The move will deliver green heat for a further 65,000 homes in the Greater Copenhagen area.
The conversion is due to star in April 2015 with planned completion in the autumn of 2016.
After conversion, the power station will generate heat based entirely on wood pellets and straw rather than coal and gas.
The Avedøre power station features two units with the second unit already being converted to biomass.
Dong Energy has agreed to supply green heat generated from unit 1 to VEKS’ customers until 2033.
The agreement 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."
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."
Image: The Avedøre power station in Denmark features two units. Photo: Courtesy of DONG Energy A/S.
