POWER station operator Drax has won its High Court appeal against the Government's U-turn over funding.
Earlier this year the Department of Energy and Climate Change withdrew its investment support for Drax's plans to convert one of its units from coal to sustainable biomass, leading to the Selby company taking legal action in April.
As part of Drax's ongoing conversion project, the government offered Drax an 'investment contract' for its third unit conversion, but said its second unit was ineligible for the same contract and instead would only qualify for an old direct subsidy system, said to be less lucrative.
This week a High Court judge ruled that the second unit conversion was "indeed eligible for an investment contract".
Drax said: "Accordingly the court has ordered that the decision of DECC to deem the second unit conversion ineligible must be quashed and the matter remitted to DECC for reconsideration in the light of this judgment. DECC has been granted leave to appeal."
Any award of an investment contract for the second unit conversion will now be subject to EU State Aid clearance.
Drax announced last week that it has won €300m (£238m) of European Union funding to build a power plant for a major carbon storage project. The carbon dioxide emissions from the plant, which will be built on land next to Drax's existing power station near Selby, will be trapped and buried in the North Sea.