The Environment Court has approved an application by TrustPower to build a $275 million canal system on the Wairau river in Marlborough.
The decision overturned an appeal by the Save the Wairau group and Fish & Game.
TrustPower says Marlborough currently takes most of its power from outside the region.
With the canal system in place, Marlborough will be able to generate 85% of its own electricity.
The scheme will take 60% of the Wairau's volume and run it though 46km of canals and six power stations before returning it to the river.
TrustPower already owns much of the land it needs and now has the right to seek to compulsorily buy the remainder of what it needs.
However, chief executive Vince Hawkworth, says some landowners still strongly oppose the scheme and he would prefer to engage in dialogue rather than resort to that option.
Save the Wairau, and Fish & Game had appealed against an earlier decision in favour of Trustpower.
They have 15 days to decide whether or not to appeal against the Environment Court decision.
Fish & Game says the decision appears to have recognised there were grounds for its concerns, but has not addressed them in its ruling.
Its Marlborough manager Neil Deans says the appellants have 15 days to decide whether to appeal against the decision in the High Court.
