Far north Queensland could soon be home to the world's largest crop of the plant used to make tequila, but rather than putting fire in bellies, it will be used to help fuel a green energy initiative.

Agave is currently grown on a commercial scale in Mexico, but Queensland's MSF Sugar is aiming to become a world industry leader, with plans to plant 4,000 hectares of the succulent on the Atherton Tablelands.

"Agave produces a huge amount of biomass with very little water, and the climate up here is very similar to Tequila, Mexico, so we thought maybe we can use it," business development manager Hywel Cook said.

The agave plantations will form part of the milling company's $60 million biomass refinery project, which will operate alongside a green energy power station and a distillery at its Walkamin sugar mill.

Agave and sugar cane fibre will be used to fuel the power station, which is scheduled for completion next year.

It will provide 200,000 megawatts of electricity annually, which will be fed into the Ergon Energy grid.

Construction has begun on MSF Sugar's green energy power plant. ( ABC Rural: Renee Cluff )

Mr Cook said the juice from the crushed agave would also be converted into clean fuel.

"During the crushing season we'll take in the cane and then in the other half of the year we'll bring in the agave," he said.

"We'll crush it and we'll separate the fibre from the juice, and the juice will make ethanol and the fibre will burn in our power station to make green power.

"Initially the ethanol will be used for fuel across Queensland, but really I see the ethanol as a raw material, so we can turn ethanol into plastics, we can turn it into other products."

Water efficiency makes agave appealing

The Atherton Tableland's dry tropics have a similar climate to Tequila in Mexico, where the largest commercial crops are currently grown. ( Supplied: MSF Sugar )

The first 10,000 agave plants will go into the ground next month as part of a feasibility study.

Some will be grown by the milling company, but MSF Sugar also is enlisting local farmers to act as suppliers.

Howe Farming Enterprises is the first to become involved.

Managing director Dennis Howe said the water-efficient plant was the perfect addition to his multi-cropping business, because a current lack of water in the Mareeba-Dimbulah irrigation supply had seen his allocation slashed to 50 per cent.

"We can turn some of our unproductive land into productive land," he said.

"The crop's beauty is that it can survive from wet season to wet season without any irrigation."

The Queensland Government provided $250,000 in funding for the feasibility study, and the first commercial crop is scheduled to be planted in 2020.