German firm MVV plans to build the £140m incinerator in the Royal Dockyard under the 25-year, £800m PFI deal with local councils in the region.
The civils element of the scheme is understood to be worth up to £40m, and an estimated 400 jobs will be created during construction.
If built, the incinerator would handle 250,000 tonnes of rubbish a year, which would generate 57,000 tonnes of bottom ash.
The German firm plans to build a plant at a quarry in nearby Buckfastleigh to turn the ash into material for road-building.
A planning application for the power plant was submitted to the city council in May, which was modified with a taller chimney after protests from home owners in nearby residential areas about air pollution.
Dockyard operator Babcock Marine is understood to be contributing to the building costs in return for using waste heat and electricity to power the shipping complex, which spends around £15m a year meeting its energy needs.
MVV plans to commence construction next year with the plant scheduled to begin operations in 2014.