very detailed independent studies and by the Environment Agency's own studies," he said.
"The plant will be closely monitored to ensure the highest operating standards and environmental protection."
EAW said its decision followed evaluation and discussions with residents and the local health board.
It set emission limits to protect health in the area, it said.
Steve Brown, EAW area manager, said the permit was designed to ensure the continued protection of people and the local environment.
"We have carried out a thorough and detailed assessment of all aspects of the permit application from Prenergy.
"We have considered the impacts on air quality and people's health as well as the local environment whilst assessing this application.
"We are confident that this power station meets the requirements of the current regulations governing its operation and that a permit can be issued."