The biomass combustion plant which Peel Energy plans to build in Manchester is likely to be issued with the environmental permit it needs to burn fuel.
However, the Environment Agency has said this is subject to consultation with local people and interest groups.
The plant will burn materials like waste wood to supply energy to homes, has been strongly opposed by local residents.
Peel earlier said that it would appeal a unanimous decision by a Trafford Council Committee, taken last November to refuse planning permission for the plant.
The facility will help meet Government renewable energy targets but residents and council planners claim it would be unsuitable and too close to homes.
Environment Agency environment manager for Greater Manchester Gordon Whitaker said: “We have carried out a thorough assessment of the application. We have consulted widely receiving comments from other organisations, including Trafford and Salford councils, Trafford and Salford Primary Care Trusts and the Food Standards Agency.
“Following this assessment and comments from health experts, we are confident the facility will not harm the environment or human health.” However, a final decision would depend on the consultation.
Peel Energy’s John England added: “We are encouraged by the draft recommendation and the Environment Agency’s confidence that the facility will not harm the environment or human health.
“We await the end of this last consultation and look forward to the Environment Agency’s final decision on the permit.”