A pilot plan will be producing electricity, activated carbon and eucalyptus oil from mallee trees grown
Work on the integrated wood processing plant designed to convert mallee trees into oil will begin this week.
The pilot plant will achieve "proof of concept" and be producing electricity, activated carbon and eucalyptus oil from mallee trees grown in the region by the end of the year, Western Power sustainable energy manger Adrian Chegwidden said.

The $1 million, four-month contractwas awarded to Kwinana company John Thompson Engineering by Western Power.
The company will now be responsible for completing the mechanical and civil works on the plant and coldcommission components.
Western Power expects the bioenergy plant to be at the cutting edge of renewable energy technology and be producing the three products by August or September.
Mr Chegwidden said this was the first of its type to be built and hadalready attracted interstate and overseas attention with the most recent visitors being from China and Japan. The technology licence is held by Western Power which is building the pilot plant to prove the technology. Costs of the demonstration plant are about $14 million which Western Power has shared with the Federal Government on a 50/50 basis.
Mr Chegwidden said the research and development nature of this innovative renewable energy projectensured the steady progress towards completion of the plant.
The plant tackled Australia's most serious environmental problem of dryland salinity and global warming.
Oil Mallee Association chairman Ian Stanley said that at the current prices of $10 to S12.50 a kilogram the oil produced from the plant was a profitable alternative to wheat. But, any big increase in production would cause the price to drop and the best hope for the industry was to be paid for carbon credit.
Mallees are multi-stemmed tree-like Eucalyptus plants that originally grew in many semi-arid parts of Australia, but are now very depleted. They withstand damage from animals, fire, and drought by resprouting as coppice regrowth from extensive lignotubers or mallee roots. The leaves of some mallees provide very high quality eucalyptus oil.