The energy regulator yesterday lifted the last hurdle to the ESB's plans to build a €300 million power plant.

The State company wants to build the plant at the site of an existing gas-fired facility in Aghada, Co Cork, but has to sell power stations with a total capacity of 1,300 mega watts (mw) - about enough power to supply 500,000 homes in a year - to its competitors in return.

The Commission for Energy Regulation yesterday authorised the company to build the new 400mw plant at Aghada. As expected, it also announced that the ESB would have to sell plants at Rhode, Co Offaly, and Tawghnamore, Co Mayo.

These have a total capacity of 208mw.

It will also have to sell the sites of former power stations at Lanesboro and Shannonbridge.

The State company will be required to sell facilities with a further 300mw by the end of next June and another 700mw by 2010.

The ESB will have to sell the electricity generated at the Aghada plant to its competitors in the Irish market.

The regulator's statement said the plant sales would pave the way to reducing the ESB's share of the electricity market to 40 per cent by 2010. Government policy is to reduce the ESB's dominance and open up the market during that period.

Minister for Communications, Marine and Natural Resources Noel Dempsey agreed that the ESB could build the plant on the basis that this would secure energy supply.

Demand in the Republic is forecast to outstrip supply in 2009 unless power generating capacity is introduced here.

The ESB can build and commission the plant in 18 months, which means it should be operating by that date.