The plant is run by British Sugar and is located alongside the world's largest beet sugar factory.
The 70 million litres of bioethanol produced annually are produced from 110,000 tonnes of locally grown sugar beet.
The sugar factory's combined heat and power plant also provides energy for the bioethanol plant ensuring that bioethanol produced delivers 60% lifecycle carbon savings compared with ordinary petrol.
Environment minister, Lord Rooker said: "Climate change is the biggest challenge facing society today.
"But it is a challenge we can tackle by using the skills and innovation that are prevalent in the UK - this groundbreaking plant is a good example of this.
"Sustainable biofuels can play an important role in reducing our carbon footprint and I am pleased to see the UK is leading the way in promoting sustainable biofuel production."