The approval marks a major step for the project, which will provide electricity for 900,000 homes.
A final investment decision on the project is yet to be finalized.
State for Energy secretary Edward Davey said: "In addition to creating hundreds of jobs during the construction phrase, this plant makes an important contribution to reducing carbon emissions in the energy sector and provides flexible generating capacity.
"CHP is a highly efficient means of generating power that can lower costs, increase efficiency and reduce carbon emissions from heating and power generation."
Planned to begin in 2015, work on the project is expected to be completed by the end of 2018.
In addition to around 500MW of electricity, the facility will also supply heat to the neighboring liquefied natural gas plant.
CHP is a process that captures and utilizes the heat, a by-product of electricity generation. The process is said to reduce carbon emissions by around 30% over traditional methods.
