The plant will be operated by Refgas [Refuse gas] renewable energy company, which has grants from the Welsh Assembly Government to develop its scheme.
Rhodri Morgan said: Energy from Waste projects like this will become increasingly more important as we seek to reduce the impact we have on the environment; we can reduce the amount of waste that is sent to landfill and we can reduce our reliance on fossil fuels for energy.
The process uses gasification to shred non recyclable waste to produce a gas which is then burned to create electricity.
Refgas chairman George Willacy told MRW: We work on a proximity basis to make power and put it back into the local community. By doing this we are cutting back on truck movements and providing a very efficient process.
The company are working on its next CHP project which will improve on the pilot project and provide energy to more homes.
Image: First Minister Rhodri Morgan