The plant, which will be located in Beckton, east London, will start commercial operations in 2009 providing up to 140 million litres of drinking water a day in times of drought or low rainfall. Thames Water has also confirmed it intends to run the proposed plant entirely on bio-diesel and is investigating whether some of this fuel could in future come from reprocessing the discarded cooking fat and oil from homes, restaurants and takeaways, which often blocks London’s drains.

The approval follows a legal undertaking by developers Thames Water in agreeing not to operate the plant until it has entered into an operating agreement with the Environment Agency.

Richard Aylard, director of external affairs and sustainability at the firm, said the decision means “we can get on with building the plant which will be technically challenging. However, we have been successfully running a pilot plant to test the process.”

Construction is due to start in 2008.