Boreholes up to two miles (3.2km) deep will be drilled in Manchester to use a thermal spring to heat homes.
If the two boreholes are successful, further plans will be submitted to create a network of underground pipes taking heat to houses.
GT Energy says it will reduce energy costs for 6,000 homes and businesses.
Drilling rigs are 40m (130ft) high and the plant will take 12 months to build. The water temperature underground, in the ancient Cheshire Basin reservoir, is about 100C (212F).
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