It is expected to cost £100 million and city officials have announced they are considering a private finance initiative to fund construction of the incinerator.
Russell Imrie, Midlothian Council cabinet member for strategic services, told the Scotsman: "The energy from waste idea is interesting because it does give you the possibility of heating or supplying electricity to huge developments.
"But we will need to consider all of the factors, including traffic into the site and other environmental considerations."
Meanwhile, Energos has been given the go-ahead for a £40 million incinerator project near the Merseyside village of Knowsley despite local opposition to the project, reports the Liverpool Daily Post.
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.