A $5.38 million boiler fuelled by waste wood, forestry thinnings and sawmill by-products to create steam for canola oil production was opened on Thursday.
MSM Milling has installed a biomass-fuelled boiler at its Manildra plant to replace three LPG-fuelled boilers.
Australian Renewable Energy Agency CEO Darren Miller said it was one of the first examples of a large Australian industry company reducing its costs and the environmental impact by using locally-sourced biomass.
"We see significant potential for the project to be replicated elsewhere in the industrial sector," he said.
MSM Milling director Bob Mac Smith said it was the country's first low carbon canola oil producer.
"The boiler is delivering a 70 per cent reduction in our thermal energy costs, reducing greenhouse emissions and fossil fuel energy use and depletion while increasing NSW's renewable energy generation," he said.