Two limited companies will be established to own and operate ground-breaking renewable energy projects in South Tyneside.
'Special purpose vehicles' will be set up to run proposed district heating schemes in Jarrow and Hebburn.
The establishment of limited companies is required to comply with the external funding condition and comply with State Aid regulations. This provides transparency to funders that that their grants are being used for the relevant projects.
Both projects have benefited from funding from the European Regional Development Fund (ERDF).
The Viking Energy Network Jarrow is a UK-first scheme which will work by harnessing heat from the River Tyne and exporting it to council buildings around the town.
A second cutting-edge district heating scheme will draw geothermal energy from flooded abandoned mines in the former Hebburn Colliery.
Together, they are expected to deliver an annual carbon dioxide reduction of over 1,000 tonnes as well as saving £817k a year, which will offset the Council's borrowing.
Cllr Ed Malcolm, Lead Member for Resources and Innovation, said: "As part of the funding criteria for each project, ERDF requires the Council to establish special purpose vehicles in the form of limited companies.
"By separating the companies from the Council through a corporate structure, the Council gains the ability to provide funding to the companies on a commercial basis, ensuring compliance with State Aid regulations.
"Also, if the energy generated from each scheme is sold commercially to third parties, then it will need to be facilitated through a separate Council company - in this case the SPV."
South Tyneside Council's Cabinet last night agreed to the establishment of the two companies and to a further report in due course seeking approval for the nomination of members of the boards and other governance matters.
Subject to planning permission, the multi-million-pound Viking Energy Network would combine a river source heat pump, a combined heat and power (CHP) back-up system, a 1 MW solar farm, and a private wire electrical network with storage battery and be the first of its kind in the UK.
Detailed designs are now being drawn up for the project, which has attracted a £3.5m grant for its innovative approach.
The £7million scheme Hebburn minewater scheme, which is being developed in collaboration with the Coal Authority and Durham University, has also gained preliminary approval for £3.5m ERDF funding.
The council declared a climate emergency last July and since then has developed a comprehensive climate change strategy and five-year action plan.
Cllr Joan Atkinson, Lead Member for Area Management and Community Safety, with responsibility for climate change, said: "Both these exciting projects are highly innovative and will make a significant contribution to the Council's drive towards carbon neutrality by 2030.
"Between them, they will slash our annual carbon emissions by hundreds of tonnes and will support our ambition for a greener, more sustainable borough."