A WIMMERA group will lobby Victorian and Federal governments for $3.5 million to build a 1mW pilot power plant at Horsham which will use crop straw to produce electricity.

Proponents hope the pilot plant will eventually lead to 10 4mW electricity generators being built in towns across the state's grain belt.

One of the proponents, Laharum agricultural consultant Bill Gardner, said straw was an environmentally friendly way of producing electricity using high-temperature pyrolysis without any net carbon-dioxide emissions.

Pyrolysis is the chemical decomposition of organic matter using high temperatures.

Dr Gardner said Norway generated 30 per cent of its power needs from crop straw.

He said many Wimmera and Western District crop stubbles were too heavy and would have to be burnt, releasing vast amounts of carbon dioxide into the atmosphere.

He said baling the straw would prevent burning of stubbles, provide income to farmers and help control weeds.

"It puts money into the community through harvesting and sale of straw," he said.

Preliminary costings by Dr Gardner put a price tag of $100 a tonne on the straw.

The power-plant plan was first proposed at a meeting of representatives of the City of Horsham, Wimmera Development Association, state government departments and sustainability groups in December.

A working group was established to pursue the proposal by developing a more comprehensive feasibility study.

Dr Gardner said the group was looking to establish a 1mW pilot plant at Horsham to "prove" the technology.

He said it would pitch for $3.5 million in funding from the Federal and State governments to help pay for the pilot plant.

If the pilot project was successful, the group would look for private investors to build the 4mW power plants.

Preliminary costings estimated the capital cost of a 4mW power generator at $12 million, but it would have the capability of earning $2.8 million annually from power sold into the national grid.

Dr Gardner said a 4mW plant provided enough electricity to supply half the needs of a town the size of Horsham.

He said the group was looking at spreading the number of electricity generation plants across the region, rather than building a large single plant, so as to minimise straw transport costs.