The University of British Columbia has begun work on a $27-million green energy project that will generate enough clean energy to power 1,500 homes.

The UBC Bioenergy Research and Demonstration Project will also eliminate about 4,500 tons of greenhouse gas emissions from UBC's campus every year, the equivalent of taking 1,100 cars off the road.

The project uses biofuel, including wood chips and trees killed by pine beetles, to generate heat and power for the university.

Brent Sauder, the director of research and partnerships with UBC, called it cutting-edge green technology.

"They bring the material up to temperature in an oxygen-starved environment, so actually it can't burn, and it becomes just like a gas, natural gas."

Sauder said that technology is the key. If the wood were simply burned, it would only contribute more carbon to the atmosphere.

And, he said, the process has an added benefit.

"That wood may have ended up in a landfill, which would then rot and create methane gas and all this other kind of stuff," he said.

"So what we do, we actually divert it to this facility. It replaces fossil fuel, our natural gas that we would have used."

An artist's rendering of the UBC Bioenergy Demonstration and Research Project building. (UBC)

Sauder said this is an important step not only for the university, but also for the advancement of green technologies.

"These technologies need some nurturing and some technical development before they're ready for prime time," he said.

"The idea of having a university as an early adopter, where we can actually be the first customers for some of these things, is very, very important."

On Thursday, the provincial and federal governments announced $11.2 million in new funding for the project.

The facility, in addition to supplying clean energy for the campus, will advance clean energy research and development. Researchers will conduct applied research on bioenergy systems, other green technologies and best practices and policies.

It's expected to be up and running in early 2012. It will be the first biomass-fuelled, heat-and-power generation system of its kind in the world.