The council has selected Danish technology company B&W Renewable to upgrade the Lerwick waste-to-energy plant, in a bid to reduce emissions and increase efficiency.
Planned upgrades promise to boost the plant’s waste-processing capacity by 15 per cent.
The plant provides hot water to the local district heating company, Shetland Heat, Energy & Power Ltd., which supplies more than 1,200 homes and businesses.
It comes after the council agreed terms with the firm earlier this month.
The project is scheduled for completion and handover to the customer in the autumn of next year.
B&W chief operating officer Jimmy Morgan, said: “B&W Renewable is proud to be a leading provider of equipment and services to the renewable energy plant fleet in Europe and throughout the world.
“We look forward to executing this important project and appreciate the confidence Shetland Islands Council has shown in our clean energy technologies.”