The move is expected to provide green heat for an additional 65,000 households in the Greater Copenhagen area.
VEKS chairman Steen Christiansen said: "First, unit 2 at Avedøre Power Station was converted to 100 per cent biomass and, with the new agreement, unit 1 will supply green district heating already from the end of next year."
Upon completion of conversion project, the Avedøre power station will generate heat based entirely on wood pellets and straw instead of coal and gas, starting from the autumn of 2016.
Power generated from unit 1 of the Avedøre Power Station will be supplied to VEKS’ customers, as part of an agreement.
The deal contributes to the Danish capital’s goal of being CO2 neutral in 2025.
Dong Energy executive vice-president Thomas Dalsgaard said: "The decision to convert unit 1 at Avedøre Power Station means that we’ll now be in a position to abandon coal and gas entirely when we’re generating heat for more than 215,000 households in the Greater Copenhagen area. It’s a significant step in the green conversion, taken in a cost-effective way.
"And we have a target stating that at least half of the electricity and heat generated at our power stations in 2020 will be based on sustainable biomass instead of coal and gas. This will give the Danes cost-effective green energy with a high degree of security of supply."
