The plant in Lincolnshire will burn straw grown within a 50-mile radius and release only the carbon dioxide that the wheat absorbed from the air.
The six-week "hot commissioning" process for the Sleaford Renewable Energy Plant began this week.
This involves firing the boiler and releasing high pressure steam, which cleans the newly-built plant system.
The plant is currently burning gas oil, but straw is due to be added next week.
David Fisher, director of projects at Eco2, which is constructing the plant, said: "Today is a milestone. It's the first firing of the boiler.
"In terms of the construction process we are a little way ahead of the original project programme so it's all going very well so far."
He said he was confident that the plant would go into production in January or February.
As well as feeding electricity into the National Grid, the plant will provide free heat to public buildings in Sleaford town centre, including the swimming pool and the council offices.
Ash produced by the plant will be recycled as crop fertiliser.
The location was chosen because it is in a concentrated region of straw production, which will reduce transportation costs.
Some people living nearby have opposed the power station, saying it will be an eyesore and lorries bringing straw will clog the roads.
However, planning permission was granted in 2008.
A straw-fired power station described as "virtually carbon neutral" has been fired for the first time.