Waste collection company John Pointon & Sons (JPS) has received a £1.4 million grant to help finance the construction of the £12 million facility at its Cheddleton headquarters.
The plant will generate up to 2MW of renewable energy and can process a maximum of 60,000 tonnes of food and industrial waste a year.
JPS has been awarded the funds by the government's Waste Resource and Action Programme (WRAP).
Steve Creed, director for business resource efficiency WRAP, said: "The capital funding we provide is crucial in stimulating private investment, as is the case with JPS.
"When finished, this AD facility will be a very impressive operation. With feedstock coming from local commercial and industrial waste streams, this will benefit local businesses and create local jobs."
The plant could be fully operational by October 2011.