The Public Utilities Commission has approved Hawaiian Electric Co.’s plan to build a biofuel-capable power generation plant at Schofield Barracks, adding more fossil fuel to Hawaii’s grid.

In an order Tuesday, the PUC approved the funding and biofuel supply contract for the Schofield Generating Station Project. The PUC put a cap on funds for the facility at $167 million.

Biofuel has to make up at least 50 percent of the 50-megawatt plant’s fuel supply to satisfy federal requirements. The other half of the fuel mix would be a fossil fuel, such as ultralow-sulfur diesel.

“The plant will generate renewable energy by operating on biofuels, and its flexible technology will enhance our ability to integrate more solar and wind energy on Oahu, increasing our use of clean energy,” said Darren Pai, HECO spokesman.

To meet the federal requirements at the Schofield plant, the PUC allowed HECO to shift its use of biofuel from a Campbell Industrial Park power plant. That plant is currently required to operate solely on biofuel, but will be allowed to use fossil fuel once the Schofield plant is running.

The order said this decision would save HECO customers money, as biofuel is still more expensive than fossil fuels.

Clean-energy advocates said they were disappointed with the utility’s investment in more fossil fuels.

“It’s unfortunate that they are continuing to have some reliance on fossil fuels,” said Marti Townsend, director of the Sierra Club of Hawaii.

Jeff Mikulina, executive director of the Blue Planet Foundation, said the clean-energy organization recognizes the facility’s benefits.

“We’re not enthused about any new investment in fossil generation,” Mikulina said. “But this is flexible generation that can use renewable fuel.”

The facility would have the capability to ramp up generation faster than other fossil fuel plants on the island — a capability that HECO said will help the utility add more renewable-energy resources to the grid.

The quick-starting facility, which will be built 8 miles from the ocean, will be less susceptible to damage from tsunamis than facilities closer to the water.

HECO will own and operate the Schofield Generating Station Project on 8.13 acres of land leased from the Army. HECO would pay rent of $342,000 a year to the Army for the space over a 30-year contract.